Last Friday’s markets proved to be an almost complete reversal of Thursday, the latter prompted by the Malaysian airlines tragedy, Israel’s infiltration of the Gaza Strip and the broadening of Western sanctions against Russia. Telling was the fact that the VIX fully reversed Thursday’s mini-spike to return to around 12.0 from 14.50 accompanied by a full recovery of Thursday’s stock market losses. In fact, the S&P bounced by 1.03%, the Dow 0.75% and the NASDAQ a cool 1.57% whilst the US Dollar closed flat.
And with the latest US and Ukrainian Government claims of compelling evidence of Russian involvement in the airline tragedy, both the UK and the Netherlands on Saturday called on the EU to review its ties with Russia. This is likely to be a key influence on the markets in the days ahead so caution is the ‘watchword’.
This morning on the economic front we have the UK Rightmove House Prices. We have no data of note due from the Euro-Zone whilst at 1.30 pm we have the Chicago Fed National Activity Index.
September S&P 500
The S&P had its second consecutive 1% move on Friday but this time it was to the upside following three months of very narrow range trading as the market completely reversed Thursday’s sell-off following the Malaysian airlines tragedy. Very late in the trading session the S&P traded up to my 1972 sell level and I am still short with the same 1977 stop. As I mentioned on Friday 1945/1950 is key support and a break and close below here will be very bearish going forward but as shown by Friday’s snap-back, this market is still strong as no matter what bad news is thrown at it it nearly always recovers. I still believe that we are trying to put in a top but we still need to see three decent down-days to enhance this view.
Today I will be a buyer on any dip to 1960/1964 with a 1956 stop. If I am stopped out of my short 1977 position I will be a more aggressive seller in front of 1989 with a 1995 stop.
Euro/USD
The Euro tried to sell-off on Friday afternoon but the market was again met by a wave of buyers as key support at 1.3480/1.3500 has so far held. With the Euro trading at the bottom of its Bollinger Band it makes it very difficult to short and interestingly the Williams Index has given a small buy signal this morning. I am still long from 1.3515 and today I will raise my stop slightly to 1.3475 on this position. With the market so oversold on the charts I do not want to be short at this time.
US Dollar Index
No change as I am still a small buyer on any dip to 80.00/80.25 with a 79.70 stop which is just below the 79.74 low made after the ECB cut rates last month.
September DAX
The Dax plan worked well on Friday as shortly after I posted it traded down to my 9680 buy level before having a nice rally in the afternoon which enabled me to cover this position at 9730 and I am now flat. The Dax is still trading heavy vis a vis the other major Indices especially given its links with Russia and the Ukraine. Today I will again be a small buyer on any dip to 9650/9680 with a 9615 stop which is just below last week’s low. I still do not want to be short the Dax at this time.
September FTSE
No change as I am still waiting for the FTSE to either break the 6660 on the downside to set up a short position or to break 6710 on the top side to put on a long position. However given how little volatility the FTSE is continuing to generate it is better to be on the sidelines as we await for one of these key levels to break.
Dow Rolling Contract
Just like the S&P, the Dow completely reversed last Thursday’s losses in Friday’s trading session and in the process traded up to my 17090 sell level near the close. I am still short and I will leave my stop the same at 17130. If I am stopped out of this position I will be a more aggressive seller in from of 17175 with a 17225 stop. I still do not want to be long the Dow at this time.
September BUND
No change as I am still short from last Thursday at 148.40 with the same 148.75 stop.
Gold Rolling Contract
The Gold plan worked well on Friday as shortly after I posted it started to get hit and eventually traded down to my 1308 buy level. As I am also now long Silver I have decided to cover my long Gold position this morning at 1314 and I am now flat. Today I will again be a small buyer of Gold on any dip to 1298/1304 with a 1289 stop.
Silver Rolling Contract
Shortly after I posted on Friday Silver started to sell-off. It traded down to my 20.85 buy level and I am still long with the same 20.25 stop. It needs to break and close over 21.50 for the market to turn more bullish.
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