Equity markets have again lost ground yesterday on tapering fears after good US Economic data was reported. US GDP was revised up to 3.6% from 2.8% versus 3.1% expected after upward revisions to inventories and non-residential investment whilst Weekly Jobless Claims fell to an impressive 298k from 321k last week. It is only the second Jobless Claim below 300k since 2007 but there has been a lot of volatility in this data in the last few months.
Markets also appear to be pre-positioning for the prospect of an upward surprise for the Non Farm Payrolls today. The median forecast is +185k,but the run of good US data in the past week means there is some upside risk to that forecast. A 200k+ outcome would not be overly surprising and it would further escalate expectations of a start to Fed tapering on December 18.
In Europe,no change at the ECB Meeting,with the ECB expecting the Euro-Zone Economy to grow by 1.1% next year and it is also confident that deflation has been avoided. A negative interest rate was only briefly discussed at the meeting but Dragi affirmed that the ECB retains an easing bias and further action in 2014 was not ruled out. The Bank of England also made no change to policy,which did not help Sterling which is the weakest performing currency over the last 24 hours.
This morning we have no economic data from Europe and all eyes will be on the Non Farm Payrolls from the US at 1.30 pm. This data is followed at 2.55 pm by the University of Michigan Consumer Confidence and the Fed’s Plosser is due to speak on the economy later this afternoon.
December S&P 500
The S&P closed down another 0.5% yesterday for the fifth down day in a row as there is nervousness about a larger than expected Payroll increase when the Non Farm Payrolls are reported at 1.30 pm. The S&P has again held important support at the 1778/1782 support zone. Yesterday after I posted the S&P was trading at my 1787 buy level and after a small rally after lunch I was able to cover this position at 1791 and I am now flat. I am going to stay flay ahead of the Payrolls announcement today and the FOMC Meeting. These are the only two days of the month that I will have no S&P position and I will always be flat going into these important announcements. If the market sells off after the release of the Non Farm Payrolls I will again be a buyer on any dip to 1779/1783 with a 1776 stop. I will also still be a seller on any rally to 1804/1808 with a lower 1812 stop.
Euro/USD
Surprisingly the Euro continues to strengthen against the US Dollar as Dragi said nothing to knock it lower at his press conference, following the ECB Meeting yesterday. I am glad that I had no sell level for the Euro as I prefer to be long the US Dollar via the US Dollar Index at this time and my 80.25 buy level was finally hit yesterday afternoon and I am still long and I will leave the same 79.80 stop on this position. My only interest in selling the Euro is on a rally to 1.3710/1.3730 with a 1.3750 stop. The Euro is overbought and at the top of the Bollinger Band but not the Williams Index. I do not want to be long the Euro at this time.
December DAX
The Dax worked really well yesterday as shortly after the US opened it traded down to my 9080 buy level and after a nice rally this morning I have covered this position at 9135 and I am now flat. Today I will still be a small buyer on any dip to 9070/9100 with a 9055 stop which is just below yesterday’s low. I still do not want to be short the Dax at this time. Given today is Non Farm Payroll day I have decided to cover my short 2818 Dax/FTSE position at 2625 this morning and I am now flat.
December FTSE
The FTSE also worked well yesterday as the market traded down to my 6490 buy level. Given how oversold the market is I am going to keep this position and I will raise my stop to 6470 as the Williams Index has given a small buy signal for the FTSE.
Dow Rolling Contract
The Dow also traded down to my 15815 buy level and as expected has again found good support at 15800. The Dow is still trading at the bottom of the Bollinger Band and as I am ahead in this trade at the moment I am going to hold this position with the same 15770 stop. One of the reasons that I am staying long is the fact the Dow is down nearly 400 points from the highs made last week despite the good economic data.
March BUND
Unfortunately I was stopped out of my December 140.45 long position at 139.95 and I am now flat. The Bund has now rolled to the March Contract and I am going to stay flat today as I want to see the new price action for this contract before making my next trade.
Gold Rolling Contract
Shortly after I posted yesterday morning Gold was trading at my 1230 buy level before quickly falling and stopping out of this position for a small loss at 1222 and I am now flat. I still believe that Gold is trying to put in a reasonable bottom in front of 1180 and today I will still be a buyer on any dip to 1212/1220 with a 1208 stop which is just below this weeks low. If I am taken long and subsequently stopped out I will be a more aggressive buyer from 1182/1192 with a 1173 stop.
Silver Rolling Contract
My Long 19.25 position was finally stopped out for a breakeven and I am now flat. I still like Silver and today I will be a buyer on any dip to 19.00/19.25 with a 18.75 stop.
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