A softer than expected US GDP Report failed to materially take the the shine off the US Dollar on Friday. A sharp rise in Oil prices benefited the Norwegian Kroner but failed to inspire the Canadian Dollar which was knocked by a weak GDP print. The Euro eased lower, as Greek rhetoric waxed, but waned over the weekend. The US economy grew at a 2.6% seasonally-adjusted annualised rate in Q4, marginally softer than the 3.0% expected, and down from Q3’s blinding 5.0%. Amongst the positives, personal consumption beat expectations at +4.3%, the strongest quarter since 2006. On the other hand, a sharp rise in inventories which looks at been a real drag come Q1. On inflation, the Fed’s preferred core PCE measure rose by 1.1%, as expected.
The US 10 Year Treasury Bond Yield was hit hard on Friday closing down 11 bps to close at a new record low at 1.64%. News reports cite strong Bond inflows into the US, driven by yield appeal against Europe and Japan. Four out of four Fed speakers who delivered comments were all upbeat on the US economy and failed to dampen the prospect of rate hikes in 2015. To be fair, Messrs Bullard, Fisher, Williams and Plosser occupy the neutral to hawkish bands of the FOMC’s spectrum of biases.
Over the weekend, China’s official Manufacturing PMI slipped below the break-even 50 mark in January, printing at 49.8 instead of the 50.2 expected. Elsewhere European investors were understandably disturbed by the new Greek Finance Minister characterising the Troika as ‘a Committee built on rotten foundations’ and stating that he refused to co-operate with it. Greek Prime Minister Tsipras issued a statement over the weekend in an attempt to soothe tensions and this helping markets to rebound this morning. Oil had its best day in three years on Friday by closing up 8.3% at $48.24.
This morning on the economic front we have German and Euro-Zone Manufacturing PMI at 9.55 am and 10.00 am respectively. Later at 2.45 pm the US will release its Manufacturing PMI. Finally at 3.00 pm we have the ISM Manufacturing.
March S&P 500
The S&P had another wild trading session on Friday with the market down hard on the weaker than expected GDP Report before rallying to my 2017 sell level at 7 pm. It then fell over 30 handles in the last two hours of trading which enabled me to cover my short position too early at 2005 and I am now flat. One key market that I always keep an eye on is the KBW Banking Index. This Index is now down 10% for 2015 and it has only taken one month of trading this year to wipe out all of its gains in 2014. The weakness in this Index indicates there is trouble brewing in the US banks especially with credit spreads starting to widen again. Note: it was the Banking Index that led the start of the stock market crash of 2008/2009.
The S&P still has an ‘open Gap’ from October 22 from 1893/1900 and I would expect this gap to be filled if the S&P finally breaks and closes below the now key support at 1960/1970. Today I will again be a small seller on any rally back to 2005/2012 with a 2018 stop which is just above last Friday’s high. My only interest in buying this market is on a dip to 1970/1975 with a 1963 stop.
EUR/USD
Finally long after I posted on Friday the Euro traded lower to my 1.1290 buy level. I am still long and today I will raise my stop on this position to 1.1265. If I am stopped out of this trade, I will be a more aggressive buyer in front of 1.1220 with a 1.1175 stop. My only interest in selling the Euro is on a rally to 1.1530/1.1580 with a 1.1620 stop.
US Dollar Index
No change as I am still short from last week at 94.85 with the same 95.30 stop.
March DAX
No change as I am still flat the DAX despite the market having another wild trading session on Friday with every dip in the market still getting bought. I refuse to buy the DAX at these lofty levels despite the positive price action as there are to many variables than can affect it at this time, namely- Ukraine and Greece. Today I will leave my sell level unchanged at 10850/10890 with the same 10930 stop. If the DAX can break and close below 10660, I will then move my sell level lower.
March FTSE
After I posted on Friday the FTSE just missed my sell level before following the other major Indices lower and I am still flat. Today I will lower my sell level to 6760/6790 with a 6810 stop. I will leave my buy level unchanged at 6630/6660 with a 6595 stop
Dow Rolling Contract
The Dow had another awful close with market falling over 300 points in the last two hours of trading on Friday. I am still flat and today I will still be small buyer on any further dip to 17030/17080 with a 16970 stop. Given how much the Dow moved on Friday I do not want to be short the market at this time.
March BUND
After I posted on Friday the Bund traded higher to my 159.20 sell level. I am still short and I will leave my stop the same at 159.55. If I am stopped out of this trade I will be a more aggressive seller in front of 159.80 with a 160.10 stop.
Gold Rolling Contract
My long 1262 Gold position from last Thursday worked out very well on Friday especially after the equity markets were hit to the downside with Gold having a nice rally which enabled me to cover this trade at 1276 and I am now flat. Today I will again be a small buyer on any further dip to 1260/1266 with the same 1249 stop which is just below last week’s low.
Silver Rolling Contract
No change as I am still long at 17.30 with the same 16.70 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 16.40 with a 15.90 stop.
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