With the US markets closed today for the President’s Day Holiday, markets are having a quiet start to the new trading week. Upside surprises in German and then Euro-Zone Q4 GDP at +0.7% and +0.3%, respectively, which occurred before the ECB’s Eur60bn per month QE programme was even announced and the absence of negative news shocks on Greece, proved to be an irresistible combination for risk sentiment and stocks.
The German DAX breached 11,000 for the first time to close at a record high of 10,963 and is now up a cool 12% for the year. The S&P 500 also posted a record closing high of 2097, which was up 0.4% on the day, while the VIX lost 0.65 to close at 14.69. Buoyant stocks/risk appetite trumped another disappointing US data point to ensure US Bond Yields were higher across the curve with the 10 year benchmark +6pbs to close at 2.05%.
The University of Michigan’s preliminary February Consumer Sentiment Index unexpectedly fell to 93.6 from 98.1 with Current Conditions printing 103.1 from 109.3 last month. Few analysts were making a big deal of the drop on Friday, seeing the outcome as within the realm of monthly noise, and coming off a very strong January print. It is worth noting that the likes of the Citigroup US economic surprises index published on Bloomberg continues to fall, now at its most negative since April 2014.
Commodities were mostly higher on Friday led by Oil, with WTI and Brent both closing up by 4%. Some of the coldest temperatures on record in parts of the US East Coast may have helped with Boston for example having a record 84 inches of snow in the past 30 days. Gains in Oil came ahead of the latest ‘Baker Hughes Rig Count’ on Friday which showed a 10th consecutive fall in operating US rig numbers, -84 to 1056.
With the US markets closed today we have no economic data due on either side of the Atlantic on what promises to be a very quiet trading session.
March S&P 500
The S&P Cash Market is closed today but the Futures Market will remain open until 4.30 pm on what promises to be a very quiet trading session. Very late on Friday the S&P closed at new highs as the theme of every dip in the market been bought aggressively continues. Remember just two weeks ago the S&P was trading at 1973.50 before having this massive rally to new highs. Today I will still be a small seller from 2095/2101 with a 2105 stop. I will also raise my buy level slightly to 2078/2083 with a 2074 stop. The S&P needs to break and close below 2065/2072 support area for me to turn really bearish, otherwise I will continue with my strategy of selling rallies with a tight stop.
EUR/USD
After I posted on Friday the Euro traded lower to my 1.1390 buy level. The Euro is opening higher this morning and I have decided to cover this position at 1.1420 and I am now flat. Today I will again be a small buyer on any dip lower to 1.1350/1.1390 with a tighter 1.1330 stop. If I am taken long and subsequently stopped out of this long position, I will be a more aggressive buyer in front of 1.1250 with a 1.1190 stop. I still do not want to be short the Euro at this time as a break and close over 1.1534 will be very positive.
US Dollar Index
No change on what was a very quiet Friday trading session for the currency markets. I will still look to go long in small size on any dip lower to 93.50/93.80 with a 93.20 stop. I will also look to sell any rally to 94.50/94.80 with a 95.20 stop.
March DAX
No change as we wait on more news developments out of Greece. I am still a small buyer on any dip lower to 10840/10890 with a 10795 stop. With the DAX closing at new all-time highs on Friday, my only interest in selling the market is still on a further rally to 11080/11110 with a 11140 stop.
March FTSE
The FTSE continues to underperform the other major Indices. I am still short from last Thursday at 6830 and today I will lower my stop to 6850 on this position which is just above last Friday’s high.
Dow Rolling Contract
The Dow plan worked well on Friday as shortly after lunch the Dow traded higher to my 18020 sell level before having a nice sell-off on the weaker University of Michigan Consumer Confidence data which enabled me to cover this position at 17970 and I am now flat. While the S&P closed at new all-time highs last Friday the Dow did not and so far is nearly 100 points below its 18103 all-time high made on December 26th 2014. Today I will again be a small seller on any further rally to 18070/18120 with an 18150 stop. A break and close over 18120 will be short term positive.
March BUND
My Bund plan worked well on Friday as shortly after I posted the Bund traded higher to my 159.10 sell level before having a small sell-off which enabled me to cover this position at 158.80 and I am now flat. Today I will again be a small seller on any rally higher to 159.10/59.40 with the same 159.60 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 159.90 with a 160.20 stop.
Gold Rolling Contract
No change as I am still long Gold at 1233 from last week with the same 1217 stop which has come close to getting hit. At least Gold is back trading above 1230 this morning. I really believe that Gold will trade higher to at least 1325/1350 over the coming weeks.
Silver Rolling Contract
My long 16.70 position from last week finally worked out on Friday as after I posted Silver had a very nice rally which enabled me to cover this position at 17.30 and I am now flat. Today I will again be a small buyer on any dip lower to 16.80/17.15 with a 16.40 stop.
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