US Equity markets turned around yesterday afternoon closing the session with an average 0.6% gain as sentiment was boosted by US Manufacturing data and Facebook’s $19 billion deal for WhatsApp. After some poor Chinese and European Manufacturing data yesterday morning markets took some comfort from the gain in the preliminary US PMI which showed a solid gain of 56.7 in February versus 53.7 last month. After all the weather related declines in recent data,the Market PMI provided some optimism that underlying data remains quite solid.
In other US data, the lack of inflationary pressure was confirmed with the headline and core CPI rising 0.1% in January for 1.6% year on year for both measures. There was a large fall in the Philly Fed Index to -6.3 in February from +9.4 in January but had little effect on markets as respondents made it clear that severe weather storms had affected the region and reduced business activity.
In Europe, the advance Euro-Zone Manufacturing PMI for February fell to 53 from 64 last month with declines in both Germany and France. These numbers suggest that Europe has seen some contraction in February although the services data was slightly better.
This morning on the economic front we have UK GDP at 9.30 am followed by the German GIK Consumer Confidence Report at 10.00 am. Later at 1.30 pm we have the US New Home Sales which will presumably be affected by the weather.
March S&P 500
The stock market recovered a large portion of Wednesday’s Key Day Reversal yesterday as the ‘buy the dips’ mantra continued. Yesterday morning the S&P was trading at my 1818 buy level but unfortunately, after I posted, the market only made a 1819 low before trading 20 handles higher as it again closed the ‘down Gap’, as expected, that had appeared before the US open. I went short at 1834 and I was very quickly stopped out of this position for a small loss at 1839 and I am now flat. The futures markets are higher this morning as they follow the lead from the Nikkei which has closed up nearly 3%. The S&P is too near contract highs at 1846 for the market not to break this key level. The top of the Bollinger Band comes in at 1854. Today is also February expiration day for the options market and for this reason I would expect the market to trade higher. I will be a very small seller on any rally to 1853/1857 with a 1859 stop. I will also be a buyer on any dip to 1832/1836 with a 1829 stop. If we were in May/June with the markets at these over extended levels I would be a lot more bearish but as it is only February which is traditionally and seasonally a very strong time of the year for equity markets.
Euro/USD
The Euro plan worked well yesterday as after I posted it traded down to my 1.3690 buy level with a 1.3682 low before trading higher thus enabling me to cover this position at 1.3720 and I am now flat. Today I will still be a small buyer on any dip to 1.3650/1.3675 with a 1.3635 stop. My only interest in selling the Euro is on a rally to 1.3780/1.3810 with a 1.3830 stop.
US Dollar Index
The Dollar Index traded down to my 80.20 buy level after I posted yesterday morning and I will leave my stop the same at 79.70. The Dollar Index really needs to break the 81.30/81.50 resistance level for the market to turn bullish.
March DAX
Yesterday, after I posted, the Dax never broke my 9525 sell level and it did indeed hold the key 9550 support zone by leaving a buy extreme from this level. I am still flat and I have to respect the price action that occurred yesterday. Today I will be a buyer on any dip to 9575/9600 with a 9545 stop. Given the price action yesterday I do not want to be short the Dax at this time.
March FTSE
Just like the S&P I was very unlucky with the FTSE yesterday as the market was trading at my 6705 buy level before I posted but the low only reached 6730 and so I am still flat. At least I was not short as the market has indeed, as expected, continued to play catch up with the other major indices. For example the DAX/FTSE spread has narrowed by over 200 points since last Monday.
This morning the FTSE is again trading higher and is at the top of both the Bollinger Band and Williams Index. I will only be a seller on any further rally to 6860/6890 with a 6905 stop. I will also be a small buyer on any dip to 6770/6790 with a 6755 stop.
Dow Rolling Contract
The Dow also rallied hard yesterday afternoon and in the process stopped me out of my short 16190 position at 16050 and I am now flat. This morning the Dow is again challenging the key 16210 resistance level and I would expect it to break this key level given that this is the fifth time we are approaching this resistance area. I am going to stand aside in the Dow today as this market has been very kind to me over the last two weeks and I want to see the price action around this key level before making my next trade.
March BUND
The Bund is trading in a very choppy range over the last two weeks making it very difficult to get a trading view. After I posted yesterday morning the Bund traded down to my 143.75 buy level before stopping me out of this position for a small loss at 143.50 and I am now flat. Today my only interest in buying the Bund is on a dip to 142.90/143.10 with a 142.75 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
The Gold plan worked well yesterday, as after I posted, it finally traded down to my 1308 buy level before having a nice rally enabling me to cover this position at 1320 and I am now flat. Today I will move my buy level higher to 1304/1310 with a 1299 stop. I still do jnot want to be short Gold at this time.
Silver Rolling Contract
No change as I am still a buyer on any dip to 20.90/21.30 with the same 20.55 stop.
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