Last Friday’s first estimate of Q1 GDP at 2.5% slightly undershot market expectations for 3% annualised growth. The detail was somewhat better than the headline however with a 3.2% rise in personal consumption (despite the tax rises at the beginning of the year). Private investment surged 12.3% driven largely by a 12.6% increase in residential investment. However it was Government consumption, led by an 11.5% drop in defence spending, that was largely responsible for holding back growth. Inventories added 1% to growth with Final Sales in domestic purchases rising by 1.9%. Stocks ended Friday’s New York session mixed, with the Dow rising 0.1% and the S&P losing -0.2%. Helping to support stocks on Friday was the better than expected University of Michigan Survey which came in at 76.4 from 72.3 preliminary. The biggest mover on currency markets was the Yen with the USD/JPY losing 1.25% as traders took profits ahead of the Golden Week Holidays which start today. Weekend news that a new Italian Government has been formed under Enrico Letta has lifted the Euro and European equities this morning. This is a big week for Central Bank Policy meetings with the Fed meeting on Wednesday (including a post FOMC press conference) and the ECB on Thursday.
Today on the economic front we have UK Hometrack Housing Survey followed in the Euro-Zone by the EC Business Climate Indicator and the German CPI. Later in the US we have Personal Income/Spending,and Pending Home Sales. Finally at 3.00 pm we have the Dallas Federal Manufacturing Activity Index.
June S&P 500
Another very quiet day for the S&P because, despite the weaker than expected Q1 GDP the market held in reasonably well. The S&P just missed my 1571 buy level before having a nice rally and I am still flat. It is hard to see the S&P sell off today and tomorrow as month end positive factors kick in. Today I am a small buyer on any dip to 1470/1474 with a 1468 stop and I will also look to sell the market on any rally to 1589/1593 with a 1595 stop. The area that I want to get short is in front of 1610 in bigger size with a 1615 stop.
Euro/USD
The Euro again tested the 1.2980 level before having another nice rally off this key support. It is higher this morning on the back of the new Italian Government been formed and this is going to be a big week for the Euro with the ECB meeting on Thursday followed by Dragi’s press conference after. Today I will be a small seller of the Euro on any rally to 1.3100/1.3120 with a 1.3140 stop. If the Euro can close over 1.3130 it will be short term bullish. I will also look to buy the Euro on any dip to 1.3000/1.3030 in small with a 1.2970 stop.
June DAX
Very unlucky on Friday as the Dax just missed my 7760 buy level before having a nice rally. This Dax is on fire as the market has now backed itself into a corner in the belief that the ECB will cut rates on Thursday. It is now up 450 points since last Tuesday’s very weak PMI Services report. Today I will look to sell the market on any further rally to 7895/7920 with a 7935 stop. I will also look to buy the market on any dip to 7820/7840 with a 7795 stop. Again given the volatility I am only trading in small size.
June FTSE
The FTSE worked well on Friday as the market dipped down to my 6360 buy level. I have taken profit this morning at 6400 on this position and I am now flat. Today I will still look to buy the FTSE on any dip to 6360/6380 with a 6350 stop which is just below last Friday’s low. As we are approaching month end I do not want to be short the market here.
June BUND
No change as I am still short the Bund at 146.30. I am surprised it is not higher given the weak US GDP report. I will leave my stop the same at 146.80 and I will look to take profit in front of the very important 145.80 support zone. A break and close below 145.80 will be bearish.
Gold Rolling Contract
After a nervous day, Gold finally sold off and I was able to take profit at 1450 on my 1475 short position. It is very important to have your target profit order set up as, given the volatility, the Gold market is very nervous and it does not take much to move the market in either direction. This morning Gold is back into the 1475/1490 resistance zone and I will be a seller today in small size from 1480/1495 with a 1505 stop. I do not want to be long at this time.
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