After an initial burst, fuelled by a good Jobs report, US Equities ran out of puff on Friday to close well down with the S&P closing on its lows. Market jitters ahead of tomorrow’s Presidential and Congressional Elections seems to have been the main driver as traders cut risk from their portfolios. Gold prices fell $40 an ounce and the US Dollar was a lot
stronger but surprisingly the US Long Bond did not benefit.These moves are implying the market is positioning itself for a Romney victory and the replacement of Ben Bernanke. There are also fears about the looming Fiscal cliff. Whilst the vote may be close, Obama has a slight lead in the swing states and I would expect him to be elected.
Today the G20 Finance Ministers are meeting in Mexico and this is an action packed week for economic news and political risk. This morning we have Euro-Zone trade balance and at the normal time in the US, as they put their own clocks back at the weekend, we have the Empire Manufacturing Index.
Dec S&P 500
As expected, the S&P has fully closed the open 1431 Gap from two weeks ago with a 1431.5 high before falling apart as political risk took over. The market was not helped by the fall in Apple shares which fell 3.5%. Apple has a weighting worth 19% of the Nasdaq and 4.9% of the S&P. When there was no follow through in the market on the back of the stronger Jobs report I went short at 1427 and took a nice gain at 1415 and I am now flat. I still believe Obama will win tomorrow and as long as we stay over 1394 the S&P is still bullish, however a break and close below 1394 will be short term bearish and I would then expect a test of the open down Gap at 1362 which exists from August 1st. This morning I will be a buyer from 1400/1404 in smaller size with a wider 1393 stop.
Euro/USD
The Euro has dropped into the middle of the 1.2770/1.2870 support area and I have gone long this morning at 1.2795 with a 1.2750 stop. The Euro is very oversold and at the bottom of its Bollinger Band and Williams Index.
USD/JPY
This Currency pair has not moved since Friday and I will raise my stop to 8010 on my 7990 long position from last week.
Dec FTSE
No Change as I still look to buy a dip from 5770/5790 with a 5758 stop.
Dec BUND
I am surprised with the weak Equity markets that the Bund is not higher and seems to be trading heavy. This morning I will be a seller from 142.05/142.25 with a tight 142.35 stop as 142.20 is strong resistance.
Gold – Rolling Contract
Gold fell $40 last Friday as the market now fears deflation. It was good that I lowered my buy level to 1690 and unfortunately I was stopped out at 1678 and I am now flat. The next big support comes in at 1650 and I will be a small buyer in front of any dip to 1650 as we are now oversold. If I am taken long I will have a 1635 stop on this position.
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