US Stocks closed mixed on Friday with the S&P 500 closing at yet another record high at 1923.6. The VIX lost 0.17 to post a new low at 1140 whilst 10 Year Bond Yields remain soft at 2.47%. In FX none of the G10 currencies moved more than 0.25% with the US Dollar weaker across the board.
The Euro rose 0.25% despite more news of disinflation pressure in the Euro-Zone, with Spain’s May CPI falling to 0.2%, down from 0.3%, and Italy to 0.4% from 0.5%. In Commodities, Oil rose 81 cents on US Dept of Energy showing a draw on Oil and Gas stocks whilst Gold fell another $6 to $1249 with the big mover being Iron Ore which fell 4%.
Friday’s US data was mixed but most attention focussed on the unexpected fall in April Personal Consumption Expenditure. Spending fell 0.1% against a +0.2% expected with wages and salaries rising by just 0.2% in April, the weakest increase of the year. There was also disappointment in the final University of Michigan Consumer Confidence Reading which only rose to 81.9 from 81.8 preliminary reading versus a rise to 82.5 which was expected.
This morning on the economic front we have UK Net Consumer Credit at 9.30 am and German CPI. This is followed by Euro-Zone and German Manufacturing PMI at 10.00 am whilst at 2.45 pm we have US Manufacturing PMI ahead of US ISM Manufacturing and Construction Spending at 3 pm.
June S&P 500
The S&P had yet another very quiet and low volume trading session as the markets on both sides of the Atlantic wait to see what Dragi and the ECB will do on Thursday and, of course, this will be followed by the US Non Farm Payroll Numbers on Friday. The Bond market with their very low yields are telling you that something nasty is coming down the economic track. On the other hand the stock market is suggesting that everything is bliss thus making it very difficult to get an edge in the market at the moment.
The S&P is still very overbought but as Keynes famously said ‘markets can remain illogical longer than I can remain solvent’ and this is why I am trading in smaller size with a wider stop. I am still short the S&P from last Thursday at 1918 and I will give this one more day to sell-off or else I will exit this position. I will still leave my stop the same at 1926 and if the market trades back to 1914 I will exit this position and take another look. I will also raise my buy level to 1905/1910 with a 1901 stop.
Euro/USD
My long Euro position finally worked on Friday as it had a nice rally which enabled me to cover my long 1.3615 position at 1.3645 and I am now flat. I will continue to buy the Euro on dips especially if it can stay over the now key 1.3550/1.3580 support level. Today I will again be a buyer on any dip to 1.3580/1.3610 with a 1.3545 stop. I will also be a small seller on any rally to 1.3690/1.3720 with a 1.3740 stop.
US Dollar Index
No change as I am still long from last week at 80.20 with the same breakeven stop. If I am stopped out of this position I will look to reset on any dip to 79.70/80.00 with a 79.45 stop.
June DAX
The Dax continues to struggle as it approaches the key 10000 resistance level. Today I will leave my sell level the same at 9980/10020 with the same 10050 stop. As I have mentioned over the last few weeks I will look to put on a more macro short position on any rally to 10245/10300 with a 10450 stop. Given how overbought the Dax is trading I do not want to be long the market at this time. I am still short the Dax/FTSE spread at 3120 with the same 3190 stop.
June FTSE
Shortly after I posted last Friday the FTSE traded down to my 6830 buy level. Today I will lower my stop to 6795 on this position. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a small buyer on any dip to 16570/16610 with a 16540 stop. I will still be a seller on any rally to 16780/16810 with a 16840 stop.
June BUND
The Bund plan worked well on Friday as shortly after I posted it was trading at my 146.60 buy level and after a nice rally into the close I covered this position at 146.85 and I am now flat. Today I will still be a buyer on any dip to 146.30/146.55 with a 146.10 stop.
Gold Rolling Contract
Unfortunately after I posted on Friday I was stopped out of my long Gold position near the low of the day at 1243 and I am now flat. Gold is extremely oversold on a Daily Basis and the Daily Sentiment Index is now in single digits which puts me on the alert for a move back higher. Today I will be a small buyer on from 1240/1246 with a 1235 stop.
Silver Rolling Contract
Silver followed Gold lower on Friday as the market traded down to my 18.80 buy level. I am still long and I will leave my stop the same at 18.45. I am waiting for a major bottom in Silver between 17.00/19.00.
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