US Equity markets having closed up an average of 0.4% on Friday, for yet another record close, are expected to open higher again this morning after news out of Geneva yesterday that Iran has agreed to limit its nuclear programme in exchange for as much as $7 billion in relief from economic sanctions over the next 6 months. European Equity markets are opening up an average of 0.5% on this news whilst oil markets are a lot lower with Brent down nearly 3% on the easing of tensions.
Shortly after I posted last Friday Germany released its latest IFO Business survey which surged to its highest level in 18 months signalling that the recovery in Europe’s largest economy remains on track even after growth slowed in the first quarter. The IFO increased to 109.3 in November from 107.4 in October. German companies are becoming more optimistic as they invest to take advantage of domestic unemployment being near a 20 year low and the end of the Euro-Zones longest-ever recession.
Markets were also helped on Friday after comments from Fed member Lockhart who thinks the Fed can handle it’s exit from QE when the time comes despite uncertainty caused by a balance sheet close to $4 trillion.
This morning on the economic front we have UK BBA Mortgage Approvals at 9.30 am. This is followed by Spanish PPI and the latest Business Survey from France. At 3 pm we have Pending Home Sales and the Dallas Fed Business Index from the US.
December S&P 500
The S&P closed higher again on Friday and for the week. Last week was the seventh consecutive weekly rise for the S&P. The sentiment extremes that I have discussed over the last two weeks continue to grow and stocks, in my opinion, continue to be over-loved, over-bought and over-valued. The last two weeks is the first time in 4 years that I have started to set up short positions in the market. The mantra of not fighting the Fed continues to be the dominant theme and this been Thanksgiving Week is traditionally one of the strongest weeks of the year.
The S&P is still trading at the top of the Bollinger Band and Williams Index and the futures markets are been helped this morning by the Iran deal announced yesterday. Shortly after I posted on Friday the market stopped me out of my small 1793 short position at 1798. The market traded higher but did not reach my sell zone. This morning the S&P is higher and is now in the main resistance area, at 1810, that I have been looking for after we originally broke the 1775 former contract high. I have gone short the market this morning at 1808 and I will leave a 1815 stop on this position. Given that this is a strong seasonal week I will be a buyer on any dip to 1788/1792 with a 1784 stop.
Euro/USD
The Euro traded up to my 1.3560 sell level overnight and I am now short. I will lower my stop to 1.3580 and I will look to cover this position on any dip to 1.3500/1.3520. I will also be a small buyer on any dip to 1.3450/1.3470 with a tight 1.3425 stop.
December DAX
Shortly after I posted on Friday the Dax traded down to 9772 before having a nice rally into the close. Unfortunately I did not cover my small short 9180 position from last Thursday and I have been stopped out of this position this morning at 9250 and I am now flat. Even though the Dax is overbought and at the top of the Willams Index and Bollinger Band it can stay overbought and the market is currently approaching its next resistance level of 9300. Today I have to respect that the Dax is making new all time highs and I will be a small buyer from 9225/9245 with a 9195 stop. I will also be a small seller from 9300/9325 with a 9340 stop.
December FTSE
The FTSE is still the weakest of the major equity indices and is not helped by the fact it has so many mining stocks in the index. The key level for the bullish case is 6660 and as long as the FTSE stays over this level the market should be fine. Today I will be a small buyer on any dip to 6660/6680 with a 6645 stop. My only interest in selling the FTSE today is on a rally to 6745/6760 with a 6770 stop.
Dow Rolling Contract
It was a good decision to stand aside from the Dow on Friday. Just like the S&P the Dow continues to trade higher in what seems like a frenzy as traders just want to own stocks. The Dow is approaching a 13 year trendline at 16150 and today I will be a small seller from 16125/16170 with a 16195 stop.
December BUND
The Bund never traded down to my 140.25 buy level on Friday before trading higher. The market is approaching the key 141.20 resistance level as I write this commentary and if it can break and close over this level I will look to reset my long position. I am going to stand aside here this morning to see how the market reacts at this key level before making my next trade.
Gold Rolling Contract
Gold continues its November sell-off and is now down over $135 since the beginning of the month. Gold is trading at the bottom of its Bolliner Band and Williams Index and the Daily Sentiment Index posted its latest reading on Friday showing a 9% bullish reading. Given how oversold Gold is trading I am going to raise my buy level to 1205/1225 with a 1195 stop. If I am stopped out I will be a aggressive buyer on any dip to 1175/1185 with a 1165 stop.
Silver Rolling Contract
Silver has traded down to my 19.60 buy level early this morning. I am now long in small size with a 18.95 stop. I will also buy more Silver if we drop down to 19.20 with the same 18.95 stop.
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