US stocks rebounded on Friday from the biggest decline since July as data showed the fastest economic growth since 2011 whilst Treasuries fell after Bill Gross departed from Pacific Investment Management Company (PIMCO). The S&P closed 0.9% higher paring it’s weekly loss to 1.4% with the market accelerating after it broke back above its 50 Day Moving Average late in the trading session. The US Economy grew at a pace of 4.6%, as expected, whilst the University of Michigan Consumer Confidence rose to 84.6 from 82.5 last month which helped to stabilise the markets which had been a lot lower before the UoM release.
Treasuries fell after speculation that the exit of Bill Gross from PIMCO may prompt the world’s biggest manager of bond funds to shift away from the bond market, especially given how low the returns on bonds are at this time. Janus the company that Gross is joining rallied 43% on this news to its highest level since 2008 whilst Allianz, the German insurer who owns PIMCO, declined 6.2% for its biggest loss in three years.
This morning on the economic front we have UK Mortgage Approvals and Net Lending at 9.30 am. This is followed at 10.00 am by Euro-Zone Economic and Consumer Confidence. At 1:00 pm Germany will release its latest CPI which will be closely watched by the ECB given their recent aggressive action to fight deflation. This is followed at 1.30 pm by US Personal Income/ Spending. At 3 pm we have US Pending Home Sales and finally at 3.30 pm we have the Dallas Fed Manufacturing Activity.
December S&P 500
The wild volatility for the S&P continued on Friday with the market trading in a 22 handle range as the authorities try to do everything they can to prevent this market from having its overdue correction, especially with QE ending next month. When QE ends the big question is where is the cash going to come from to sustain this market rally. Normally when you a lot of two way extreme price action near the stock market highs it tends not to end well and can lead to the start of something nasty.
The market just missed my 1951 buy level before having this huge rally which accelerated after we broke back above the 50 Day Moving Average. After the market rallied to my 1972 sell level I was stopped out of this position at the day’s high at 1977 and I am now flat. Today I am going to watch and observe the market with my only interest in selling the S&P on a rally back to 1985/1990 with a 1994 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 2000 with a 2005 stop. Given how nervous I am with regard to these stock markets I do not want to be long at this time.
Euro/USD
The decline in the Euro continued on Friday afternoon after briefly trying to rally earlier before again being met by a wave of sellers. Sentiment remains at extreme levels against the Euro and if we do not a meaningful rally soon then it could crash lower. I was stopped out of my latest 1.2743 long position at 1.2690 and I am now flat. I am going to stay flat today unless we break back above 12750. If we break this level I will gain be a buyer with a tight 1.2715 stop.
US Dollar Index
No change as I am still flat the Index. Just like the Euro above the Index is now rallying in a straight line since the 78.91 low of May 8. The next resistance comes in at 86.00 and today I will be a small seller from 85.90/86.20 with a 86.45 stop.
December DAX
The Dax plan worked well as after I posted it traded down to my 9465 key support level before having a nice rally which enabled me to cover this position near the New York close at 9530 and I am now flat. The market underperformed the other major Indices due largely to Allianz falling over by 6% on the back of the Bill Gross exit from Pimco. Today I will again be a buyer on any dip to 9470/9500 with a 9435 stop. I still do not want to be short the Dax at this time especially with month end tomorrow where we normally see some strong buying.
December FTSE
The FTSE just missed my 6560 buy level on Friday before trading higher and I am still flat. Today I will raise my buy level slightly to 6560/6590 with a 6535 stop. Given how oversold the market is currently trading I do not want to be short at this time.
Dow Rolling Contract
The Dow plan worked well on Friday as just as I posted the market was trading at my 17030 sell level and after a nice sell-off shortly after the US markets opened I was able to cover this position at 19980. The market closed back above the July highs at 17150. Today my only interest in selling the market is on a rally back to 17200/17250 with a 17280 stop. Given my overall nervousness of the Dow going forward and despite last Friday’s rally I do not want to be long the market at this time.
December BUND
No change as I am still short at 149.60 with the same 150.05 stop.
Gold Rolling Contract
Shortly after I posted on Friday, Gold traded down to my 1215 buy level. I am still long but only in small size and I will leave my stop the same at 1199. If I am stopped out of this position I will be a more aggressive buyer in front of 1185 with a 1175 stop.
Silver Rolling Contract
No change as I am still long at 17.65 with the same 16.95 stop.
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