Financial markets are in limbo at present with no clear trends evident. Profit taking is seen as contributing to the slide in equities over the past week after the Fed’s no change to QE decision however the five day losing streak in US Equities was halted yesterday after a late rally which saw the S&P and Dow rising 0.3% and 0.4% respectively. Capitol Hill remains in the spotlight as investors are concerned about a Government shut down next week and a US default on its debt servicing obligations in mid-October.
Better Weekly Jobless Claims data, which fell to 305k last week from 325k expected, helped buoy equities. This better labour data paves the way for a better Non Farm Payrolls Report next Friday and the consensus for this report looks to be to low at 179k. US Budget negotiations continues yesterday as the Senate tries to cobble together a ‘clean’ Budget which would then need to be ratified by the House. This clean Bill would strip out contentious issues and allow funding for Government operations to continue. On the currency front Sterling was the best performer after a better than expected UK GDP 2nd Quarter.
This morning on the economic front we have Euro-Zone Business Climate Indicator and German CPI. Later at 1.30 pm we have US Personal Income/Spending whilst at 2.55 pm we have the latest University of Michigan Consumer Confidence Index. Fed members, Evans and Dudley are to speak on the economy later this afternoon.
December S&P 500
As expected the five day losing streak came to an end yesterday as the S&P posted a small gain of 0.3%. The whole market whilst paying attention to the various economic releases is really just watching developments from Capitol Hill to see when a Budget agreement can be reached. After I posted yesterday the S&P was trading at my 1689 buy level and after a nice rally I was able to cover this position at 1696 and I am now flat. I still believe that we will get a Budget agreement and as I said yesterday the ramifications of not getting one are too great and will lead to a large sell off in stocks. Today I will be a small buyer from 1686/1690 with the same 1682 stop as yesterday. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1670 with a 1665 stop. I still do not want to be short the S&P at this time.
Euro/USD
The Euro traded down to my 1.3480 buy level yesterday and I am still long. I will raise my stop to 1.3450 on this position. I still feel the Euro will trade up to 1.3700 before making a meaningful top and a break and close over 1.3550 will help this view. I still do not want to be short the Euro at this time.
December DAX
I was very unlucky in the Dax yesterday as shortly after I posted the market traded down to a 8632 low just missing my 8630 buy level before having a nice rally and I am still flat. This morning I will raise my buy level to 8625/8650 in small size with a tight 8610 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 8560 with a 8540 stop. I still do not want to be short the Dax at this time.
December FTSE
The rally that I was looking for in the FTSE finally happened yesterday enabling me to cover my 6510 long position at 6550 and I am now flat. Today I will be a small buyer again on any dip to 6505/6525 with a tight 6495 stop. Remember a break and close below 6480/6500 will be very bearish.
December 10 Year Treasury Bond
The Bond market eased a fraction yesterday after the huge run up in the market over the last week. I will still leave my buy level the same at 125.30/125.60 with the same 125.10 stop.
December BUND
The Bund just missed my 140.10 sell level with a 140.09 high before having a nice sell off. Today I will raise my sell level to 140.20/140.40 with the same 140.55 stop. I will also be a small buyer on any dip to 139.10/139.40 with a 138.95 stop.
Gold Rolling Contract
Gold traded down to my 1322 buy level and I am still long. I will leave my stop the same at 1314 and if I am stopped out of this position I will be a more aggressive buyer on any dip to 1294/1304 with a 1287 stop which is just below the low made before the Fed Non Tapering decision. A break and close below 1290 will be very bearish.
Silver Rolling Contract
Silver worked well yesterday as we finally got a rally enabling me to cover my 21.50 long position at 22.00 and I am now flat. Silver is trading lower this morning and I will again be a small buyer on any dip to 21.10/21.40 with a 20.95 stop.
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