The first cut of Euro-Zone December GDP, released after I posted last Friday, was reassuring as growth posted a 0.3% gain versus 0.2% expected led by the major economies of France and Germany. The Euro-Zone is experiencing very gradual growth at this stage but at least it is showing signs of life. Across the Atlantic the US Industrial Sector under-performed in January again suggestive of the severe weather being experienced on the East Coast and this bad weather will likely hinder activity into the February data as well. As some reassurance, the first reading of Consumer Sentiment in February was steady at 81.2 but still a little below its long term average.
The markets are opening a little stronger this morning after China reported its lending was very positive in January coming in much better than expected as aggregate financing was at record levels.
The Dow and S&P closed up another 0.8% and 0.5% respectively with the markets almost regaining all its losses from January. Bond Yields were higher but the big move were in Gold and Silver which broke and closed over key resistance levels last Friday and these gains have continued this morning.
This morning, on the economic front, the only data of note is the UK Rightmove House Price Index. We have no data due from the Euro-Zone whilst the US cash markets are closed for the President’s Day Holiday.
March S&P 500
The S&P again closed higher on Friday despite the very weak Industrial Production Numbers as the weather was again blamed. The markets are going back to the last quarter of 2013 as the theme of bad news is good news for the stock market especially after new Fed Chair Janet Yellen said in her testimony last week that the Fed will stop tapering if the economic data is weak. One interesting piece of data that I read over the weekend showed that despite the S&P closing up on 7 of the last 9 trading days the trading volume contracted on 8 of these days, which is incredible.
After I posted last Friday the S&P just missed my 1819 buy level before trading substantially higher and I am still flat. Today the cash market is closed for the US President’s Day Holiday whilst the Futures market will close at 4.30 pm. The S&P is so near the 1846 contract highs that I would expect the market to break this key resistance level over the next few days. It is amazing that all the Gaps left from the January sell-off have now been filled. Today I will be a small buyer from 1830/1834 with a 1827 stop. My only interest in selling the market is on a rally to 1846/1850 with a 1852 stop.
Euro/USD
No change as I am still a small buyer on any dip to 1.3645/1.3675 with a 1.3620 stop. I still do not want to be short the Euro at this time.
US Dollar Index
As I mentioned last Friday the key level for the Dollar Index is at 78.90 and as long as we can stay over this key support the market should be fine. Today I will be a small buyer on any dip to 79.60/79.90 with a 79.30 stop.
March DAX
It is very frustrating that the Dax continues to trade higher without me being able to get a long position on board but at least I have not been short. The Dax has now risen over 600 points from its low of two weeks ago. Today I will raise my buy level to 9595/9625 with a 9570 stop. I still do not want to be short the Dax at this time until we see a sell extreme first which may indicate that the market is running out of steam.
March FTSE
The FTSE is still struggling in comparison to the other major indices. It is interesting that the DAX/FTSE spread has widened out to over 3000. Today I will raise my buy level to 6580/6610 with a 6560 stop. I will still be a small seller on any rally to 6670/6700 with a 6710 stop.
Dow Rolling Contract
The Dow has two key resistance levels going forward. The first one is at 16210 which is where we have a 14 year trend line. The second, and major resistance, comes in at the Dec 31 high at 16589. The market really needs to clear the second one for me to turn bullish. The Dow just missed my buy level on Friday before trading over 200 points higher to my 16160 sell level. As I am only short in very small size and given the significance of the 16210 resistance level I am going to raise my stop to 16240 on this position.
March BUND
No change as I am still short from last Thursday at 143.70. I will lower my stop to 143.85 as I look for the Bund to trade lower.
Gold Rolling Contract
Gold did indeed break and close over the key 1300/1310 resistance level last Friday. It is very overbought at these levels and today I will be a small seller on any further rally to 1335/1342 with a 1350 stop. I will also raise my buy level to 1304/1311 with a 1299 stop.
Silver Rolling Contract
My Silver trade is finally beginning to gather momentum. It has broken and closed over the key 20.65/21.00 resistance level and this zone will now act as major support going forward. Silver is very extended this morning and I would not chase the market higher at these levels. Last Friday I covered half of my long 20.10 position at 21.20 and I will raise my stop on the other half to the same price at 21.20.
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