Friday was another quiet trading day with nothing dramatic to note in either of the European and US markets. US Equities ended the day mixed with the S&P and NASDAQ closing down 0.4% and 0.5% respectively whilstthe Dow closed 0.25% higher. An earnings miss from UPS and a lowering of its full year guidance contributed to weakness. European Indices were all slightly higher with the Dax leading the way despite reports that Deutsche Bank was likely to issue a profit warning which saw its share price falling 3%. In currencies the US Dollar was firmer led by weakness in Euro/USD which fell 0.6% to 1.3530. Sterling bucked the stronger US Dollar trend after the whopping 2.5% rise in December Retail Sales.
The US data failed to drive much volatility despite the downside miss in the University of Michigan Survey which came in at 80.4 versus 83.5 expected. Industrial Production met expectations at +0.3% while Housing Starts were close to expectations at -9.8% versus the -9.7% estimate but off a slightly upward revised November 23.1%. Building permits were weaker than expected though and suggest that housing construction growth is set to slow further.
Fed comments were confined to Richmond Fed President Lacker who described the December Employment Report as ‘aberrational’. He said ‘it would take a very significant change in the outlook for me to support putting a hold on tapering and I don’t think the data we have seen so far is close to that.’
Over the weekend saw the release of December Chinese Property Price data which was uniformly strong, with price rises for new homes reported in 69 of 70 cities and the highest annual growth rates of the year for many. Early this morning China released a report showing that economic growth slowed in the 4th Quarter as gains in Factory Output and investment spending eased last month.
Today will probably be a quiet trading session with the US closed for Martin Luther King Day. The only data of note on the economic front is the release of the UK Rightmove House Price Index.
March S&P 500
The US Equity markets are closed to day for the Martin Luther King Holiday with the Futures market only open until 4.30 pm this afternoon. Last Friday worked well as the S&P started to rally just after I posted enabling me to cover my 1837 long position at 1842. However the S&P having traded in a very quiet range on Friday got hit in the last hour of trading as nervousness set in ahead of the long weekend. I have bought the S&P this morning in small size at 1832.5 and I will leave a 1827 stop on this position. If I am stopped out I will be a more aggressive buyer on any dip to 1820/1824 with a 1818 stop. My only interest in selling the market is on a rally to 1845/1849 with a 1851 stop.
Euro/USD
After I posted on Friday the Euro started to sell off and quickly traded down to my 1.3540 buy level. Unfortunately I was stopped out of this position overnight at 1.3510. The Euro is oversold and is trading at the bottom of the Bollinger Band but interestingly the Williams Index has started to turn up and for this reason I have bought the Euro again this morning at 1.3530. I will leave a 1.3490 stop on this position.
US Dollar Index
The US Dollar is finally beginning to find good support at the key 80.50 support level. I am still long from 80.95 and after the nice upward move that we saw on Friday I am going to raise my stop to 80.85. If the US Dollar Index can break and close over 81.50 it will be very bullish.
March DAX
The Dax worked well on Friday as after I posted it, having rallied earlier in the day, finally traded down to my 9715 buy level before having a nice rally and I was able to cover this position at 9745 and I am now flat. The Dax is still trading at the top of the Bollinger Band after the huge rally that we have had over the last month but interestingly the Williams Index has started to turn down. Today I will be a small seller on any rally to 9740/9770 with a tight 9785 stop. My only interest in buying the Dax today is on a dip to 9630/9650 in small size with a 9615 stop.
March FTSE
The FTSE traded down to my 6760 buy level after I posted on Friday. I am still long and I will raise my stop to 6735. I am still looking for this market to start outperforming the Dax this year.
Dow Rolling Contract
In contrast to the rest of the trading week the Dow outperformed both the S&P and NASDAQ on Friday. If it can break and close over the Dec 31st high at 16589 it will be very bullish but as long as we remain below this key level the market will remain nervous. I still believe that overall the markets will trade higher especially with the key FOMC Meeting and Janet Yellan’s first meeting as Chair next week. The Dow will also close at 4.30 pm today and I will be a small buyer on any dip to 16370/16400 with a tight 16350 stop. I still do not want to be short the Dow at this time.
March BUND
I am glad that I decided to stand aside on Friday to see if the March Bund could take out the key 141.10/141.30 resistance level. It has done so and today I will be a buyer on any dip to 141.00/141.30 with a 140.90 stop. Even though the Bund is overbought I do not want to be short the market at this time.
Gold Rolling Contract
Overnight Gold is trading higher and is trying to break the key 1255 resistance level. This morning I have decided to buy Gold at 1255 and I will leave a 1242 stop on this position. The next resistance for Gold is from 1275/1280 and a closing breaking over 1280 will probably lead to a challenge to the key 1300/1350 resistance area that I have mentioned over the last few weeks.
Silver Rolling Contract
No change as I am still long from 20.20. I will raise my stop to 19.90 and if I am stopped out I will be a more aggressive buyer on any dip to 19.40/19.70 with a 19.20 stop.
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