The ECB and developments in Hong Kong have dominated the headline and intra-day market price action over the last 24 hours, the latter more so than the former. US stock markets recovered to close flat on the day, having being lower earlier in the trading session (-1.4%) on news that Hong Kong’s Premier Leung planned to meet with protest leaders and would hold a press conference.
This news coincided with Twitter reports that Chinese military vehicles were crossing borders into Hong Kong. The fear from a market perspective, at this stage, was that if Leung announced his resignation-as demanded by ‘Occupy Central’ protestors, he would be replaced by an even more pro-Chinese Premier and that the protests could escalate rapidly. It transpired that Leung merely recognised that reforms would follow basic law and that he planned to meet with student leaders which elicited a relief rally in equities and a sell-off in bonds. Currencies also traded in fairly choppy fashion over the past 24 hours with the Dollar also having a nice sell-off.
The Euro closed firmer alongside sharply weaker Euro-Zone equities and higher Euro-peripheral Bond Yields after ECB President Dragi underwhelmed in his post Naples ECB Meeting press conference. The ECB left its key lending and deposit rates unchanged at 5bps and -20bps respectively and outlined plans to commence the purchase of Covered Bonds this month and ABS during Q4. The ECB will relax its credit standards to allow for the purchase of senior tranches of Greek and Cypriot bonds. Disappointment stemmed from the absence of a cast iron commitment from Dragi to do ‘whatever it takes’ to expand its balance sheet back to its 2012 peaks ie from €1 trillion to €3 trillion.
This morning on the economic front we have German and Euro-Zone Services PMI at 9.00 am. The UK will release its Services PMI data at 9.30 am while at 10.00 am we have the latest Euro-Zone Retail Sales which are expected to fall 0.4%. At 1.30 pm we have the US NonFarm Payroll data where the consensus is for a 210K rise after last month’s disappointing 142K. At 2.45 pm we have the US Services PMI while finally at 3 pm we have the ISM Non Manufacturing Composite.
Note: I am giving a talk on the markets next Tuesday and I will take time to go through these indicators in detail. If anybody wants to attend please click on the ‘Event Icon’ on my tradernoble website for details.
December S&P 500
Yesterday was one of the wildest trading sessions for the S&P in a very long time as at one stage it look like the market was going to have a mini-crash before buyers again returned to the market and managed some how to close over the now key 1935 support level. This is why the Daily Bollinger Band and Williams Index are very important and reliable technical indicators to follow.
The S&P plan worked well yesterday as after I posted, the market was trading at my 1938 buy level and as expected we got a nice rally ahead of the ECB announcement which enabled me to cover this position at 1944 and I am now flat. Subsequently the S&P made a new low at 1919 before having this massive ‘V’ shaped rally all the way to the close. I am going to stay flat until we get the Non Farm Payroll data out of the way. If the S&P rallies after the release I will be a small seller from 1959/1964 with a 1968 stop. I will also look to buy the market on a weak print to 1925/1933 with a wider 1918 stop which is just below yesterday’s low. I am hoping that yesterday’s low print will be the low for a while as a break and close below 1918 opens up the possibility of a move to at least 1870. On the other hand if the S&P can break and close back above 1992 then we are looking at a move to new highs at 2100.
Euro/USD
For once I was very lucky with my Euro plan yesterday as after the ECB announcement the Euro spiked lower to my 1.2615 buy level before having a nice rally which enabled me to cover this position at 1.2680 and I am now flat. Given how oversold the Euro is currently trading as evident by the very low Daily Sentiment Index readings I still believe that we ill get a nice counter trend move to the upside. Today I will move my buy level higher to 1.2610/1.2640 with a 1.2585 stop.
US Dollar Index
My short Dollar Index also worked well yesterday as the Dollar had a nice move lower on Dragi which enabled me to cover my short 86.10 position at 85.65 and I am now flat. Today I will again be a seller on any rally back to 85.90/86.20 with a 86.50 stop which is just above last week’s high.
December DAX
I was not so lucky with my Dax plan yesterday as after I posted the market had a very nice rally just falling short of my 9440 sell level before having another 250 point move to the downside and after I went long at 9250 I was stopped out near the lows of the day at 9195 and I am now flat. The next big support comes in at 9160/9180 exactly where the Dax bottomed yesterday and today I will be a small buyer from 9170/9200 with a 9135 stop. Given how oversold the Dax is trading I do not want to be short the market at this time.
December FTSE
After I posted, the FTSE rallied ahead of the ECB announcement which enabled me to cover my long 6500 position at 6530 and I am now flat. I have to respect the fact that the FTSE closed below the key 6500 support level and this price level should now act as strong resistance. Despite the fact we are trading below this key resistance I do not want to short the market it is very oversold at this stage. The next key support is at 6380 and today I will be a small buyer from 6380/6410 with a 6365 stop.
Dow Rolling Contract
I was also very lucky with my Dow execution yesterday as the market traded down to my 16760 buy level before having a small rally which enabled me to cover this position at 16800 before the market traded down 150 points and back up 200 points in a very short space of time and I am now flat. The big question is was yesterday’s spike lower to 16590 the low for this move or will we have another test before trading higher. Two weeks today the Dow was trading at 17350 so we have had a 750 point move lower in just 9 trading sessions. Today I will again be a small buyer on any dip to 16720/16780 with a 16680 stop. I do not want to be short the Dow at this time.
December BUND
No change as I am still flat the Bund. I am going to stay flat until I see which way this market is going to break as we are at such a key level at 150.00 as mentioned in yesterday’s update.
Gold Rolling Contract
No change as I am still long at 1214 with the same 1199 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 1187 with a 1173 stop.
Silver Rolling Contract
I am still long at 16.95 with the same 16.45 stop. A break of 17.50 will see me add to my long position with a 17.10 stop on the two trades.
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