Last Friday saw fairly subdued action on both sides of the Atlantic with Equities closing slightly higher, Bond Yields also higher whilst the US Dollar was virtually unchanged. US data on Producer Prices and Consumer Confidence surprised to the downside. The best performing Currency was again Sterling which this morning is trading over 1.70 versus the US Dollar for the first time since 2009. This follows last Thursday’s comments from Bank of England Governor Carney who said that UK rates could rise before year-end. These comments helped to send the FTSE lower which closed below key support at 6800.
US Equities closed 0.25% higher despite Emerging Market currencies ending the day weaker, led by the Indonesian Rupiah which fell 1%. This morning there is some focus on Poland with the Zoty under pressure after the release this weekend of leaked tapes purporting to show collaboration between the supposedly independent Central Bank and Government Officials regarding efforts to keep the Government’s debt within legal limits.
Iraq is still the centre of attention. Over the weekend Sunni extremists claimed to have executed 1,700 Iraqi Army Soldiers. Developments in Ukraine also bear close scrutiny albeit market impact to date has been muted.
This morning on the economic front we have UK Rightmove Hose Price Index. This is followed at 10.00 am by Euro-Zone CPI and the ECB Monthly Report. Obviously the CPI will be closely watched especially after the ECB Cut rates two weeks ago to try and fight Deflation. At 2.15 pm we have US Industrial Production and Capacity Utilisation. This is followed at 3 pm by the NAHB Housing Market Index.
June S&P 500
This is a very important week for the S&P as we have the June Contract expiring on Friday whilst tomorrow sees the start of the latest FOMC Meeting with the results of this Meeting at 7 pm on Wednesday. So far the tradition of whatever low is put in for the S&P on the Thursday/Friday in the week ahead of Contract Expiration has held, with the June Contract making a 1924.75 low on Thursday and 1926.75 low on Friday. I was unlucky with my plan on Friday as the market just missed my 1926 buy level before it rallied after the US markets opened and closed higher despite the weakness in European Equities. Today I will again be a small buyer from 1924/1928 with a 1922 stop. My only interest in selling the S&P is on a rally to 1939/1943 with a 1946 stop.
Euro/USD
Just after I posted last Friday the Euro traded down to my 1.3530 buy level. I am still long and today I will raise my stop to 1.3510 on this position. If I am stopped out of this position I will again look to buy the Euro on any dip to 1.3470/1.3495 with a 1.3455 stop. I still do not want to be short the Euro at this time as the price action continues to tell me that it is a buy on dips and this is why today’s CPI is going to be so important for the Euro going forward.
US Dollar Index
No change as I am still a buyer on any dip to 80.20/80.40 with the same 79.95 stop.
June DAX
The continued tensions in Ukraine have finally spilled over into the Dax. This morning it is also being affected by the weakness in the Polish Zoty and it looks like this 10000 resistance level is, for the moment, proving to be very difficult to break through. Today I will lower my sell level to 9920/9950 with a 9975 stop. I still do not want to be long the Dax at this time and I am still short the Dax/FTSE spread at 3110 in small with a wider 3200 stop which is just above last week’s all time high at 3195.
June FTSE
Unfortunately just before I posted last Friday I was stopped out of my long 6840 position at 6810 and I am now flat. It was another great example of how important it is to have stops in the market especially with the FTSE trading 50 points lower this morning. The break and close below 6800 is bearish and today I will be a small seller on any rally back to 6780/6800 with a tight 6820 stop. For the first time in weeks I do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow just missed my 16660 buy level on Friday before spending the rest of the day trading higher. I still do not want to be short the Dow especially if the market can continue to trade above the key 16580 support level which is the high from December 31 last, plus the fact we have Contract Expiration on Friday coupled with the two day FOMC Meeting and rate announcement on Wednesday. Today I will raise my buy level slightly to 16640/16670 with a 16610 stop.
September BUND
After I posted on Friday the Bund traded down to my 145.30 buy level. I am still long and this morning I will raise my stop to a break-even. If I am stopped out of this position I will be a more aggressive buyer on any dip to 145.00/145.25 with a 144.85 stop.
Gold Rolling Contract
Gold continues to rally as expected off the very oversold and extreme readings which prevailed at the 1240 level. It is now trading above 1280 this morning. I am still long from last week at 1250 and today I will raise my stop on this position to 1270.
Silver Rolling Contract
One of the main reasons that I have held on to my long Gold position is the fact that I have not been able to get long of Silver which continues to push higher and is approaching the key 20.00 resistance level this morning. Today I will raise my buy level to 19.30/19.60 with a 19.10 stop on any long position.
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