The ECB bank stress test results have been greeted with some relief by the market at the open of FX trade this morning with the Euro enjoying a modest bounce, up 30/40 pips to 1.2680/90. Sterling has also jumped at the open of trading whilst the AUD is opening up this morning just above 0.88, the point at which it closed in NY on Friday. Commodities were mixed on Friday, LME metals and Brent oil lower whereas gold and iron ore were up somewhat.
The ECB announced on Sunday that 25 banks, or around 1 in 5 of 130 large institutions assessed through 2013/14, failed stress tests thus requiring an additional €25bn capital as a result. However, they also said that 12 of the 25 banks had already covered their capital shortfall by raising an additional €15bn in the current year.
The UK economy notched up growth of 0.7% in Q3, exactly as expected, Sterling enjoying only a slight temporary bounce. On the other side of the Atlantic, US new home sales in Septemberwere almost right on expectations, though with a hefty downward revision to August Sales.
This morning on the economic front we have the German IFO Survey at 10.00 am. At the same time the Euro-Zone will release its latest Money Supply. Today at 2 pm we have US Pending Home Sales whilst at 2:30 pm we have the latest Dallas Fed Manufacturing Activity Index.
December S&P 500
Unfortunately by the time that I posted on Friday the S&P had moved away from my 1935 buy level before having another huge day to the upside. The market eventually traded higher to my 1955 sell level and after a brief sell-off I was able to cover this position at 1949 and I am now flat. The S&P again rallied into the close with the market now hovering near the next key level at 1960. The McClellan Oscillator which has led this move higher is now very over bought at +217. However we have an FOMC Meeting and Rate decision at the earlier time of 6pm on Wednesday making it very difficult to short the market ahead of this key meeting when QE is expected to finish. Fed Chair Yellen is not expected to give a press conference following the meeting.
Today I will move my buy level higher to 1948/1953 with a 1943 stop which is just below last Wednesday’s spike higher before reversing on the Ebola news. Given how over bought the market is trading I will be a small seller on any further rally to 1966/1971 with a 1974 stop.
Dow Rolling Contract
Very late in the trading session on Friday the Dow eventually rallied to my 16800 sell level. I am still short and today given my entry level I will raise my stop on this position to 16870. If I am stopped out of this trade I will be a more aggressive seller in front of 16920 with a 16970 stop. Despite the fact that we have an FOMC Meeting on Wednesday I do not want to be long the Dow at this time especially since the market has rallied nearly 1000 points since its low 10 days ago.
Euro/USD
My short 1.2670 trade from Thursday worked out well on Friday as shortly after I posted the Euro traded lower allowing me to cover this position at 1.2640 and I am now flat. The Euro is opening a little higher on the better than expected stress test results and today I will again be a small seller on any further rally to 1.2730/1.2770 with a 1.2795 stop. I still do not want to be long the Euro at this time.
US Dollar Index
No change as I am still a small buyer from 8510/85.40 with the same 84.85 stop.
December DAX
The Dax failed to move ahead on Friday despite the huge rally in the US markets. It may perform better today on the back of the stress test but we still have to get through the IFO at 10.00 am. If the market rallies further from here I will still be a small seller from 9095/9130 with a 9155 stop. I will also be a small buyer on any dip to 8910/8940 with a 8860 stop.
December FTSE
My 6395 FTSE short from Thursday worked out well on Friday as after I posted the market had a nice sell-off which enabled me to cover this position at 6360 and I am now flat. Today I will again be a small seller from 6420/6450 with a 6480 stop. I still do not want to be long the FTSE at this time.
December BUND
My long 150.30 Bund position from Thursday also worked out well on Friday as the market had a nice rally before lunch which enabled me to cover this position at 150.70 and I am now flat. As I have mentioned over the last two weeks the key level for the Bund is at 149.80 and as long as we can stay over this level the market is fine. Today I will again be a buyer on any dip to 149.95/150.20 with a 149.75 stop.
Gold Rolling Contract
No change as I m still a buyer on any dip to 1212/1220 with the same 1205 stop as Gold continues to back away from the key 1240/1250 resistance level.
Silver Rolling Contract
No change as I am still a buyer on any dip to 16.50/16.80 with a 16.25 stop. Silver needs to break and close over 17.50 for me to move my buy level higher.
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