As I reported very late in my commentary yesterday morning Ukraine and Russia agree on a ceasefire accord to take effect from Sunday in a marathon meeting in Minsk, Belarus between PM Poroshenko, Putin, Merkel and Hollande. No one knows whether the ceasefire will be successful, for now, the Russian sanctions remain. That agreement seems to have played some part in lifting investor sentiment on European Bourses.
The Euro also traded to higher levels, aided to some degree by the ceasefire news, but also by the decline in the US Dollar that followed the release of the weaker than expected US Retail Sales Report. Elsewhere in Europe, the Swedish Riksbank surprised markets, cutting rates to -0.1% from 0.00, with the SEK declining 1.7% net for the trading session.
Sterling however rose after the Bank of England raised its growth forecasts for 2016 and 2017, seeing inflation dropping below zero in coming months but then hitting its target by the end of its three year forecasting period. Bank of England Governor Mark Carney was unfazed by the currency strength, by saying that he was monitoring the seven year high in Sterling in trade weighted terms.
It was the January US Retail Sales report that shook markets up. Once again, the Report disappointed expectations, leading to a decline in the Dollar which fell 1%, a rally in US Treasuries, factors that supported the Dow, as did some positive corporate reports.
On the economic front Germany has already released its GDP for the last Quarter which showed a stronger than expected rise at 0.7% versus 0.1% rise the previous Quarter. The stronger GDP is seeing the DAX opening higher and approaching new highs. At 10.00 am the Euro-Zone will release its Trade Balance and GDP. Finally at 3.00 pm the US will release its very important University of Michigan Sentiment Index.
March S&P 500
Yesterday after I posted my market commentary, the S&P finally broke the key 2070 resistance level and as expected is approaching the 2090 highs made in late December. The big question going forward is are we going to have a double top at these highs with the market selling off aggressively from here or are we going to have new breakout in the market, leading to a rally to 2150/2200 over the coming months. Thus we really are at a critical juncture, as a false break here that is quickly reversed back below 2070 will be very bearish. I have to respect the fact that we broke the 2070 level and today I will be a small buyer on any dip lower to 2072/2077 with a 2066 stop. Given the fact that the S&P is approaching the top of its Bollinger Band and that we are currently trading at the top of the Williams Index after the 114 handle rally in the last 10 days, I will be a small seller on any further rally to 2094/2100 with a tight 2105 stop. Be careful of any longs as a reversal and close below 2067/2072 will be very bearish.
EUR/USD
The expected rally in the Euro is finally starting to gather momentum but unfortunately the market just missed my 1.1310 buy level after I posted yesterday with a 1.1320 low, but at least I was able to get short the Dollar Index. I still believe that the Euro will trade higher to 1.17/1.20 over the coming weeks as nearly every major trader that I speak to is short, and as you know I pay huge respect towards the Daily Sentiment Index which remains at historic lows towards the Euro. Today I will raise my buy level to 1.1350/1.1390 with a 1.1310 stop. I still do not want to be short the Euro at this time.
US Dollar Index
The Dollar Index plan worked well yesterday as after I posted I went short at 94.90, and after a nice sell-off in the Dollar following the awful Retail Sales report I have covered this position at 94.10 and I am now flat. Today I will still be a small buyer on any further dip to 93.60/93.90 with a tight 93.35 stop. I will also lower my sell level to 94.50/94.80 with a 95.20 stop.
March DAX
Unfortunately just as I posted yesterday morning the DAX started to spike higher on the Ukraine Peace Agreement and that theme has continued this morning with the DAX testing its highs at 11000 made earlier this month. Thankfully I have not been short for this move which is exactly what the price action in the DAX is telling you, which continues to only be a buyer on dips. Today I will raise my buy level to 10840/10890 with a tight 10795 stop. My only interest in selling the DAX is on a spike higher to 11080/11100 with an 11140 stop.
March FTSE
My big worry for the stock markets in general is the under-performance of the FTSE in relation to the other major Indices as shown by the DAX/FTSE spread which has widened out to over 4100 points from 3000 last year. Amazingly the FTSE is still trading below its record highs made back in 2000, which is incredible when you see the amount of new highs that the German and US markets have made in the intervening period. After I posted yesterday the FTSE finally traded higher to the top of my sell range at 6830. I am still short and today I will raise my stop on this position to 6870. I still do not want to be long the market at this time.
Dow Rolling Contract
No change as I am still a small seller from 17090/18050 with an 18110 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 18160 with a 18210 stop.
March BUND
My short 159.00 Bund position from yesterday morning worked out very well as by the time I posted the Bund was trading at 158.50 which enabled me to cover this position at this price and I am now flat. Subsequently the Bund traded higher on the release of the US Retail Sales report, with the Bund back at the 159.00 level again. Today I will be a small seller from 159.10/159.40 with a tight 159.60 stop which is just above contract highs made in late January.
Gold Rolling Contract
No change as I am still long at 1233 with the same 1217 stop. If I am stopped out of this trade I will be a more aggressive buyer in front of 1208 with a 1197 stop.
Silver Rolling Contract
No change as I am still long at 16.70 with the same 16.30 stop. Again if I am stopped out of this position I will be a more aggressive buyer on any further dip to 15.80/16.10 with a 15.40 stop.
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