Another volatile day in the currency and equity markets yesterday as stock markets reversed early weakness to close substantially higher on the day. The Dow, having been down 120 points at one stage, closed 180 points higher whilst the S&P had an incredible 42 handle range and in contrast to Wednesday when US markets closed on their lows they closed on their highs yesterday. The catalyst for the turnaround was the better than expected Retail Sales data out of the US, which rose 0.6%, whilst the Weekly Jobless Claims fell to 334k versus 346k last week.
Also supportive of both equity and bond prices was a Wall Street Journal article from Fed ‘watcher’ Jon Hilsenrath which headlined with ‘Fed likely to push back on expectations of rate increases’. The Fed were certainly worried by the price action in both bonds and equities over the last two weeks as they cannot afford for Bond Yields to go higher until we get a sustainable recovery and Bernanke’s press conference post the FOMC meeting next Wednesday will be very interesting.
Overnight the Nikkei, having fallen 6.4% yesterday, closed up 2.6% today although the market was up over 5% at one stage.
This morning on the economic front we have UK Construction and Euro-Zone CPI. This is followed by a very heavy US data calendar later, encompassing Producer Prices, Industrial Production, Monthly Capital Flows(Tics), QI Current Account and, probably most importantly, the preliminary Michigan Consumer Sentiment Index which is expected to be unchanged from last month at 64.5.
June S&P 500
It was a wild day for the S&P yesterday but my trading plan worked well as, in contrast to Wednesday, the market opened on its lows and spent the rest of the day trading higher for an incredible 42 handle ‘up move’. The idea that the market puts in a low on the Thursday/Friday prior to contract expiration the following week coupled with the very negative McClellan Oscillator supported my bias towards being long. Unfortunately I covered half my long 1598 position to early at 1612 and I covered the other half at 1623 and I am now flat. I am impressed at the way the S&P was able to close over 1635 and today I will be a small buyer on any dip to 1626/1631 with a 1622 stop. My only interest to short the market is if we trade up to the 1646/1650 area with a 1652 stop. I see a break and close over 1650 as being bullish.
Euro/USD
The Euro worked well as the market traded up to my 1.3380 sell level and after the Euro fell I was able to cover this position at 1.3320 and I am now flat. The Euro is back higher this morning and at the top of the Bollinger Band but interestingly the Williams Index has started to turn down. For this reason I will be a small seller from 1.3350/1.3380 with a 1.3395 stop which is just above yesterdays high. I do not want to be long at this time.
June DAX
The Dax, having traded heavy all morning, finally caught a bid and followed the US market higher in the afternoon and is now 200 points higher than when I wrote this commentary yesterday morning. I bought the Dax at 7882 and I covered my position to early at 8060 and I am now flat. Today I will be a small seller from 8160/8200 with a 8240 stop.
June FTSE
The FTSE worked really well yesterday and the key to this rally was the upturn in the Williams Index. I covered my long 6210 position at 6305 to more than make up the loss I took on Wednesday and I am now flat. I am impressed the fact the FTSE could close over the important 6270/6300 support area and today I will be a small buyer on any dip to 6280/6300 with a 6265 stop. I do not want to be short at this time.
September BUND
No change as I am still flat and I am going to stand aside for the weekend as there are more opportunities in the other markets that I trade.
June Nasdaq 100
The Nasdaq plan worked well yesterday as I was able to cover my 2910 long position at 2960 and I am now flat. Today I will look to go short on any rally to 2980/3000 with a 3020 stop. I will also be a buyer on any dip to 2920/2940 with a 2195 stop.
September Nikkei
What a wild 24 hours trading the Nikkei has had. The market had a massive 600 point rally yesterday before sellers returned to the market overnight. I covered my long 12650 position at 12980 and I am now flat. Today I will be a small buyer again on any dip to 12700/12850 with a 12500 stop.
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