After an initial bout of delight, markets have settled into a mood of cautious optimism this morning. The positive surprise of an EU Summit actually deciding anything, let alone something that counts, was reflected in a surge of risk appetite which has now settled. The key is whether we can hold onto these gains and then build on them going forward. The clue here is ‘will the Bond Yields for Spain and Italy continue to ease?’. The press in Germany was scathing over the concessions that Merkel made.
The focus should return to the Economy as European tensions have eased somewhat and we have a lot of Economic data and Central Bank meetings this week whilst all eyes will be on the Non Farm Payrolls on Friday and any surprises with the data is likely to be on the upside. Chinese PMI released over the weekend was weaker than expected and today we have UK PMI.
Sept S&P 500
The S&P traded up to my sell level last night and I went short at 1359 which I covered at 1354 this morning.The 1350/1375 area is going to be very hard to get through and will act as strong resistance. Today I will look to short at 1360/1365 with a 1370 stop. If I enter this short position, I will target the 1350. We now have a large gap left from the close on Thursday at 1322.
Sept DAX
The Dax had a huge rally off the important 6200/6250 level and we are also testing the top of its Bollinger Band. Today I will look to sell in small from 6510/6530 with a tight 6550 stop as I look for a move back to the 6450 area where I will look to cover if I am short.
August Crude Oil
Crude has also had a massive move as we are up over 10% since the low of Thursday. As I said on Friday, if we break 8150 it will very bullish. I bought in very small on this break and I was able to take profit at 8450 on Friday. Today I will look to go long from 8300/8350 with a 8270 stop. If the market is bullish it should not fall a lot as it squeezes higher thus forcing all the shorts to cover their positions.
Sept FTSE
The FTSE just missed my buy level on Friday at 5500. It has reacted least to the EU Summit announcements due mainly to the ‘Libor fixing allegations’ and fines of some of its major banks. Today I will raise my buy level to 5520/5540 with a 5510 stop which was the low of Friday.
Sept EURO
This is the market that I am finding hardest to trade. I am only interested in going short if we trade up to 1.2750/1.2800 area. This is big resistance and selling in this area is a good risk reward. Otherwise I have no interest in putting on a position.
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