Equity markets recovered their poise on Friday, positive news from Hewlett Packard and AIG boosting US Technology and Insurance sectors and, following gains in Europe, inspired by a stronger than forecast German IFO Survey. Real money interest in buying the dip from earlier in the week was the primary flow in US markets. Moodys’ downgrade of the UK’s credit rating by one notch to AA1 from AA came after stocks closed. GBP lost a cent in the last half hour of New York trading to trade at its lowest since mid-July 2010. All eyes today will be on the result of the Italian Election which is due just after 2 pm, after the second day of balloting ends. Turnout yesterday was lower than for the 2008 Election and anything other than a clear win for Bersani’s Democratic Party in the Lower House, and a seemingly workable Bersani/Monti Coalition in the Senate, will almost inevitably see pressure resurface on Euro Peripheral Debt Markets and a risk that Euro/USD will head further south to as far as 1.30. In these circumstances, global equities would most likely struggle to maintain Friday’s rally. Also this week, Bernanke is due to testify to the Senate Banking Committee in the US on Tuesday and anything short of a public push-back against the market skittishness engendered by last weeks FOMC Minutes will also likely undermine Risk Assets.
Today is very quiet on the Economic front with just the Dallas Fed Manufacturing Activity due out of the US.
March S&P 500
As many of you know I am in Chicago for a few days and I spent three hours in the S&P Pit on Friday. During that time, the S&P traded between 1508/1512 on what was an extremely quiet day. I have not been to Chicago for over five years during which time the S&P daily volume has gone from over 50,000 futures contracts to less than 5000 now.
The S&P never hit any of my guidelines on Friday and I am still flat. The market broke its seven week winning streak to close lower on the week but it is finding it very hard to go down 2 days in a row. Today I am only interested in going short on any rally to 1521/1525 with a 1531 stop which is just above last weeks high. I am also a buyer on any dip to 1502/1507 with a 1499 stop. If the market trades lower and I am stopped out of any long position I am a very aggressive buyer in front of 1490 with a 1485 stop.
Euro/USD
The Euro did not trade up to my 1.3230 profit target and I am still long from 1.3175. The market just missed my 1.3140 stop loss level with a 1.3150 low. Even though the Euro is oversold I do not want to have a position into the Italian Election result and I have taken profit overnight at 1.3210 on this position and I am now flat. I am going to stay flat until after the result is announced.
March BUND
The Bund traded down to my 143.25 buy level with a 143.19 low and I took a nice gain at 143.60 and I am now flat. I will still look to reset my long position on any dip to 142.90/143.20 with a 142.75 stop. I do not want to be short at this time.
March FTSE
The FTSE worked really well and I was able to take a nice gain at 6340 on my 6278 long position and I am now flat. I am a seller on any rally to 6360/6385 with a 6405 stop and I will also look to buy the market on any dip to 6270 with a 6250 stop.
GBP/USD (Cable)
Cable got slammed after the market close on Friday due to the Moodys’ downgrade. Having traded over 1.5300 on Friday morning we have traded well below 1.5100 overnight. Cable is extremely oversold, at the bottom of the Bollinger Band and Williams Index and this morning I am a small buyer in front of 1.5000/1.5030 with a 1.4970 stop.
Gold Rolling Contract
Gold is trying to bottom and I will raise my buy level to 1560/1570 with a 1552 stop which is just below last weeks low. If I am taken long and subsequently stopped out I will be an aggressive buyer in front of 1530 with a 1520 stop.
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