Equity markets in Europe continued to power ahead after the better than expected IFO Survey from Germany was reported on Friday. European markets are now back near 6 year highs and despite the very weak GDP no from the UK which fell 0.3% for December, putting the UK back in recession, the FTSE also finished strongly.Surprisingly, New Home Sales were weaker than expected in the US and, after an initial wobble, the US market also finished the week on a strong note with the cash S&P closing over 1500 for the first time in nearly 6 years. Yesterday Chinese Industrial Companies reported earnings rising for a fourth consecutive month which helped weaken the Yen initially. Expectations that the Bank of Japan will expand their economic stimulus have driven the Yen down 12% against the US Dollar and 17% against the Euro since November 14th last when elections were announced.
Australia was closed today for Australia Day and this morning on the economic front we have German Retail Sales and M3 from the Euro-Zone. Italy is to sell bonds this morning whilst later in the US we have Durable Goods Orders, Pending Home Sales and the Dallas Fed Manufacturing Activity.
March S&P 500
The S&P worked well on Friday as for the second day in a row I was able to sell the market at 1497 and I took a nice gain at 1492 and I am again flat. Currently we are not getting the intraday volatility that we were getting even five weeks ago and consequently until the Vix picks up we have to take smaller profits. The S&P is now overbought on both a daily and weekly basis. The market’s bullish consensus is now back to a two year high and retail investors have joined the party since the beginning of January. As I said on Friday I believe we will put in a top of some significance over the next two weeks and even though the S&P is overbought we can stay that way for a while. Today I am a seller on any further rally to 1503/1507 with a 1510 stop. I will also be a small buyer from 1490/1493 which is at Fridays low with a 1488 stop.
March DAX
The Dax worked well as after I posted on Friday the market dropped down to my 7820 buy level and I took a nice gain at 7865 and I am now flat. The Dax is also overbought and today I will be a buyer again on any dip to 7810/7830 with a 7795 stop. I will also look to go short from 7890/7910 with a 7925 stop.
Euro/USD
The Euro also worked well on Friday because after I posted it traded down to my 1.3420 buy level. I took a nice gain at 1.3460 and I am now flat. This 1.3380/1.3420 is crucial as a break back below this level will be short term bearish. Today I will look to reset my long position on any dip to 1.3400/1.3420 with a 1.3390 stop. I will also be a seller the first time we test 1.3500 with a 1.3525 stop on any short position taken.
March FTSE
Despite the awful GDP Nos reported on Friday the FTSE continues to trade at 5 year highs. Late Friday it traded up to my 6255 sell level. I will leave a 6280 stop on this position. The FTSE is at the top of its Bollinger Band and the Williams Index has started to turn down. If it sells off from here I will look to take profit from 6200/6220.
GBP/USD
Much to my frustration I was stopped out of my 1.5795 long position this morning at 1.5750 and I am now flat. I am going to stand aside here and observe for the next 24 hours.
March BUND
I was also stopped out of my 142.95 long position on Friday at 142.75 and I am now flat. The Bund is still very oversold and is back at the very important 142.00/142.50 support zone. This morning I will look to re-buy on any dip to 142.10/142.30 with a tight 141.95 stop. A break and close below 142.00 will be very bearish.
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