Apologies for the delay in today’s post but it was due to a problem with the internet connection in the office.
Another fall in equity markets yesterday as the US Government shutdown continues with little progress between President Obama and Congressional leaders. Whilst markets are already frustrated with the shutdown there is also rising concern about the US debt ceiling. The US Treasury said a US default could cause a recession worse than 2008 whilst the IMF’s Christine Lagarde warned that failing to raise the US debt ceiling by October 17 would thereafter threaten the entire global economy.
US equity markets finished the day down another 0.9% whilst European markets averaged a 0.5% decline. The Weekly Jobless Claims came in at 308k, better than the 315k expected. However there was an unexpected fall in the Non-Manufacturing ISM which fell to 54.4 in September from 58.6 in August.
As for Non Farm Payrolls due today, the US Bureau of Labour Statistics confirmed it will not release the report at 1.30 pm and an alternate date has not been scheduled. Amid the current US Fiscal issues,the chances of the Fed starting its QE ‘tapering’ this year continues to dwindle. There are two more meetings this year with the next one due on October 29-30, it is improbable that they will ‘taper’at this meeting and a lot will have to go right for the Fed to taper at the next meeting on December 18 which will also be Ben Bernanke’s last meeting and press conference as Fed Chairman.
Today on the economic front we have no significant data due from the UK or the Euro-Zone whilst later from the US we have Retail Sales at 1.30 pm,Industrial Production at 2.15 pm and finally University of Michigan Consumer Confidence.
December S&P 500
The S&P is now getting oversold on a Daily basis having been down for 9 of the past 11 trading sessions. We are at the bottom of the Bollinger Band but not the Williams Index and worryingly the McClellan Oscillator (internal reading of the stock market) closed only -80 last night and for me to be really confident of a meaningful rally I would like to see this indicator with a-250/-300 print.
Shortly after I posted yesterday the S&P was trading at my 1678 buy level and after a nice rally to a 1684.25 high I was able to cover my position at 1683 and I am now flat. The market tested my 1668 support level but managed to close over this level. Given that we are at the bottom of the Bollinger Band I will be a small buyer on any dip to 1662/1666 with a 1659 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1642/1650 with a 1638 stop. Remember if we get a Budget agreement we will have a short and very sharp rally and this is why I am rshying away from the short side.
Euro/USD
The Euro continues to frustrate all traders who are short the market as the Euro is now approaching the 1.3700 highs made last February. I will leave my sell level the same at 1.3670/1.3700 with the same 1.3720 stop. I will still be a small buyer on any dip to 1.3550/1.3580 with a tight 1.3535 stop.
December DAX
The DAX just missed my 8655 sell level with a 8650 high before spending the rest of the day trading lower. Subsequently the market broke my 8590 sell level and I am now short in small at 8590 with the same 8620 stop. If I am stopped out of this position I will be a more aggressive seller in front of 8650 with a 8680 stop. I do not want to be long the Dax at this time as this market is overdue a reasonable correction.
December FTSE
The FTSE plan worked well yesterday as the market traded down to my 6400 buy level with a 6392 low before having a small rally and I was able to cover this position at 6425 and I am now flat. I still like the FTSE and I will be a buyer on any dip again to 6370/6395 with a 6349 stop which is just below Wednesday’s low.
Dow Rolling Contract
I have not traded the Dow for a few months now but I think there is a good trading set up developing. Unlike the S&P above the Dow is at the bottom of the Bollinger Band and Williams Index. The market is down nearly 800 points form its Sept 18 highs. Today I will be a small buyer from 14900/14950 with a 14825 stop.
December BUND
The Bund plan worked well yesterday as shortly after I posted, the Bund was trading at my 139.90 buy level and after a nice rally I was able to cover this position at 140.30 and I am now flat. Today I will look to reset my long position on any dip to 139.70/140.00 with a 139.55 stop.
Gold Rolling Contract
Gold also worked well yesterday as Gold traded down to my 1306 buy level with a 1301 low before having a nice rally and I was able to cover this position at 1318 and I am now flat. As I have been saying the key level for Gold is 1290 as a break and close below here for two consecutive days will be very bearish. Today I will again be a small buyer on any dip to 1302/1310 with a 1297 stop which is just below yesterday”s low.
Silver Rolling Contract
Shortly after I posted yesterday Silver was trading at my 21.50 buy level and after a small rally I was able to cover my position at 21.75 and I am now flat. I still like Silver and I will be a small buyer on any dip to 21.25/21.50 with a 20.95 stop.
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