The S&P500, Dow and NASDAQ all closed 0.5% higher on Friday follower another barnstorming day for European stocks that saw Germany’s DAX rally by 1.75% to a new record closing high with the market now up over 26% year to date. The Eurostoxx closed 1.0% higher for a 21.3% YTD gain. Sentiment, not news, appeared to drive the flow. Gains followed a fresh push higher in Hong Kong’s Hang Sang Index, +1.2% on top of last Thursday’s 5.75% surge. Inflows on both Thursday and Friday from mainland China met the 10.5bn Yuan daily maximum allowed, and the Hong Kong Central Bank bought $1.7bn in Asia and then $1.4bn in New York to defend the HK Dollar peg, following $400mn purchases on Thursday.
US Treasury Yields were slightly lower from 5 years out to 30 years, though the 2-year yield rose into the close and following reported comments from the hawkish Richmond Fed President Jeffery Lacker, who stated his preference is for a first rate hike in June. Lacker also started in the Q&A to define ‘several’ ( in respect of last week’s FOMC Minutes that reported several Members favouring a June first tightening) said ‘it was a pretty substantial amount in my recollection’. In contrast the ultra-dovish Kocherlakots said it would be a mistake were the Fed to raise rates this year.
In FX, the US Dollar continued to push higher led by GBP/USD and EUR/USD, with the latter closing 0.5% lower at 1.0604, while Sterling lost ground in part on a disappointing Industrial Production and Construction data closing 0.60% lower at 1.4632 which is its lowest closing level since June 2010.
In Commodities, Iron Ore was lower again while Gold and Oil both rose.
This week is very heavy for economic releases but unfortunately we have no data of note due on either side of the Atlantic today.
June S&P 500
For a change the S&P traded in a very narrow range in last Friday’s trading session. However the S&P did manage to close at a new all-time closing high. I will continue with my strategy of selling rallies in both the S&P and Dow as this plan has worked very well so far in 2015. Very near the close last Friday night the S&P traded higher to my 2096 sell level. I am still short and I will leave my stop the same at 2104 on this position. If I am stopped out of this trade I will use my ‘5 Handle Rule’ to go short again with a stop above whatever new high is printed. Note for new members please click on the education tab on my www.tradernoble.com website for an explanation of the ‘5 Handle Rule’. I will also raise my buy level slightly to 2079/2084 with a 2075 stop. The S&P is overbought on both a Daily and Weekly basis but we still need a sell extreme that lasts more than a few days for me to put on a more long-term bearish strategy.
EUR/USD
The Euro plan worked very well on Friday as shortly after I posted the Euro traded lower to my 1.0575 buy level before having a nice rally shortly after the US markets opened which enabled me to cover this position at 1.0620 and I am now flat. The Euro is extremely oversold on nearly every Technical Indicator that I watch, while sentiment remains at near extreme levels towards the Euro. Today I will again look to buy the Euro on any further drop to 1.0530/1.0560 with a 1.0525 stop. Again If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1.0480 with a 1.0450 stop which is just below the lows made in late March.
June US Dollar Index
The Dollar plan also worked well on Friday as shortly after I posted the Dollar traded higher to my 99.90 sell level before having a nice sell-off after lunch which enabled me to cover this position at 99.50 and I am now flat. With sentiment at such extreme levels towards the Dollar I will continue with my strategy of selling rallies with a tight stop as I firmly believe that the Fed are not going to hike rates to the extent that the FX Markets are currently pricing in. Today I will again be a small seller from 99.95/100.30 with the same 100.50 stop.
June DAX
The DAX plan did not work out on Friday as just as I posted the DAX was spiking higher to my 12340 sell level before very quickly stopping me out of this trade at 12380 for a small loss and I am now flat. With the DAX closing at new all-time highs again on Friday I am not going to look to sell the market despite how overbought the DAX is, unless we get a decent sell extreme that holds for more than a few hours. Given the extent of last Friday’s move higher I will raise my buy level to 12270/12320 with a 12235 stop.
June FTSE
I am very surprised by the extent of the move higher in the FTSE over the past few days especially with the UK Election just over three weeks away. Shortly after I posted on Friday I was stopped out of my 6975 short position for a small loss at 7020 and I am now flat. The move higher on Friday has just like the other major European bourses led to a new all-time closing high for the FTSE. However the FTSE is trading at the top of its Bollinger Band while interestingly Williams Index has given a small sell signal this morning. Today I will be a small buyer on any further dip lower to 6970/6990 with a 6955 stop. Given the move in the Williams Index I will be a small seller on any further rally to 7050/7085 with a 7105 stop.
Dow Rolling Contract
The Dow plan also worked out very well on Friday as shortly after I posted the Dow had a nice rally to my 18010 sell level before having a nice sell-off which enabled me to cover this position at 17060 and I am now flat. Just like the S&P above I will continue with my strategy of selling rallies with a tight stop and today I will again look to go short on any further rally to 18060/18110 with a 18140 stop. I still do not want to be long the Dow at this time especially with three confirmed Hindenburg Omen’s on the clock.
June BUND
No change as I am still as small seller on any further rally to 159.55/159.85 with the same 160.10 stop.
Gold Rolling Contract
My long 1199 Gold position finally worked out well on Friday as shortly after I posted gold started to rally which enabled me to cover this position at 1210 and I am now flat. Today I will again look to buy Gold on any dip lower to 1192/1198 with a 1187 stop which is just below last week’s 1192.50 low.
Silver Rolling Contract
No change as I am still long at 16.40 with the same 15.90 stop.
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