The week ended with more of a whimper than a bang as markets hunker down ahead of the Wednesday’s Fed decision and penultimate post-Bernanke press conference. Friday ended the day little changed despite a fairly volatile trading session as traders try to position themselves for Wednesday. Overnight US Equity Futures were down sharply at one stage after the weaker than expected Chinese Manufacturing was reported but have rallied back since.
Treasury Yields and the Dollar Index are both little changed from Friday whilst Gold has rallied back 1% after the hammering it got on Thursday. Despite the Fed’s best efforts we have no sign of any Inflation in the States with PPI coming in flat on Friday. Over the weekend the SPD party in Germany voted in favour of entering into a Coalition Government with Angela Merkel thus bringing an end to the political uncertainty and this may benefit the Euro on the expectation of more peripheral friendly policies from Bonn notwithstanding the fact that Schauble retains control of the Finance Ministry.
This morning on the economic front we have Euro-Zone and German PMI Manufacturing/Services. Later at 1.30 pm we have US Empire Manufacturing and Non Farm Productivity ahead of Industrial Production at 2.15 pm. The ECB President Dragi is due to speak to the European Parliament in Brussels.
December S&P 500
This is the last few days for trading the December contract which expires on Friday. This is probably the most important week of the year as the market awaits the Fed’s decision as to whether they start tapering because whatever decision they take will set the tone for 2014. Friday worked really well as the market traded down to my 1773 buy level before having a nice rally and I was able to cover this position at 1780.
Overnight on the back of the weak Chinese Manufacturing data the S&P traded down to my 1764 buy level with a 1760.50 low. As most members know at this stage I will never be short the market ahead of an FOMC Meeting especially one of this importance. The S&P is still trading at the bottom of the Bollinger Band but interestingly the Williams Index has started to turn up. I am going to hold this position and I will leave a 1760 stop. If I am stopped out I will use any subsequent five handle rally to reset my long position with a stop just below whatever low is put in.
Euro/USD
No change as I still prefer to be long the US Dollar via the Dollar Index rather than be short the Euro. I am still long the March US Dollar Index at 79.90 and I will raise my stop to a breakeven. If I am stopped out I will be a more aggressive buyer in front of 79.60 with a 79.25 stop.
December DAX
The Dax again tested the key 8980 support level on the open this morning and in the process traded down to my 8990 buy level. I am going to raise my stop on this position to 8975 which is just below this mornings low. If the Dax stops me out and subsequently trades down to 8960 I will go short in small size with a 9010 stop. Just to recap 8980 is the key level and a break and close below here will be very bearish.
December FTSE
Overnight the FTSE also traded down to my 6420 buy level with a 6395 low. I am still long and I will leave my stop the same at 6390. Themarket is also very oversold and I am expecting a bounce in this market ahead of Wednesday especially the fact that the FTSE has now closed down for the last six weeks which is the longest loosing streak since July 2008.
Dow Rolling Contract
The Dow having been down all day on Friday eventually followed the S&P higher enabling me to cover my 15750 long position at 15785 and I am now flat. The Dow is also very oversold and I would expect this market to rally ahead of Wednesday. As I am already long the S&P, Dax and FTSE I am not going to buy the Dow here but if the market trades down to 15630/15670 I will be a small buyer with a 15595 stop.
March BUND
The Bund never reached my 139.80 buy level before trading higher and I am still flat. Today I will raise my buy level to 139.90/140.10 with a 139.75 stop.
Gold Rolling Contract
Gold is getting more difficult to trade over the last week as the big question remains are we going to get a test of the June low at 1180 before the market attempts to rally. Gold is still trading heavy and I am reluctant to chase this market higher unless we can close over 1260 for 2/3 days. I am going to leave my buy level the same at 1182/1195 with a 1175 stop.
Silver Rolling Contract
Just like Gold, Silver continues to trade heavy. As Silver is now down over 60% from its May 2011 high I still prefer to own Silver. Today I am going to raise my buy level to 19.10/19.30 with a 18.80 stop which is just below last months 18.88 low.
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