We start this week with an escalating sense that we coming to a turning point in Europe. We are used to Troika helping the markets but they are adamant that any new Government in Greece will have to adhere to the bail-out agreement. But with politicians beholden to local voters at this point there is a high risk that they will try to back away from austerity even if only through rhetoric at this stage. This increases the talk of Greece exiting the Euro which is a major source of market instability with Greece likely to have another election in June. The EU Ministers meet today and we have a G8 meeting at the end of the week. Japan has pledged to use its FX reserves to provide stability in the event of Greece leaving the Euro.
Over the weekend China cut its reserve requirement by 50 basis points which is it’s third cut in five months. Today we have three year auctions from Italy.
NOTE: All comments below refer to the June Futures Contract in each instrument
S&P 500
The S&P managed to close its down Gap again on Friday and traded up to my sell level at 1360. On the back of the Greek news the market fell hard into the close and I covered my short position at 1349. Today I want to buy from 1337/1341 with a 1335 stop as I look for the Gap to be closed again. The market is very oversold and if I am taken out of my long I will still be agressive buyer from 1320/1323 with a 1317 stop loss.
IBEX
The IBEX sold off nicely into my buy level at 6705 and then rallied almost 200 points into the close. I took profit a 6870 and I am now flat. It shows how important this 6700 level is as we have three tests here and each time we have a had a 200/300 point rally. Today we are back down to 6700 . I have an order to buy at 6660 with a 6600 stop, looking to take profit from 6780/6820. Again as I have said all last week I am only trading in small size.
Euro
No change as I still look to buy at 1.2850 with a 1.2810 stop. The Euro is extremely oversold and I do not want to be short at this time. If I am taken long I will look to take profit at 1.2920
Bund
I was taken out of my 142.95 short at 143.10 this morning and I am now flat. I am still convinced we are putting in a long term top in the Bund and I will leave an order to go short at 143.70 with a 144.00 stop
FTSE
No change on my previous comments, I want to buy at 5450 with a 5420 stop.
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