Another new record high for the Dow Industrials yesterday but the broader S&P 500, even though it also closed higher, still continues to lag the latest 0.2% gain in the Dow. US Bond yields are smartly higher, yet the combination of rising stocks and bonds that of late have been helpful to the US Dollar, have so far failed to support the ‘greenback’ this time, which is down across the board. The Euro/USD rose 1%, mainly on the back of the ECB’s no rate change and continued expressions of optimism by President Dragi towards economic recovery kicking in later this year, notwithstanding the slight downgrade to growth and inflation forecasts through 2014. A well received Spanish Bond Auction with a higher bid-cover ratio and lower yields than at last month’s auction also helped the Euro with peripheral bond yields lower across the board. US data has again been supportive of market risk, this time from an unexpected drop in Initial Jobless Claims to 340k which has brought the ‘4 Week Moving Average’ to its lowest level for five years.
This morning on the Economic front we have German Industrial Production followed big Non Farm Payrolls in the US at 1.30pm. After Wednesday’s better than expected ADP data, the market is probably priced in for higher than the expected 170k whilst the Unemployment Rate is expected to remain at 7.9% which, if validated, will serve as a reminder that the Fed’s $85 billion a month pace of balance sheet expansion is probably in place through 2013 at least.
March S&P 500
Another really quiet day as the market continues to trade slightly higher but in a very narrow range. The S&P continues to lag the Dow which has now broken it’s 2007 high by 150 points whereas the S&P is still 20 handles below its 1565 cash high. Today is Non Farm Payroll day and I have not traded the S&P since I covered my 1525 long position on Tuesday at 1535. Even though the market is very overbought on both a Daily and Weekly basis, I believe that until we get two down days in a row its is very hard to sell this market as we are so near new highs and because the market is so overbought it makes it very difficult to be long unless you have a tight stop. Today if we get a strong Payroll No. I will be a small seller from 1553/1558 with a 1561 stop. I will also look to buy the market on a weak No. from 1530/1535 with a 1524 stop. As I said yesterday as long as we stay over 1525 the market is still bullish.
Euro/USD
The Euro worked really well and after Dragi spoke I was able to take a really nice profit at 1.3100 on my 1.3010 long position and I am now flat. This 1.2950/1.3000 is now proving to be really strong support and it will take a closing break of 1.2950 for me to get bearish. Today if the Euro continues to rally from here I will be a seller from 1.3170/1.3200 with a 1.3220 stop. I am also a buyer on any dip to 1.3000/1.3030 with the same 1.2965 stop.
March DAX
The Dax is higher this morning and in my sell zone as outlined yesterday. I have now actually gone flat myself as I don’t want to have a position ahead of today’s Non Farm Payroll No’s. The Dax, just like the Dow and S&P, is very overbought and if we get a strong No. today I am a small seller from 8010/8040 with a 8060 stop. I still want to buy the Dax on any sell off to the 7870/7900 area with a 7849 stop.
June BUND
The Bund has now rolled to the June contract. The new pricing for the June contract has a 188 point discount from the March Contract. The key level to watch on this contract is 142.80. If we continue to trade over this price the market is still bullish whereas a break and close below here is short term bearish. Again, as today is Non Farm Payroll day, I am going to stand aside and get used to the new pricing before making a trade.
March Dow
As the Dow refuses to trade lower and with today been Non Farm Payroll day I have covered my 14260 short position at 14320 and I am now flat. The next key resistance level is 14440 and I am a seller today on any rally to 14400/14430 with a 14480 stop. I am also an aggressive buyer on any dip to 14170/14200 with a 14140 stop which is just below the 2007 highs that we broke out of last Tuesday.
Silver Rolling Contract
Silver traded down to my buy level late yesterday and I have gone long in very small at 28.75. As Silver is so volatile I have to leave my stop at 27.85.
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