Mixed global equity performance is the theme of the week so far with the Nikkei still flying whilst European Equities are trading in a quiet range as the US continues to lose ground as so far we have no agreement on the Fiscal Cliff. The S&P had its biggest drop in over a month on the Fiscal Cliff impasse despite the fact that President Obama cut short his
Christmas vacation to return to the White House last night in order to resume negotiations. In addition, the US market was not helped by the worse than expected fall in Consumer Confidence. The S&P is down for 4 straight days which is its longest loosing streak since Oct 10th. Obama is pushing for lawmakers to agree to an interim deal to avert more than $600 billion of automatic tax increases and spending cuts that will otherwise come into effect next month.
European Equity markets are taking a relaxed approach to the Fiscal Cliff and appear to believe a deal will be done before Tuesday. The Japanese Yen continues to weaken after one of the Government officials said he expects the Yen to have a new 85/90 trading range versus the US Dollar.
Later today we have Pending Home Sales from the US and it will be interesting to see how these numbers are after the better than expected Housing Data that we have had all week. This data is followed at 3.00pm by the Chicage PMI. Trading will again be sparse and volatile as liquidity continues to dry up ahead of the year end on Monday and markets will be subject to Fiscal Cliff headlines.
March S&P 500
The Fiscal Cliff is playing havoc with the S&P at the moment as every new piece of news is moving the market in an aggressive manner. At the moment we have two huge Gaps in the market. On the topside we have a Gap left from last Thursday from 1428/1440 and from November 16th we have a Gap from 1355/1368 in the March contract or 1360/1373 in the cash market. If a deal is reached we will close the the 1440 Gap and if no deal is reach I believe the market will fall and close the lower Gap at 1355/1360. In my last update on Monday I was long the S&P at 1418 and I took a small gain at 1423 and I am now flat. Today the market sold off aggressively only to turn in the last hour of trading when we rallied from 1396 to 1416. My own belief is they will cobble together some sort of deal and today I am a buyer from 1406/1411 with a 1402 stop. Again if I am stopped out I will use
my 5 handle buy back rule. If we get a deal and we manage to close the Gap I am a seller from 1435/1440 with a 1443 stop.
Gold Rolling Contract
Gold worked really well on Monday as we traded up to my 1668 sell level and I took a nice gain yesterday at 1655 and I am now flat. I will still look to buy the market from 1645/1652 with a 1634 stop.
Silver Rolling Contract
Silver also worked well as after I posted on Monday we dropped down to my 29.70 buy level and I was able to take a nice gain at 30.40 on Wednesday and I am now flat. As Silver continues to trade in an oversold manner I will look to reset my long position on any dip back to 29.60/29.90 with a 29.40 stop.
Eur/USD
The Euro traded up to my sell level with a 1.3285 high. I went short at 1.3275 and took a nice gain at 1.3220 and I am now flat. Today I am a buyer on any dip to 1.3170/1.3200 with a 1.3150 stop. I have had three nice trades on the short side from the 1.3270/1.3300 area and if the market rallies back to this level I will not sell a forth time as I want to see if we are going to break the 1.3300 area first. The 1.3170 area is the key level to watch as a break and close below here will be short term bearish.
USD/JPY
Unfortunately I was stopped out of my 8490 short at 8540 and I am now flat. The Yen continues to weaken substantially against both the Euro and the US Dollar. Today I will look to reset my short position from 8650/8680 with a 8710 stop as we are very overbought and the number of Yen bulls is now below 7% and at an 8 year low.
Recent Comments