The key feature from last Friday’s trading was the fresh spike higher in US Treasury Yields with 10 year Bond yields making a new closing high of 2.82% for the year. This surge in yields came despite the release of US economic data which disappointed the markets. Housing Starts rose by 5.9% overall, against +7.1% expected, within which single family starts were actually down by 2.2% with all the strength coming from the more volatile multi-family unit sector. Meanwhile the University of Michigan Preliminary August Consumer Confidence fell to 80.0 from 85.1 last month and against an expected 85.2. Higher Bond yields and disappointing data conspired to see US Equities weaker, with the S&P losing another 0.3% to round off one of its worst weeks of the year so far.
Today on the economic front we have no US data of note whilst this morning we have the Rightmove House Price Index from the UK followed by Euro-Zone Construction Output.
September S&P 500
The S&P had a much quieter session on Friday after the major fireworks last Thursday as the market finally closed the down gap left from early July. The S&P dropped down to my 1651 buy level and I closed this trade before the close at 1655 and I am now flat. We still have the large gap from Thursday from 1669/1682 and if this is not filled by tomorrow we will than have a break-away gap to the downside which, coupled with the Hindenburg Omen signals over the last few weeks, will be very bearish for the market going forward. The key level to watch today is from 1645/1649 as a break and close below 1645 will be very bearish and opens up a move down to the next support at 1620/1625. The market is very oversold and today I will be a buyer in the 1645/1649 range with a 1643 stop. I do not want to be short the market today.
Euro/USD
The Euro worked well on Friday as the higher bond yields drove the US Dollar slightly higher. The Euro traded up to my 1.3370 sell level and after a nice drop I was able to cover this position at 1.3330 and I am now flat. Today I will leave my sell level the same at 1.3370/1.3400 with the same 1.3420 stop. My only interest in buying the Euro is on a drop to 1.3230/1.3260 in small with a 1.3210 stop.
September FTSE
The FTSE traded up to my 6490 sell level and I am now short in small with a 6515 stop. The 6500 is the key level going forward as a break and close higher will put the Bulls in charge whilst another close below this level will leave the Bears in control.
September DAX
The DAX plan worked well as the market dropped down to my 8335 buy level before having a nice rally and I was able to cover this position at 8380 and I am now flat. I am very surprised at how well the Dax is trading versus the other Equity Indices given how close we are to the German Elections. Today I will leave my buy level the same at 8310/8340 with a 8290 stop. I do not want to be short the market at this time.
US 10 Year Treasury Note
I have not traded this contract for a while and have never discussed it in this forum but given the huge move up in bond yields over the last six weeks I feel there is a good opportunity here. The market is very oversold and at the bottom of the Bollinger Band and almost at the bottom of the Williams Index. Today I will be a small buyer on any dip to 124.40/124.60 with a 123.95 stop.
Gold Rolling Contract
Gold just missed my 1352 buy level with a 1356 low before having a nice rally and I am still flat. Today I will raise my buy level to 1655/1660 with a 1649 stop.
Silver Rolling Contract
Silver worked well on Friday as it traded up to my 23.20 sell level with a 23.30 high before having a small sell off and I was able to cover this position at 23.00 and I am now flat. Silver is still very over-bought and today I will be a seller from 23.30/23.60 with a 23.80 stop. I do not want to be long Silver at this time.
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