US Equity markets ended weaker on Friday night as the lack of progress in the Fiscal Cliff negotiations continues to frustrate markets. With just two weeks to go, House Speaker John Boehner’s proposal for tax rate increases on incomes over $1million in exchange for entitlement cuts was rejected on the weekend as Obama wants to increase tax on incomes over $200k. However it is the first time that Republicans have supported any tax increase at all on the highest earners, so a very small sign of some progress been made. The big news over the weekend was in the Japanese elections where the LDP party
were returned to power giving it a mandate for aggressive BOJ easing and a higher inflation target. The Tankan report came in weak last Friday and as a result I would expect the BOJ at their meeting next Thursday to increase its asset purchase programme. USD/JPY is now 9.5% above its 77.13 mid September low and IMM data released on Friday shows net speculative shorts at 94,000 Contracts which is the largest since July 2007.
This morning we have House Price Data from the UK and Euro-Zone Trade Balances ahead of Empire Manufacturing in the US at 1.30pm.
Dec S&P 500
I was stopped out of my 1417 long position at 1413 and, as I said on Friday, I would rebuy any 5 handle rally from whatever low was put in. The low made was 1411.5 and I was able to go long again at 1416.5. I still like this position as this is expiration week and generally the S&P makes its low on the Thurs/Friday ahead of expiration. I will leave my stop at 1411 and I will look to take profit on any rally to 1425/1430. I do not want to be short at this time.
GBP/USD
This currency pair has had a nice rally from the bottom of its Bollinger Band at 1.5830 made last month as we approach the very important 1.6200/1.6230 resistance level. GBP/USD is now at the top of its Bollinger Band and Williams Index and this morning I am a small seller from 1.6190/1.6220 with a 1.6240 stop. If I am taken short I will look to take profit on any dip to 1.6100/1.6130.
Gold Rolling Contract
Finally Gold is breaking down and I am still short from last week at 1702. This morning I will lower my stop to 1695 and I will still look to take profit at 1681. If I am stopped out at 1695 I will still look to sell any rally from 1705/1712 with a 1717 stop.
Dec DAX
The Dax has rallied to my 7625 sell level this morning and I am now short with a 7640 stop. I will look to take profit on any dip to 7560/7580.
Dec FTSE
The FTSE continues to trade heavy and this morning I am a seller from 5915/5925 with a 5940 stop.
Eur/USD
I was stopped out of my 1.3100 short at 1.3125 and I am now flat. I still believe the Euro is putting in a top. This morning I am a small seller from 1.3190/1.3220 with a 1.3240 stop as the Euro/USD continues to trade at the top of its Bollinger Band and Williams Index.
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