The anticipation of the monthly US Payroll Number often ends with a shrug of the shoulders, a shake of the head and then ignoring the numbers and moving right on to the next data. This was the case last Friday as the weaker than expected headlines were dismissed as a non-event and as a result, Equities edged higher, Bond Yields and the US Dollar moved lower and the Japanese Yen under-performing.
US Employment tends to be significant market moving event but the confusing recent releases together with the Fed’s continuous insistence that QE Tapering will go on, increased the impact of the January data. The headline change in Employment was weaker than expected at 118k but the Unemployment rate fell to 6.6% from 6.7% in December. These factors, combined with annual benchmark revisions and poor seasonal adjustment factors resulted in most traders deciding to wait until next month to decide what it all means.
There was little other data released but lots of talk. The US’s debt ceiling debate returns to the fore with Treasury Secretary, Lew, sending a letter to Congress outlining the likely deadline of February 27 for when they run out of cash. As yet there is no Bill to be forwarded for a vote and they need to get their skates on to reduce any adverse market effects.
In China the PBoC has warned that the volatility in market rates is likely to continue as they move towards a more market driven system. This tends to weigh on risk appetite in Australia so it bears monitoring. In Europe the new banking supervisor, Nouy, has warned that some of the weaker banks may fail and that the upcoming bank stress tests may see some banks not meeting the criteria if they are to be credible.
On the economic front we have no data of note from either the US or the Euro-Zone today as the markets continue to react to last Friday’s surprisingly weak Payroll Number.
March S&P 500
Last Friday was a good example of why I go into a major announcement, such as Non Farm Payrolls, with no positions. However I do have a plan and orders to buy a dip or sell a rally after the data is released as we nearly always get a two way reaction. Friday was no exception as the S&P traded up to 1784 after the announcement before falling to 1758 and then spent the rest of the day trading higher. After the data was released, the market traded up to my 1779 sell level and amazingly almost traded back down to my 1756 buy level before trading higher. I covered my short 1779 position at 1765 and I am now flat. I am very impressed at how easily the S&P was able to break and close over the 1780/1785, the previous resistance level, and today I will be a small buyer from 1783/1788 with a 1779 stop. I will also be a seller on any rally to 1805/1809 with a 1812 stop.
Euro/USD
The Euro just missed my 1.3660 sell level before trading lower and I am still flat. The price action is making it very difficult to short the Euro as every time it is sold off it is bought by the market. The Euro has now easily regained its 100 Day Moving Average meaning we should have good support at the 1.3590/1.3620 level. I will be a buyer on any drop to the area with a tight 1.3575 stop. I do not want to be short the Euro at this time.
US Dollar Index
The US Dollar Index traded back down to my 80.70 buy level on Friday. I am still long and I will leave my stop the same at 80.30. The Index needs to break and close over 81.50 for me to turn really bullish.
March DAX
The decision not to be short the Dax for now is proving to be correct but unfortunately, for the second day in a row, it just missed my buy level before trading substantially higher. After the Non Farm Payrolls were released, the market traded down to a low of 9225 just missing my 9200 buy level before trading as high as 9350 and I am still flat. I do not want to chase the market higher at these levels and today I will be a small buyer from 9225/9250 with a 9195 stop. I still do not want to be short the Dax at this time.
March FTSE
The FTSE did not have as big a reaction to last Friday’s numbers and I am still flat. It closed near the key 6530 resistance level and today I will be a small buyer on any dip to 6495/6510 with a 6475 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
For a change I got really lucky with my Dow buy level on Friday as the market traded down to my 15530 level after the Payrolls were released and after a nice rally I was able to cover this position at 15680 and I am now flat. The Dow has major resistance from 16000/16200 and I will be a more macro seller on any rally to this area over the next week in small size with a 16250 stop. Today I will be a small buyer on any dip to 15670/15700 with a 15645 stop.
March BUND
The Bund just missed my 143.55 buy level on Friday with a 143.60 low before trading higher. Today I will raise my buy level slightly to 143.45/143.65 with a 143.30 stop.
Gold Rolling Contract
Gold is again challenging the key 1275/1280 resistance level and a break and close over 1280 will be bullish. Today I will raise my buy level to 1260/1268 with a 1255 stop. I still do not want to short Gold at this time.
Silver Rolling Contract
After I covered my long Silver position on Thursday the market traded lower but unfortunately just missed my 19.60 buy level. Silver is now back trading over 20.00 and I have decided to go long Silver at 20.10 this morning. I will leave a 19.70 stop on this position which is just below last Friday’s low.
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