Markets lost ground yesterday as we await Bernankes speech this afternoon. Spain is again in the news after delaying its decision on whether to seek a bailout whilst European Economic data is so dismal. Spanish PM, Rajoy said that he will delay making a decision on whether to seek a sovereign bailout until he has some clarity as to what exactly is on offer. Both he and French President Hollande called on the ECB to implement the decision from the June Summit and lower borrowing costs for EU members facing financial problems. Meanwhile the Valencia Region is seeking an extra 1bn Euro, thus raising its rescue fund to 4.5bn Euro. Euro-Zone confidence data was dismal, falling to its lowest level since mid-2009 with business and consumer confidence readings in August suggesting that the Euro-Zone economy is on course to contract by 1% in the third Quarter.This news hit the European Equity markets hard.
Today the main focus will be on Bernankes speech in Jackson Hole where he will speak on Monetary Policy since the crisis, and markets will be looking for him to signal plans for additional monetary stimulus. On the data front we have CPI and Unemployment from the Euro-Zone and later, in the US, we have Chicago PMI, US Factory Orders and University of Michigan Consumer Confidence. Tomorrow morning we have PMI from China.
Sept S&P 500
The S&P dropped down to my buy area after the weak economic releases and I went long at 1400. It is very difficult to have a position into Bernankes speech. If he implements QE3 the market will roar along with Gold and Silver and the the US Dollar will weaken. However no mention of QE and the market will fall hard. I am going to cut my position before he speaks and if we drop hard I will be an aggressive buyer on any dip back to the 1362/1375 Gap which remains from four weeks ago. On the other hand, if he implements QE I will look to go short from 1420/1425 with a 1427 stop.
EURO/USD
The Euro dropped down to my 1.2490 buy level and I am going to leave a breakeven stop on this position. If we rally up to the 1.2540 level before Bernanke speaks I will cut my position and go flat. Similar to the S&P if QE3 is announced and the Euro rallies I will be a seller into the 1.2680/1.2720 area with a 1.2760 stop. This 1.2700/1.2750 is the key level for the next major move in the Euro going forward.
Sept FTSE
The FTSE is still at the bottom of the Bollinger Band and the market dropped down to my buy zone and I went long at 5710. I am going to hold this position into Bernankes speech and I will leave my stop the same at 5690. If the market rallies I will look to take profit from 5770/5800. I do not want to be short at this time.
Sept DAX
The Dax also dropped down to my buy area at 6910. I have covered this position to go flat this morning as the Dax is too dangerous to have an open position into this afternoon, even though we are at the bottom of the Bollinger Band. If the Dax drops hard later I will look to go long from 6800/6830 with a 6780 stop.
Oct Crude Oil
Crude rallied yesterday morning but just missed my 9580 sell level and then I was stopped out on my 9485 long at 9470 and I am now flat. Again it is too dangerous to have a position into this afternoon and I will stand aside and look at it on Monday.
USD/JPY
I was stopped out of my 7850 long position for a small loss at 7840 and I am now flat. I still believe the Yen has to weaken and I will use any weakness to go long USD/JPY. Today I will look to go long on any dip back to the 7770/7800 area with a 7750 stop on any long position.
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