It has been a very wild ride for Equity, Bond and Currency markets over the past 48 hours. After the confusion over Fed QE Policy from Bernanke’s dovish testimony transcript and then his hints of tapering in his Q+A, Asian market volatility soared. Japan was at the centre of the action with the Nikkei having risen to just under 16,000 and then subsequently fell to a low, below 14,000, before stabilising overnight at 14,600. The selling of Equities continued in Europe until New York opened which helped stabilize the market with the Dow only closing fractionally down.The steadiness in the US Market was helped by better than expected data including better than expected US New Home Sales (including upward prior month revisions), higher US House Prices and a welcome pullback in Jobless Claims after last weeks unexpected rise.
In currency markets, the US Dollar and other currencies have had a similarly wild ride. After the US Dollar rally, late in the US session, on Wednesday, it lost ground yesterday against the resurgent Yen and has been softish overnight with the US Dollar Index closing down 0.7%. The European PMIs for May, reported yesterday, were fractionally less worse than in April, but still indicate continuing recession through Q2.
Today is another busy day for economic data to finish the week. This morning we have the German IFO Survey and, after yesterdays slight improvement in German PMI, there is a slight upward risk to the IFO. There are several European Finance Officials speaking this morning including Weidmann, Constancio, and the EU’s Rehn ahead of US Durable Goods Orders at 1.30 pm.
June S&P 500
What a day yesterday as the S&P, having been on its knees all morning until the US Equity markets opened, proceeded to almost close the Gap left from Wednesday. I bought the market at 1637 and I took a gain at 1648. The market rallied up to my 1654 sell level overnight and I have covered this position this morning at 1650 and I am now flat. I am going to stay flat until we get the US Durable Goods Orders at 1.30 pm as this data has the potential to cause a large movement in the S&P. If we get a strong number I will be a seller on any rally to 1656/1660 with a 1663 stop. If the S&P can break and close over 1660 I would expect the market to challenge the highs made last Wednesday before sellers return. If we get a weak number I will look to buy the S&P on any dip to 1641/1645 with a 1638 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1630 with a 1627 stop. As long as the market can stay over 1630 the market is still bullish.
Euro/USD
The Euro worked really well yesterday as the strategy of not being short the Euro at this time continued. I took profit at 1.2890 on my 1.2840 long position and I am now flat. I still like the Euro and I am impressed how easily it was for the Euro to trade back over 1.2900. Today I am a small buyer on any dip to 1.2890/1.2910 with a 1.2870 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1.2810 with a 1.2740 stop. I do not want to be short the Euro at this time.
June DAX
The Dax worked really well as after I posted yesterday morning we were trading at my 8300 buy level and the market stayed here for most of the morning before having an afternoon rally. I bought the Dax at 8300 and I took profit at 8350 and I am now flat. Today as long as the Dax can stay over 8340 the market is okay but a break and close below 8340 will be short term bearish. This morning I am a small buyer from 8340/8360 with a 8320 stop as I look for the Dax to retest the 8500 resistance area.
June FTSE
The FTSE also dropped down to my 6680 buy level and I am still long. I will raise my stop to 6665 and I will look to take profit on any move back to 6710/6720.
June BUND
The Bund traded down to my 144.40 buy level yesterday and given how strong Equities are this morning I have covered this position for a small profit at 144..52 and I am now flat. I will still look to re-buy the Bund on any dip to 143.90/144.15 with a 143.75 stop. I do not want to be short the market at this time.
June Nasdaq 100
The Nasdaq rallied up to my 3000 sell level and I am now short. I will lower my stop to 3030 and if I am stopped out I will be a more aggressive seller in front of 3050 with a 3070 stop.
Silver Rolling Contract
No change as I am still long from 22.20 with the same 21.75 stop. If I am stopped out I will still look to reset my long position on any dip to 20.90/21.20 with a 19.90 stop. Medium term I am looking for Silver to bottom in this area.
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