Equities were generally lower yesterday as comments from Central Bankers worried investors, triggering a fall in the Euro and a rise in Sterling. US data was a tad weaker than expected which provided investors with an excuse to take some money off the table after the strong rally throughout January. Company news was somewhat mixed but investors tended to focus on some negative results from Sprint Nextel Corp, the third largest US wireless carrier. Sterling rallied strongly versus the Euro although it could not match it against the US Dollar as the incoming BOE Governor, Mark Carney said in a testimony to Parliament that “it is entirely possible – I hedge because I am not expert enough on the current situation in the UK – in fact probable, that the current stance of policy is consistent with the economy achieving escape velocity”. In other words he is saying that he is not sure if any more stimulus is needed – Sterling rose by 1.2% versus the Euro after these comments. In the US, Weekly Jobs disappointed with 366K versus 360K expected and Non Farm Productivity fell 2% following a 2.9% rise the previous quarter. At the ECB press conference yesterday comments from Dragi caused the Euro to have its biggest one day fall in seven months by suggesting its recent appreciation could dampen inflation, a signal that further interest rate cuts remain a possibility. This morning on the economic front we have CPI and Trade Balance from Germany, followed in the US by Wholesale Inventories and Trade Nos.
March S&P 500
It has been very frustrating to trade the S&P these last few days. Having been up 5 handles on the market in the morning I did not take my profit and I ended up getting stopped out of my 1506 long at 1498 and I am now flat. The market made a low at 1495 and then had a nice rally into the close on the back of the large move in Apple shares in the last hour of trading. Given how high the S&P has risen compared to last year I am going to have to trade in smaller size with a larger stop and I said yesterday the market needs to break and close below 1490 for me to get bearish. I still like the market and I still believe we will test at least 1530 before going lower. This morning I am a small buyer from 1500/1506 with a 1489 stop. I am only interested in going short if we test 1525/15320 with a 1535 stop.
Euro/USD
As noted above, the Euro had its largest one day fall in seven months on comments from Dragi yesterday. I bought the Euro at 1.3455 and I was stopped out at 1.3440 for a small loss and I am now flat. The next big support is 1.3350/1.3380 and I am a small buyer here with a 1.3340 stop. For me its is to dangerous to short the Euro here and if the Euro rallies over the next few days it will give me a better entry level to put on a short position.
March DAX
The Dax worked really well yesterday as we dropped down to my 7570 buy level in the afternoon. It performed better than the other indices as it is now correlated with the Euro. If the Euro rises the Dax falls and vice versa. I took a nice gain at 7615 on my 7570 long position and I am now flat. This morning I will look to reset my long position in small on any move down to 7560/7580 with a 7530 stop.
March BUND
The Bund also worked well and I took a nice gain at 142.20 on my 142.60 short position and I am now flat. The Bund is back at the important 143.00 level and this morning I am a small seller from 143.10/143.30 with a 143.40 stop. I will also look to buy the market on any dip back to 142.20/142.50 with a 142.12 stop which is just below yesterdays low.
March FTSE
The FTSE just missed my 6300 take profit level before getting hit hard after comments from Mark Carney. I was quickly stopped out of my 6260 long position at 6235 and I am now flat. I have no strong view here and I am going to stand aside and have another look on Monday.
GBP/USD (Cable)
Cable is better bid this morning on comments from Carney and I will look to buy on any dip to 1.5680/1.5710 with a 156.60 stop.
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