Markets remained in an optimistic mood looking ahead to cheaper credit, lower volatility and the Central Banks, as the saviours of all things risky! European equities had a solid day on Friday as they are now back to the 2007 highs. When New York opened, the party kicked on with the S&P adding an additional 0.4% after its spectacular post-Fed rise on Thursday. The US Dollar continued to weaken as the US-Dollar Index lost another 0.5%. The markets were helped by the better than expected Retail Sales which rose 0.9% and the University Of Michigan Consumer Confidence jumped to 79.2 from 74.3, well above forecasts of 74.0.
Today is busy on the Economic front as we have ZEW from Germany, CPI from the UK, and the NAHB Housing Index from the US. Later, the Fed’s Evans speaks in Michigan presumably to explain the QE3 decision which they announced last Thursday.
Sept S&P 500
The S&P continues the spectactular rally that we have had over the last two months as we are now back to the highs made in 2007, before the credit crisis started. One lesson that I have learned over the years is never to fight the policies of the Fed or other Central Banks. However it is very overbought and the Williams Index has started to turn down. I went short on Friday at 1468 and I was stopped out at 1472 and, after the marketed topped out at 1475, I went short again at 1469. I do not like the market at these levels and a correction is due. I am going to stay short with a wider stop at 1475 because, as I said on Friday this 1465/1470 is very big resistance going back to 2007. I do not want to be long unless we get a shakeout back to the 1440 level.
Dec BUND
The Bund has worked really well over the last week and I was able to take profit on my 140.35 short at 139.20 on Friday. The Bund has continued to fall and is now back at the important 138.50/139.00 area. I have gone long this morning at 138.72 and I will leave a stop below this morning’s low at 138.38. I will look to take profit on any rally to the 139.5 area.
Sept DAX
The Dax also worked well on Friday as I still believe it is trading heavily at these levels. I took profit this morning at 7385 on my 7440 short from Friday. Today I will look to go short again from 7410/7440 with a 7450 stop which is just above Friday’s high. If I am taken short and the market subsequently breaks 7380 I will lower my stop to 7420.
Sept FTSE
The FTSE finally hit my buy zone overnight and I went long at 5860. As I have said for the last week I like the FTSE and I will raise my stop to the 5880 level as I want to give this trade some room. If we trade up the 5950 I will look to take profit here.
EURO/USD
The Euro continues to power ahead and we are not seeing any correction despite the fact that we are very overbought, having moved up from 1.21 to 1.31 in 6 weeks. The fact that we closed the week over 1.30 is very constructive and I will look to buy any dip from 1.3000/1.3030 with a 1.2990 stop. I will also look to go short in small from 1.3130/1.3160 with a stop above last Fridays high at 1.3175.
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