Markets can be fickle! We wait a whole month for the US Payrolls to provide guidance – it turns out to be good – and then some very poor Chinese trade data over the weekend changes the story. Its a lesson in the fact that you can never ever be sure or predict what is going to happen and that is why the essence of effective trading is in having a view, creating a plan (which includes how you are going to protect yourself with stops) and then sticking to it once you execute! Anyway, as a result of the poor Chinese news, European markets are opening a lot weaker this morning.
On Friday, post the positive US data, Equities were a little higher, 10 Year Yields were higher as US Payrolls rose 175k versus 150k expected, despite the weather being a headwind. Earnings were also good and the prior months were revised higher. However the Unemployment Rate did tick up.The S&P made yet another new high but reversed course shortly after the US markets opened and finished flat on the day.
China’s trade data was horrible. They reported a $23 billion deficit against the $14 billion surplus expected with Exports down 18.1% year on year. Markets are now worried about the underlying state of the Chinese economy again. On the upside, Chinese CPI came in at 2% year on year, versus 2.5%, so there is no need for policy tightening. Another reason for markets opening weaker this morning is the rise in Ukraine and Russian tensions. The Referendum for the Crimean Peninsula is due next Sunday so we may see tensions continue through until then.
Today we have no economic data of note from either side of the Atlantic as most notable data is due on Thursday and Friday when Retail Sales and Consumer Confidence will be released.
March S&P 500
After the Non Farm Payrolls were released last Friday, the S&P made yet another new high before reversing once the day session of US markets opened – it finished the day flat. It traded up to my 1886 sell level before having a nice sell-off which enabled me to cover my short position at 1878 and I am now flat. The S&P has still left the huge 1844/1862 Gap from last Tuesday. It is opening a lot weaker this morning on the back of the poor Chinese Trade data released over the weekend. Today I will be a small buyer on any dip to 1860/1866 with a 1858 stop. If I am take long and subsequently stopped out I will be a more aggressive buyer in front of 1845 with a 1841 stop. My only interest in selling the S&P today is on a rally back to 1881/1886 with a 1890 stop which is just above last Friday’s high.
Euro/USD
The Euro just missed my 1.3840 buy level on Friday before having a nice rally back to 1.3890 and I am still flat. It continues to be a ‘buy on dips’ market especially that we have now convincingly broke the key 1.3820/1.3850 resistance zone which should now act as good support going forward. Today I will raise my buy level slightly to 1.3825/1.3855 with a 1.3795 stop on any long position. I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still long the Dollar Index from last Thursday at 79.80 with the same 79.30 stop. As long as the market stays over 78.90 it is okay but a break and close below this level will be very bearish for the Dollar in the short term.
March DAX
My opinion that the Dax was trading heavily on Friday proved accurate as, after the Non Farm Payrolls were released, it traded up to my 9520 sell level before falling 200 points and I was able to cover my short position at 9395 and I am now flat. The Dax is again opening weaker this morning, on the weak Chinese Trade data, but is approaching good support at 9260/9290 where I will be a small buyer with a 9235 stop. Given how oversold the Dax is trading today and by how much it is underperforming the other major indices I do not want to be short the market at this time.
March FTSE
The FTSE also worked well on Friday as the market traded down to my 6720 buy level before having a nice rally and I was able to cover this position at 6745 and I am now flat. The FTSE has broken the key 6720 support this morning and if it can break and close below 6685 today it will be very bearish and opens up a test of 6600, and possibly even 6500, over the coming days. Today I will be a small seller on any rally to 6740/6760 with a 6775 stop. I do not want to be long the FTSE at this time.
Dow Rolling Contract
I was very unlucky on Friday as the Dow just missed my 16530 sell level with a 16516 high before the market got hit hard and I am still flat. As mentioned over the last few weeks if the Dow cannot break its December 31 high at 16589 we will have negative divergence in relation to the S&P which potentially could be very bearish going forward. Today I will raise my buy level slightly to 16320/16360 with a 16280 stop. My only interest in selling the Dow is on a rally to 16540/16580 with a 16610 stop.
June BUND
The Bund rallied ahead of the Non Farm Payrolls on Friday enabling me to cover my long 142.20 position at 142.40 and I am now flat. Having broken the key 142.00 support level after the Non Farm Payrolls were released, it is back trading at 142.30 this morning. Today I will be a small buyer from 141.90/142.15 with a 141.75 stop which is just below last Friday’s low.
Gold Rolling Contract
Gold continues to consolidate above 1300. Today I will leave my buy level the same at 1310/1318 with a 1305 stop. I do not want to be short Gold at this time.
Silver Rolling Contract
After I posted on Friday, Silver traded down to my 20.80 buy level. I am still long and I will leave my stop the same at 20.40 as I look for Silver to break back above 21.00.
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