Better Manufacturing PMI’s in China and the US saw equity markets make small gains yesterday albeit unfazed by the Thai military coup and the exchange of artillery fire between North and South Korean warships. Positive earnings from US retailers also supported market sentiment. The HSBC Advance Manufacturing PMI for May saw a rise to 49.7, from 48.1 in April, thus returning to levels last seen in January. After the steady data outcomes in the past few weeks it provides further confidence that the Chinese economy is holding up with exports performing well and China should see GDP growth of at least 7% this year.
US economic data was mostly better. The Markit Manufacturing PMI rose to 56.2 in May from 55.4 last month, a 3 month high, whilst the Kansas Manufacturing Index was up to 10 from 7. Existing Home Sales rose 1.3% in April, less than the 2.2% expected, but it was only the second increase in the past 9 months. Jobless Claims however were disappointing rising to 326K versus 310K expected but again highlighting the volatile nature of this series. Nevertheless the trend is declining and we should see further improvements in the unemployment rate in coming months.
In contrast to the better Chinese and US Manufacturing data, European Manufacturing Readings were disappointing. The advance Euro-Zone Manufacturing PMI fell from 53.4 to 52.5 in May with falls in both the German and French indices. Indeed French Manufacturing and Services both fell below 50. In the UK, Q1 GDP was unrevised at 0.8% with consumption growth of 0.8% stronger than the 0.6% expected.
This morning on the economic front we have German GDP and the IFO Business Survey at 10.00 am. This is followed by US New Home Sales at 3 pm.
Finally I would like to wish a nice weekend and just to note to say that due to the UK Markets been closed on Monday for the Spring Bank Holiday and US markets are also closed for Memorial Day the next update will be on Tuesday May 27.
June S&P 500
The breakout above the key 1878/1880 resistance level finally happened yesterday with the market closing near record highs at 1890 and now set to break and close over the key 1900 level over the next few days. The top of the Bollinger Band is at 1899 but as the last year has shown this signal is not as reliable on the top side. After I posted yesterday morning the S&P unfortunately just missed my 1882 buy level before trading higher and I am still flat. Today I will raise my buy level to 1882/1886 with a 1878 stop. My only interest in selling the market is on a rally to 1900/1904 with a 1907 stop. With the US markets closed on Monday for the Memorial weekend volume will be light but the S&P could still be volatile.
Euro/USD
This morning the Euro is trying to break below the key 1.3650 support level. Yesterday after I posted it traded down to my 1.3645 buy level and I am still long. I will leave my stop the same at 1.3620 and if I am taken out of this position coupled with the Euro closing below this key 1.3650 support level this evening I will then look to start to set up a core short position going forward.
US Dollar Index
The US Dollar Index has consolidated its recent break of the key 79.80/80.00 resistance level which should now act as good support going forward. I am still flat the US Dollar and today I will raise my buy level to 80.00/80.20 with a 79.70 stop.
June DAX
Just like the S&P, which managed to consolidate above the key 1878/1880, level the DAX also managed to close above its key 9660 support level for the second consecutive day. Unfortunately it just missed my 9690 buy level with a 9692 low before trading higher and I am still flat. Today I will raise my buy level slightly to 9670/9700 with a 9645 stop. As I mentioned yesterday my only interest in selling the Dax is on a rally to 10085/10200 where I will look to put on a more macro short position.
June FTSE
The FTSE continues to struggle which is worry considering how strong the other major indices are trading coupled with the very strong economic data being reported from the UK. After I posted yesterday morning the FTSE sold off which enabled me to cover my short 6825 position at 6800 and I am now flat. Today I will be a small buyer on any dip to 6770/6790 with a 6745 stop. With the DAX/FTSE spread back trading above 2900 I do not want to be short the FTSE at this time. If the Ftse can take out this key 6830/6850 resistance level I will then look to set up a long position.
Dow Rolling Contract
The Dow struggled yesterday in comparison to the S&P and the NASDAQ. Shortly after I posted it traded down to my 16500 buy level and after a nice rally I was able to cover this position at 16540 and I am now flat. Today I will again be a buyer on any dip to 16460/16500 with a 16430 stop as I eventually look for the Dow to break and close over the key 16600/16640 resistance level.
June BUND
As expected the Bund broke back above the key 146.00 resistance level. I am still flat and today I will be a small buyer on any dip to 145.60/145.90 with a 145.45 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold just missed my 1290 buy level before spiking higher and I am still flat. Today I will lower my buy level to 1279/1285 with a 1273 stop. A break and close over 1310 will be very bullish.
Silver Rolling Contract
Silver worked out very well yesterday as shortly after I posted it spiked to a high of 19.84 which enabled me to cover my long 19.25 position at 19.70 and I am now flat. I still like Silver and today I will again be a buyer on any dip to 19.10/19.40 with the same 18.70 stop.
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