Markets remained subdued yesterday due to a combination of some disappointment after the ECB meeting and the soft economic data in Europe and the US. Meanwhile the Japanese Yen has continued to weaken further after the BOJ meeting. As expected there was no policy change from either the ECB or the BOE, but in Europe there was some disappointment that President Dragi failed to announce a series of non-standard monetary measures in his pres conference. However he did acknowledge that the recovery is now subject to downside risks and that there had been a discussion of a cut in interest rates. By talking down the economy, Dragi may be trying to limit Euro appreciation, especially in light of the BOJ actions. Dragi also stressed that the Cyprus bailout should not be seen as a template for future bailouts. Meanwhile Sterling strengthened after the BOE left the Bank rate at 0.5% and also maintained its asset purchases of £375 billion. The GBP/USD rebounded form intra day lows of 1.5050 to 1.5250. European Equity markets were down across the board but US Equities made small gains after a late session rally. The Euro-Zone PMIs were revised a touch lower whilst the weekly US Jobless Claims rose to a weak 385k from 357k last week.
This morning on the Economic front we have Euro-Zone Retail Sales and German Factory Orders. The ECB will also release its 3 year LTRO repayments. All focus then turns to the US at 1.30 pm when the Non Farm Payrolls are released. These were expected to be 200k in March although expectations have been wound back somewhat after the 158k gain in the ADP last Wednesday. The unemployment rate is expected to remain at 7.7%.
June S&P 500
The S&P worked well yesterday as we traded up to my 1556 sell level with a 1557.50 high. I took profit at 1549 and I am now flat and I am going to stay this way until after the Non Farm Payrolls are released. The expectations for a strong Number have been revised down after the weaker than expected ADP report and the much higher than expected Weekly Jobless Claims. If we get a strong Payroll Number today I will be a seller from 1560/1564 with a 1569 stop which is just above contract highs made last Tuesday. If the Payroll comes in weaker than expected I will be a buyer on any dip to 1536/1540 with a 1529 stop. Otherwise I will do nothing and wait for the market to make up its own mind as to which way we break from here. A break and close below 1530 will be very bearish and the first signs that a top is in the market as we still have not had two strong down days in a row this year.
June DOW
The Dow just missed my sell level yesterday before falling 100 points and I am still flat. Today I will look to sell any rally to 14610/14640 with a 14680 stop. I have no interest in been long the market at this time.
Euro/USD
The Euro worked well yesterday as after Dragi finished his press conference it rallied over 150 points as the trend for been long the Euro into his press conferences continues. I took profit to early at 1.2880 on my 1.2800 long from yesterday morning and I am now flat. I think the market is caught short the Euro and I am looking for another short squeeze higher before I will look to go short again. Today I will be a small buyer on any dip to 1.2860/1.2890 with a 1.2835 stop. I will also look to go short in small on any rally to 1.2980/1.3010 with a 1.3020 stop. A break and close over 1.3050 will likely lead to the Euro trading as high as 1.3200 before sellers return.
June BUND
Unfortunately I was stopped out of my 145.65 short position at 145.90 for a small loss and I am now flat. With the present flight to quality into the Bund we will have to see a sell extreme first before we can say that the Bund has reached a top. I do not want to be long at this time and if the Bund rallies to 146.20/146.50 I will be a seller with a 146.70 stop.
June DAX
The Dax was hit hard yesterday as the market resisted the key 7920 level. This morning I am a seller on any rally to 7870/7900 with a 7920 stop. If the Dax continues to sell off from here I will be a reasonably aggressive buyer on any dip to 7735/7760 with a 7710 stop.
June FTSE
Yesterday proved why it is so important to have stops in the market as after I was stopped out of my long position at 6350 the FTSE followed the Dax by getting hit hard. This morning I will be a buyer on any dip to 6220/6240 with a 6195 stop.
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