US Equities closed lower yesterday by almost 1% on concerns about the European debt crisis which overshadowed the better than expected American data reported earlier. European Equities got hit after the worse than expected PMI data from Germany. The Purchasing Managers Index for Germany’s Manufacturing Industry unexpectedly fell this month whilst a measure of Euro area services and manufacturing output contracted more than forecast. The ECB said it may cut Cypriot banks off emergency funds after Monday as Parliament struggles to forge an agreement on a plan to stave off financial collapse. In the US, sales of previously owned homes rose in February to its highest level in three years. The Weekly Jobless No’s came in at 336k whilst the Philly Fed Index rose for the second straight month. Despite the economic woes from Europe, the Euro so far is managing to hang in but this will change if the Cypriots cannot agree on a plan to raise the €5.8 billion needed to satisfy the IMF and the ECB by March 25th.
On the economic front today the only news of significance is the German IFO Survey which will be closely watched after yesterday’s very poor German PMI data.
June S&P 500
The S&P worked well yesterday but it only worked if you had a take profit order in after the market hit my buy level. I bought the S&P at 1543 and I was able to take profit at 1547.5 and I am now flat. The market, having initially sold off after the weak PMI data in Europe, then rebounded on the back of the better than expected US Economic data before having a bad last hour on worries that Cyprus will not have access to cash from Monday. Today as long as the S&P stays over 1525 the market is fine but a break and close below this level will be bearish. Today I am a small buyer on any dip to 1530/1534 with a 1524 stop. Again if I am stopped out I will use any subsequent five handle rally to go long again with a stop below whatever low is put in.
June DOW
The Dow dropped down to my buy 14370 buy level. So far I have not been stopped out and as my position is small I will leave my stop the same at 14310. If the Dow rallies back to 14360 I will cut my position and go flat as I do not want to have a position over the weekend ahead of the potential contagion effect from Cyprus.
June BUND
The Bund worked well and I was able to take profit at 144.45 on my 144.10 long position from Wednesday. I still like the Bund and I will use any sell off to 144.00/144.30 to reset my long position. I do not want to short unless we rally to 145.50 where I will look to go short with a 145.80 stop.
June DAX
The Dax also worked well yesterday as we dropped down to my 7900 buy level with a 7898 low. The market then rallied to 7960 and I was able to take a nice gain at 7945 and I am now flat. The key level to watch for the Dax is 7850 and as long as we stay over this level the market is fine. However a break and close below here will be bearish. Today I will look to go long on any dip to 7850/7880 with a 7835 stop.
Euro/USD
No change as the Euro as done nothing in the last 24 hours. The market is still holding over the 1.2875 key support and given the potential for a large move either way over the weekend I am going to stay flat and wait to see what develops from Cyprus either today or when the markets reopens on Sunday night.
Silver Rolling Contract
Silver continues to trade quietly higher and this morning I have bought Silver in small at 29.08. I am not going to risk to much here and I will have a 28.60 stop on this position as I look for Silver to trade up to 29.70/30.00 resistance area.
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