US equity markets ended the week higher but with no key Economic data it was solid earnings reports that drove the gains. Strong first-quarter earnings for Google and Microsoft, in particular, helped push the main indices higher overcoming some large falls in IBM (-8%), GE (-4%) and McDonalds (-2%). The US Dollar strengthened further on Friday reflecting the rising concern about the global growth picture after the run of weaker US and Chinese data in the past fortnight. US Dollar strength was also helped by a drop in the Yen. The Japanese Yen fell to a 4-year low after the G20 effectively gave the green light for further Yen weakness by supporting the aggressive easing by the Bank of Japan. However the G20 did add that it would like to see Japan also detail the structural reforms it can take to further boost growth. The USD/JPY briefly rose above 100 in early Sunday evening trading before falling back. Fitch cut the UK’s Credit Rating to AA+ from AAA, citing the weaker economic and fiscal outlook and this led to a much weaker Pound on Friday.
This morning on the economic front we have Euro-Zone Gov Debt/GDP ratio and Euro-Zone Consumer Confidence. Later in the US we have Existing Home Sales and the Chicago Fed National Activity Index.
June S&P 500
A very quiet trading day as the S&P rallied late on Friday to complete the April Options Expiry. Friday was also a day where we had no economic news. The S&P rallied to my 1548 sell level and as we stayed there all day with very little movement I covered my position at the same price on the close as I wanted to be flat for the weekend. As I write this commentary, the S&P is trading at 1555 and is probably higher on the stronger Gold. We now know that the 1530 level is key and as long as we stay over this level the market is okay but a break and close below here will be very bearish. Today I will be a small seller on any rally to 1558/1563 with a 1565 stop and I will also look to buy the market on any dip in small size to 1544/1548 with a 1539 stop. The market will be nervous ahead of Apple which reports tomorrow.
Euro/USD
No change as the Euro briefly broke above 1.3120 but sellers quickly returned after Fitch downgraded the Credit Rating for the UK which saw the US Dollar strengthen across the board. I am still a buyer on any dip to 1.3010/1.3030 in small size with the same 1.2985 stop. Remember as long as the Euro stays over 1.2990 the market is okay but a closing break below 1.2990 will be bearish.
June DAX
The Dax worked perfectly on Friday as we dropped down to my buy level with a 7525 low before having a nice rally. I bought the market at 7440 and as I did not want to have a position over the weekend I covered my long for a nice profit at 7475 before the close and I am now flat. The Dax is back above 7500 this morning on the stronger S&P and today I will be a small buyer on any dip to 7470/7490 with a 7450 stop. If I am taken long and subsequently stopped out I will look to buy the Dax aggressively from 7410/7430 with a 7390 stop.
June FTSE
The FTSE also worked well on Friday as the market quickly traded up to my 6230 sell level before the Fitch downgrade sent the market lower. I took a small gain at 6210 as I did not want to have an equity position over the weekend and I am now flat. This morning I am a small seller on any rally to 6275/6290 with a tight 6310 stop.
June BUND
The Bund is still trading sideways and with the stronger equity markets I thought the Bund would be lower and so I have covered my 146.22 short position this morning for a small profit at 145.95 and I am now flat. If the Bund rallies from here I will look to reset my short position from 146.25/146.45 with a 146.60 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
After I posted on Friday, Gold quickly fell down to my buy level. I bought the market at 1405 and I was lucky not to stopped out as it traded down to a low of 1392 before having a nice rally overnight. I have taken profit here this morning at 1425 as we are now at critical resistance. A break and close over 1430 will be short term bullish and lead to a retest of the important 1460/1480 next resistance area. I am going to stay flat here and my only interest in Gold today is to buy a dip again to 1400/1410 with the same 1390 stop.
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