A US February Employment report that comfortably exceeded expectations in all departments made it five out of five for US Equities last week with the Dow posting another new record high up 0.47% on the day to close at 14,397 with the S&P and Nasdaq not far behind. The onus is now on the S&P to scale its record high of 1565 made in October 2007. US Treasury prices crunched lower straight after the Payrolls with 10 Year Yields hitting 2.10% before easing down to 2.04% in late trading, up 5 basis points (bps) on the day and 20 bps higher on the month. The combination of rising Stocks and Bonds is acting to further undermine the hitherto negative correlation between risk appetite and the US Dollar with the Dollar Index rising another 0.75%. For markets the key takeaway from Friday is that risk assets are holding their poise despite the resurrection of concerns about how quickly the Fed might look to take away the ‘easy money’. This is now challenging the received wisdom that in the absence of the Feds largesse risky assets must sell off.
There is nothing of note due on the US Calendar today. Europe will get Industrial Production for France and Q4 GDP for Italy whilst Germany has Trade and Current Account data.
March S&P 500
The S&P has closed up for 8 of the past 9 days and 9 out of the past 10 weeks which includes all but one week of this year. The daily sentiment index has risen to 80% bulls which is the highest reading since July 2011. The end of market rallies often occurs when this reading is over 75%. On Friday, the S&P worked well as we traded up to my 1553
sell level after the release of the ‘Number’ and I was able to take a nice gain at 1545 and I am now flat. As the market is so overbought yet we are only 1% from all time highs making it tricky to make a call from here. Today I am a small seller on any rally to 1553/1558 with a 1566 stop. If I am taken short and subsequently stopped out I will use any ‘5 handle sell off rule’ to get short again with a stop at whatever high is put in.
Euro/USD
Unfortunately I had my stop to tight on Friday and I was stopped out of my 1.3010 long position at 1.2965 before the market rallied back over 1.3020 and I am now flat. Today I will look to buy the market again on any dip to 1.2950/1.2975 with a 1.2935 stop.
June BUND
The Bund is holding well in comparison to the US Treasuries. I like the Bund and today I am a small buyer on any dip to 142.50/142.70 with a stop at 142.20 which is just below Frday’s low.
March DAX
The Dax also worked well on Friday as after the No’s were released we traded up to my 8010 sell level with a 80210 high. I took profit at 7970 on my 8010 short position and I am now flat. This morning I am a seller on any rally back to the 8010/8040 area with a 8060 stop. I do not want to be long the Dax at this time.
March Dow
The Dow also worked well on Friday because after the No’s, the Dow traded up to my 14415 sell level and I was able to take profit on this position at 14360 and I am now flat. Today I will look to go short again on any rally to 14400/14430 with a 14460 stop. I do not want to be long at this time given how over extended the market is.
Silver Rolling Contract
Having watched Silver trade down to 28.40 I have taken profit this morning at 29.10 on my 28.75 long position and I am now flat. Today I am a buyer of Silver on any dip to 28.30/28.60 with a 27.85 stop.
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