Yesterday was not a great trading session for currencies, with the Euro losing a little ground. There was a slight risk-off tone to market sentiment as Ukrainian tensions and fighting continued, with Russian and US spokespeople trading words. The Russian MICEX Index closed down 1.7% and Ukraine’s PFTS by 3.3%. The data releases out of Europe and the US were just okay. US Q2 GDP was marginally revised up to 4.2% from the initial 4.0% print. Jobless Claims were still tracking just below 300k and Pending Home Sales rose more than expected in July. In Europe, German CPI came in as expected at 0.8%, year on year, whilst the Euro-Zone Business Climate Indicator was little changed in August. There was nothing to push the Euro down in the data but Ukraine tensions depressed the mood.
Although we have a lot of economic releases due today I would expect the markets to continue with low volumes ahead of the long Labour Weekend, with the US markets closed on Monday. As can be seen from the volumes, this week has been the slowest of the year so far and hopefully we will get back to normal trading again next Tuesday when traders from both sides of the Atlantic will be finished their summer vacations.
This morning on the economic front at 10.00 am we have Euro-Zone Unemployment and the now very important CPI. At 1.30 pm we have US Personal Income and Spending and this is followed at 2.45 pm by the Chicago Purchasing Managers Survey. Finally at 2.55 pm we have the University of Michigan Consumer Confidence which is expected to rise to 80.1 from last month’s 79.2.
September S&P 500
My open S&P trade worked well yesterday as the market had a nice drop after I posted which enabled me to cover my short 1996 position from Tuesday at 1990. It then dropped to my 1988 buy level and the rally that I was expecting at the end of the week due to the strong seasonal factors that are prevalent at this time of the year kicked in with the S&P rallying strongly into the close to finish at 1999. I covered my 1988 position at 1995 and I am now flat. Today I will be a buyer on any dip to 1989/1994 with a 1986 stop which is just below yesterday’s low. My only interest in selling the market today is on a rally to 2007/2012 with a 2015 stop. I would expect the market to return to two-way volatility when the US traders return to their trading desks next Tuesday.
Euro/USD
No change as I am still long the Euro at 1.3190 with the same 13160 stop. The Daily Sentiment Index for the Euro closed on Wednesday night at just 6% bulls which is one of the lowest on record. The market may well hold in until the ECB Meeting next Thursday but I cannot see the ECB doing enough to fight deflation. As I have mentioned over the last two weeks the German Bund Yield is telling us we are in for some nasty times ahead in the Euro-Zone and this is supposedly 7 years into an economic recovery.
US Dollar Index
No change as I am still a seller on any rally to 82.65/82.95 with the same 83.30 stop. The Dollar came close to my sell target this morning but so far has not traded at this level yet.
September DAX
As I mentioned earlier in the week, I decided not to chase the Dax higher as you do not know what new negative news is going to come out of Russia or the Ukraine. Yesterday after I posted the Dax started to sell off and eventually traded down to my 9460 buy level with a 9416 low. I am still long and I will leave my stop the same at 9415 as I would expect the month end buying pressure to push this Dax higher today. My only interest in selling the market is on a rally to 9600/9630 with the same 9655 stop.
September FTSE
The FTSE has almost literally stopped trading, with low volume and a narrow price range a feature all month. Hopefully this will change next week when normal trading should resume. I am still a buyer on any dip to 6750/6780 with a 6730 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Finally my short 17105 Dow position from earlier in the week paid off yesterday as shortly after I posted the market started to sell-off which enabled me to cover this position at 17040 and I am now flat. Today I will again be a seller on any rally to 17130/17170 with a 17205 stop. Given how overbought the Dow is currently trading I do not want to be long the market at this time.
September BUND
The Bund continues to not be my friend at this time as the market continues to rally no matter what negative news is thrown at it. It is now trading near 85 basis points (for 10 Year Bond) which is telling us that Europe is on its way to being another Japan. Next Thursday’s ECB Meeting and the Dragi Press Conference which follows is going to be one of the highlights of the year. Today I will move my buy level higher to 150.85/151.15 with a 150.65 stop. I will again try to sell the Bund on any further rally to 152.00/152.30 with a 152.55 stop.
Gold Rolling Contract
Gold just missed my buy level before trading higher and I am still flat. I really believe that it is trying to put in a bottom but we will probably need to see a decent correction in the equity markets before Gold really starts to rally. Today I will raise my buy level to 1278/1284 in small size with a wider 1269 stop.
Silver Rolling Contract
My long 19.40 Silver position finally worked out today as, shortly after I posted, it traded a lot higher which enabled me to cover this position at 19.80 and I am now flat. Today I will again be a small buyer on any dip to 19.20/19.50 with the same 18.95 stop.
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