Month/Quarter end, portfolio rebalancing and hedge-fund related flows dominated market price action on Friday. The Dollar Index closed up another 0.3% after two Fed members, Jeremy Stain and Jeffery Lacker, both gave hints that QE tapering will commence in September. This had the effect of pushing Treasury Yields higher, with the 10 Year Bond now back at 2.5%, and stock markets lower with the Dow losing 0.75%. Economic data was mixed with the Chicago PMI disappointing expectations at 51.8 down from 58.7 last month but the University of Michigan Consumer Confidence reading rose to 84.1 from a preliminary reading of 82.7 and better than the 83.0 expected.
The Fed comment that provided much of the related support for the US Dollar was Steins remark that ‘the best approach is to be clear that in making a decision, in say September, we will give primary weight to to the large stock of news accumulated – and we will not be unduly influenced by whatever releases arrive in the few weeks before’. Overnight, Asian stock markets, apart form Japan, declined on weaker than expected Chinese Manufacturing PMI which fell to its lowest level in four months.
Today, Mark Carney takes over as boss of the Bank Of England and his appointment will certainly add to more volatility with regards to the FTSE, Sterling and the UK Bond market as he starts to implement his own policies. This morning on the economic front we have German, UK and Euro-Zone Manufacturing followed by Euro-Zone CPI and Unemployment. Later in the US, we have Construction Spending and ISM Manufacturing.
September S&P 500
The S&P, having sold off on Friday after comments from Fed Member Stein is back higher this morning as new month buying comes into the market. This is a shortened trading week with the US markets closed on Thursday for the 4th July celebrations and is seasonally one of the strongest weeks of the year. My only interest in shorting the market is if we trade up to the 1617/1624 open Gap left from nearly two weeks ago and I will be a seller here with a 1628 stop. The S&P is leaving a large Gap this morning so far, from Fridays close, and today I will be a buyer on any dip to 1595/1600 with a 1592 stop which is just above the low made overnight.
Euro/USD
The Euro is holding in very well and continues to hold this very important 1.3000 level. The market dropped down to my 1.3000 buy level on Friday and I have taken profit this morning at 1.3040 and I am now flat. Today I will continue to look to buy the Euro on any dip to 1.2990/1.3010 with the same 1.2975 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1.2900 with a 1.2870 stop. I do not want to be short the Euro at this time.
September DAX
Very Frustrating as I got stopped out of my 7950 long position on Friday at 7925 and I am now flat. Today I will be a small buyer on any dip to 7900/7930 with a 7880 stop. My only interest in selling the Dax is if we rally back to 8090/8120 with a 8140 stop.
September FTSE
With Carney taking over as boss of the Bank of England today it promises to add to the FTSE volatility going forward as he tries to implement his own stamp on policy which should lead to good trading opportunities. My only interest in the FTSE at this time is to be a seller on any rally to 6270/6300 with a 6330 stop as I do not want to be long the market at this time.
Gold Rolling Contract
The Gold plan worked well on Friday as after the market dropped down to my 1195 buy level with a 1188 low. We got the buy extreme that all the Daily Sentiment Index readings were indicating and I covered half of my position on Friday at 1225 and I have just covered the other half at 1245 this morning and I am now flat. This Sentiment Index reading has been below 10% bulls for Gold for the previous six days which has never happened in the 26 year history of the data. I still like Gold and I will be a small buyer on any pull back to 1220/1232 with a 1208 stop as I look for a retest of the 1300 level over the coming weeks.
Silver Rolling Contract
Silver also left a buy extreme on Friday with the metal having a massive 6% rally. Having covered half my long 18.20 position at 18.85 on Friday I have covered the other half this morning at 19.90 and I am now flat. The area from 20.30/20.60 will be strong resistance and a closing breaking above 20.60 will be bullish. Today I will look to reset my long Silver position on any pull back to19.10/19.50 with a 18.95 stop.
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