The US stock market had another bad day on Friday, led by the NASDAQ which lost a further 1.34% to close down below 4000 for the first time since early February and is down 4.3% for the week. The S&P 500 closed down 0.95% for a loss of 2.9% on the week whilst the DOW fell 0.88% to be down 2.4% – all three indices are now in the red for the year.
Alongside the continued melt-down in technology stocks in which excessive valuations continues to be trotted out as the cause of the sell-off, financial stocks also weighed on the broader market. This was after JP Morgan reported a 19% drop in earnings over the same period of 2013 at $1.28 per share which missed its consensus earnings estimate of $1.40.
Weakening stocks continued to tug on Treasury Yields and accentuate the flattening theme. The 2 Year Bill rose 0.4 basis points to 0.36 but the 5 Year Bill fell 2 basis points to 1.38%. FX markets were largely an innocent bystander on Friday with the Dollar Index rising 0.1% to 79.50 seemingly flat footed by the ongoing slippage in Bond Yields and traditional safe-haven support from falling equities. Meanwhile ECB Council Member Couere speaking in Washington yesterday was playing down prospects of a large scale ECB QE Bond buying programme, saying asset prices are about price and not quantity and that the yardstick is success and not size. The Financial Times Newspaper is this morning reporting that the imposition of negative interest rates on deposits with the ECB is the preferred option of several ECB officials in order to tackle the single currency’s appreciation.
This morning on the economic front we have Euro-Zone Industrial Production. This is followed at 1.30 pm by US Retail Sales.
June S&P 500
Despite the economic news coming out better than expected over the past week the S&P had one of its worst weeks in nearly two years with the Index falling from a high after the Non Farm Payrolls were released at 1892.5 to this morning’s low at 1803.5. After I posted on Friday the market was trading at the day’s high at 1832.25 just missing my 1833 sell level. It thus began another wild trading session as important support at 1810 was tested after the US market opened, before having a nice rally only for the market to get hit again into the close. I am still flat and at least we have not been caught long for this huge and unexpected down move. This morning the S&P is oversold and at the bottom of the Bollinger Band and Williams Index whilst also approaching important support from 1794/1800. When we do get a rally it will again be sharp and violent. As I mentioned last week, a break and close below 1830 will be bearish. Today my only interest in selling the S&P is on a rally back to the breakdown at 1829/1834 with a 1837 stop. I will also be a small buyer from 1798/1803 with a 1790 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1773/1780 with a 1768 stop.
Euro/USD
The Euro gapped down on the open last night after the report in the FT stating that the ECB are considering introducing negative interest rates on deposits. It traded down to my 1.3840 buy level and I am now long in small size with a 1.3790 stop. I still believe that until the ECB finally decide to do something to try and weaken the Euro and try to fight the deflation that exists in the Euro-Zone, that the market will continue to test the ECB’s resolve by bidding the Euro higher
US Dollar Index
No change as I am still a buyer on any dip to 78.95/79.25 with a 78.70 stop.
June DAX
The DAX continues to trade lower with the market just missing my 9185 buy level this morning with a 9213 low. As I mentioned on Friday, I will be a buyer on any dip to 9140/9185 as this is a good support zone for the DAX. Today I will still be a buyer in this area with a 9120 stop. I will also lower my sell level to 9330/9365 with a 9395 stop.
June FTSE
After I posted on Friday ,the FTSE started to sell-off and finally traded down to my 6505 buy level before quickly stopping me out of this position for a small loss at 6480 and I am now flat. I do not like the fact that the FTSE broke and closed below 6520 and today on any spike higher I will be a seller from 6520/6550 with a wider 6575 stop. I do not want to be long the market at this time.
Dow Rolling Contract
The Dow broke and closed below key support at 16050 on Friday which is bearish going forward. It is amazing that a week ago we were trading at record highs over 16600 and everything was well in the world – it just shows what can happen in a week! After I posted on Friday the Dow traded down to my 16060 support level before having a nice rally back to 16120 before again being hit hard in the last hour of trading and I am still flat. The market is oversold but the next good support is down at 15800. Today I will be a small buyer on any dip to 15890/15930 with a 15860 stop. My only interest in selling the Dow is on a rally back to 16150/16220 with a 16260 stop. I have to use wider stops given the volatility.
June BUND
Today I will raise my buy level on the Bund slightly to 143.40/143.70 with a 143.25 stop. I still do not want to be short the market at this time.
Gold Rolling Contract
I was unlucky with my Gold plan on Friday as the market made a low of 1313, just missing my 1312 buy level, which is very unfortunate with it trading at 1328 this morning. Gold is now comfortably back above its main Moving Averages and now has positive momentum again as the market looks to trade back to its next resistance at 1350. Today I will raise my buy level to 1310/1317 with a 1305 stop.
Silver Rolling Contract
After I posted on Friday Silver traded down to my 19.90 buy level. I am still long and I will raise my stop to 19.60 on this position as I look for it to retest the key 20.50 resistance level.
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