Quiet was the order of the day for trading last Friday. US Equities closed a little higher, the Dow and S&P both closed up 0.2%, whilst the UK FTSE also closed 0.3% positive and the Eurostoxx 600 ended flat. The VIX was also a touch higher at 10.85. There was no US data whilst German PPI came in as expected at -0.2% which was the third consecutive monthly decline, leaving the reading at -0.8% year on year.
The biggest mover in FX was the rally in the Canadian Dollar, with USD/CAD closing down 0.6% following a big upside surprise in Canadian CPI which jumped 2.3% in May (from 2.0% previously) with core CPI up 1.7% from 1.4%. The EUR/USD closed unchanged at 1.3600 whilst Sterling was not helped by comments from the Bank of England’s Anthony Haldane who said the Bank was not under immediate pressure to raise rates thanks to low wage growth and subdued inflation.
Speaking over the weekend, ECB President Dragi kept the Euro QE dream alive. In an interview with Dutch newspaper De Telegraaf he said that large scale asset purchases are part of the ECB’s toolkit but for now it is focusing on the latest set of stimulus measures.
This morning the markets are opening higher after the Chinese Manufacturing PMI was released earlier this morning showing a rise to 50.8, versus 49.7 expected, and back above the key 50.0 expansionary level.
On the economic front, this morning, we have Euro-Zone and German Manufacturing Services/PMI which are both very important. This is followed at 1.30 pm by the Chicago Fed National Activity Index. At 2.45 pm we have US Manufacturing PMI while at 3 pm we have Existing Home Sales.
September S&P 500
Shortly after US markets opened on Friday the S&P made a new high but could not sustain this break and spent the rest of the session trading lower in one of the quietest contract expiration trading sessions that I can remember. In this process, the S&P traded up to my 1956 sell level and after a brief sell-off I was able to cover this position at 1952 and I am now flat. The S&P is opening higher this morning on the back of the stronger Chinese PMI but the market continues to trade ‘overbought’ on almost every indicator that I monitor but we need a ‘sell- extreme’ before I can have confidence that this market is about to turn. The S&P has not had a 10% correction in nearly three years which is very unusual.
The market still has strong resistance at 1970 and today I will be a small seller from 1958/1963 with a wider 1972 stop. I will also be a small buyer on any dip to 1941/1945 with a 1937 stop.
Euro/USD
Shortly after I posted on Friday the Euro traded down to my 1.3580 buy level with a 1.3565 low. I am still long and this morning I will raise my stop to 1.3560 on this position. It is interesting that despite the comments from ECB President Dragi over the weekend that QE was still a possibility, the Euro is trading higher.
US Dollar Index
No change as I am still long from last week at 80.25. This morning I will raise my stop on this position to 80.00. The Index is still stuck in a very narrow range at 78.80/81.50 for the last seven months and it will need a break either side of this range to determine the next real move for the Dollar.
September DAX
The Dax plan worked well on Friday as shortly after I posted it was trading at my 10050 sell level and after a sell-off I was able to cover this position at 10000 and I am now flat. The key level to watch for the Dax in the short term is 10110 and as long as we can stay below here the market is bearish. Today I will again be a small seller in the 10040/10080 range with 10115 stop. Given how overbought the Dax is trading I do not want to be long the market at this time.
September FTSE
The FTSE is having real difficulty in trying to close over 6830 in the cash market as it keeps rejecting this now very important pivot point. The corresponding resistance level for the September Future is at 6790. A break and close over 6810 will be very constructive and opens up the possibility of a substantial move higher to 7100. Today I will be a small seller into this resistance level from 6795/6815 with a 6830 stop.
Dow Rolling Contract
The Dow is getting closer to breaking the key 17000 resistance level. The last two days have seen some of the quietest trading sessions in a very long time. Today I will be a small seller on any further rally to 17030/17070 with a 17105 stop. Given how overbought the Dow is trading my only interest in buying the market is on a dip to 16810/16840 with a 16780 stop.
September BUND
The Bund just missed my 145.60 buy level on Friday. I am not going to chase this market higher and I will leave my buy level the same at 145.40/145.60 with a tight 145.25 stop.
Gold Rolling Contract
Gold continues to consolidate its large break from Thursday. It is now back trading above its 50-Day and 200-Day Moving Averages which is crucial for the market going forward. After I posted on Friday, it just missed my 1305 buy level and today I will raise my buy level to 1304/1310 with a 1295 stop.
Silver Rolling Contract
For the second consecutive day Silver managed to close over the key 20.50 pivot point and this level should now act as good support. I am still long from last week at 19.58 and today I will still leave my stop the same at 20.20. I am still looking for Silver to retest the key 25.00 resistance level over the coming weeks.
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