Equities were back in focus yesterday after Asia posted gains in Tokyo and Shanghai, thus breaking a losing streak earlier in the week. Unexpectedly strong labour market figures out of the US lifted markets on both sides of the Atlantic with the international press headlining yesterday’s strong jobs report from Australia. The Dow built on early gains to close at another record high which has been up for 10 days in a row. The catalyst for the equities rally was a fall in the Weekly Jobless Claims number to 332k, down from 342k the previous week, and well below forecasts of 350k. On currency markets, the US Dollar was down against all G10 currencies with Sterling the best performer thus reversing recent weakness and gaining 0.9% versus the Dollar. Speculation that Qatar is about to make large investments in UK infrastructure were a catalyst for the move in Sterling plus some pre-positioning ahead of the UK Budget next Wednesday.
On the economic news front we have Euro-Zone Q4 Employment and CPI at 10.00 am, whilst in the US we have CPI at 12.30 pm followed by Industrial Production at 1.15 pm and the very important University of Michigan Consumer Sentiment at 2.00 pm. Fisher from the Fed is due to speak this afternoon and today is expiration day for all the March Futures Contracts for all major Equity Indices and Options.
June S&P 500
The S&P continues to grind higher and the market finally hit my sell level overnight and I have gone short at 1558. I will leave my stop the same at 1566 and if I am stopped out I will still use any ‘five handle sell off rule’ to go short again with a stop just above whatever high is put in. Today the March Futures contract finally expires just after the US open, whilst the options do not expire until the cash market closes at 8.00 pm. From past experience, after the cash market closes on expiration day the last 15 minutes can be volatile. My only interest in buying the S&P is if we dip down to the 1530/1534 area with a 1524 stop.
June Dow
The Dow managed to close up for the 10th day in a row. The most I have seen is 11 ‘up days’ and for this reason, plus all of the reasons that I listed yesterday, I believe that a short term top is imminent. This morning, given that my Dow short position is very small from the 14435 level yesterday I am going to raise my stop to 14505 level. If I am stopped out I will use any ’50 point sell off’ to go short again with a stop just above whatever high is put in.
June DAX
The Dax has now rolled to the June contract with a premium of 9 points versus the March contract. Yesterday the March contract traded up to my 8050 sell level with a 8060 high. I took a small profit on this position at 8022 and I am now flat. Today in the June contract, given that I am already short both the Dow and the S&P, I am only interested in selling the Dax in small size on any rally to 8090/8120 with a 8140 stop.
Euro/USD
I was extremely unlucky in the Euro yesterday as the Euro traded down to my 1.2910 buy level but I did not get filled and then I just watched as the Euro took off. We now know that this 1.2875/1.2900 is key support and the Euro must hold this level or it is in big trouble. I like the fact that the Euro managed to close back above 1.3000 and today I am a small buyer on any dip to 1.2970/1.2990 with a 1.2945 stop.
Silver Rolling Contract
I am still long Silver from 28.70 and I will give this trade one more day to work. I will leave my stop the same at 28.38.
June BUND
I still like the Bund and I will raise my buy level to 142.70/142.95 with a 142.58 stop. As I have been saying all week a break and close over 143.30 will be very bullish.
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