Another day and yet another US Equity market rally! Having added 0.3% on Christmas Eve the S&P 500 closed up another 0.5% yesterday with the Dow and S&P closing higher to post yet another new record close. Equity gains have gone hand in hand with a fresh rise in Treasury Yields that have flirted with a 3% yield on the 10 Year Bond for the first time since September but so far have failed to breach this key 3% level. Decent US economic data is the common denominator to equity price and bond yield gains. Durable Goods Orders exceeded expectations with a headline rise of 3.5% versus 2% expected. New Home Sales slipped by 2.1% in November but this was on the back of an upwardly revised 17.6% October surge. October home prices rose by 0.5% as expected whilst the Weekly Jobless Claims came in at 338k versus 345k expected.
On the currency markets the big move has been the sell off in the US Dollar overnight with the Euro rising from 1.3690 to challenge the year’s highs at 1.3800 this morning. The reason for the this aggressive sell-off in the US Dollar is that the market is short the Euro resulting in Short position-holders being squeezed out and are forced to cover their positions for year-end.
Today on the economic front we have no data of note from either the Euro-Zone or the US and with most traders still on holidays until next Thursday we can expect thin trading which can often be volatile.
March S&P 500
The relentless rally in the S&P continues with little or no sell-off as the market closes higher nearly every day. The S&P is now nearly 75 handles higher than the low made last Wednesday after the Fed announced it was to start tapering. By any standards this is an incredible move. One interesting article that I read over the Christmas showed that the Fed’s stated total capital is $54.98 billion whilst its total assets are $4 trillion which makes its leverage a mind-boggling 72.8 to 1.
The S&P is extremely over bought now on a Daily, Weekly and even Monthly basis but it is very difficult to short the market at this time as this is seasonally the strongest time of the year especially coming into year end next Tuesday. However given how over-bought the market is and the fact that the March Contract faces very strong resistance at 1840 I will be a very small seller from 1738/1743 with a 1746 stop.
Euro/USD
I was happy that the Euro traded lower last Monday giving me a chance to cover my 1.3680 short position for a small loss at 1.3690 and I am now flat. The Euro is back challenging the 1.3800/1.3830 key resistance level this morning as all short positions are being squeezed out of the market ahead of year-end next week. If it breaks and closes over 1.3830 we could easily see a spike to 1.3900. Today my only interest in selling the Euro is on a rally to 1.3900/1.3930 with a 1.3950 stop.
The US Dollar Index is back trading lower this morning as the US Dollar is getting hit across the board. Today I will be a small buyer on any dip to 79.80/80.00 with a 79.55 stop.
March DAX
The Dax also continues it’s driving move higher and is now 600 points higher off the key 8980 support level that we were trading at only last week. The market is trading at the top of the Bollinger Band and Williams Index but given the time of the year it makes it very difficult to short the market. The next key resistance is from 9600/9630 and I will be a small seller here with a tight 9650 stop. Given how over extended this market is and the fact that I believe this market is going to run into a brick wall in early 2014 I do not want to be long at this time.
March FTSE
The FTSE just missed my 6550 buy level on Monday before trading a lot higher as the year end rally that I was expecting eventually occurred. The FTSE has key resistance at the 6680 level where we are trading this morning and a break and close over this level will lead to a rally to at least 6750. If the market breaks 6695 I will be a small buyer with a 6660 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow worked well last Monday as after I postedit traded up to my 16310 sell level before having a small sell-off and I was able to cover this position at 16280 and I am now flat. Today I will be a small seller on any further rally to 16510/16530 with a tight 16550 stop. Given how overbought this market is trading at I do not want to be long at this time.
March BUND
The Bund is following the US 10 Year Bond yields higher this morning after been closed for the last 3 days. The next key support for the Bund is at 1.3880 and today I will be a small buyer on any dip to 138.70/138.90 with a 138.60 stop.
Gold Rolling Contract
My Gold trade is finally beginning to work. I am still long from 1203 and 1190 and today I will raise my stop to 1200 on the whole position. If I am stopped out I will be a more aggressive buyer on any dip to 1170/1180 with a 1162 stop.
Silver Rolling Contract
Silver worked well over the last few days and after a nice rally yesterday I was able to cover my 19.20 long position at 20.00 and I am now flat. I still like Silver and today I will be a small buyer on any dip to 19.50/19.80 with a 19.35 stop.
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