Weather permitting today we should see normal trading begin in earnest for 2014 with all trading desks now manned after the Christmas and New Year celebrations. I see 2014 as one of continuing to move back towards normality which was kicked off by the Fed’s tapering in December,which is expected to continue. In the absence of more fiscal woes in the US I see policy very slowly normalising and the US Dollar recovering.
We had a number of Fed speakers talking last Friday and in the main they highlighted the positive outlook for the US and the need,for a process to normalise policy. Plosser, a known hawk, highlighted the fact that the Fed was often slow to tighten policy,but then raised interest rates faster than expected. Lacker a non-voter saw substantial improvement in the labour market and noted that they could raise interest rates in 2015 but could also do so in late 2014. While we know these two are keen for policy normalisation, their comments boosted US Bond Yields and the US Dollar. Outgoing Chairman, Bernanke, now in his last month of his role,was also more upbeat and discussed the improving economy although he did note that the Fed had been optimistic in its expectations. Bernanke also highlighted that the Fed could adjust policy in ways other than higher interest rates as he talked about raising the interest rate on excess returns as a way to raise short term interest rates.
This morning on the economic front we have UK and Euro-Zone PMI Services at 9.30 am and 10.00 am respectively. We also have Euro-Zone Sentix Investor Confidence and German CPI. Later from the US, we have Factory Orders at 1.30 pm followed by ISM Non Manufacturing Composite.
March S&P 500
As expected the S&P rallied nicely into Chairman Bernanke’s speech last Friday before reversing late in the day. After I posted on Friday the S&P was trading at my 1826 buy level and after a nice rally I was able to cover this position at 1831 and I am now flat. The S&P has left a gap from last Tuesday’s close at 1843 to last Thursday’s high at 1838 and if we do not close this gap by today or tomorrow we could have a break away gap to the downside. The key level to watch on the downside is 1820 which we have tested twice this year and a closing break below 1820 will be bearish and will open up a test of 1800. We are still in the seasonally positive time of the year making it difficult for me to go short the market with all the new monies coming into the market in the first week of the year. Today I will be a small buyer from 1820/1824 while I will still be a small seller on any rally to 1840/1844 with a tight 1847 stop.
Euro/USD
The Euro has had a wild last 10 days of trading. Having been at the top of the Bollinger Band at 1.3900 it is now trading at the bottom of both the Bollinger Band and Williams Index. The Euro fell hard after Plosser’s comments on Friday and traded down to my 1.3590 buy level. Even though I am bullish the US Dollar, the Euro is oversold here and I will leave my stop the same at 1.3560 on this small long position. If I am stopped out I will be a more aggressive buyer on any dip to 1.3500/1.3530 with a 1.3480 stop. My only interest in selling the Euro is on a rally to 1.3700/1.3730 with a 1.3750 stop.
March DAX
When I posted on Friday the Dax just missed my 9380 buy level before trading higher and as I previously mentioned, as long as the Dax can stay over 9350/9380 the market is okay but a break and close below 9350 will be bearish. Today I will raise my buy level to 9390/9420 with a 9375 stop which is just below last Friday’s low.
March FTSE
No Change as I am still long the FTSE from last Thursday at 6660 with the same 6640 stop. I still like the FTSE versus the other major indices and I am trying to give this trade some room to breathe. However a break and close below 6640 will be bearish. If the FTSE can break and hold 6710 it will be short term bullish.
Dow Rolling Contract
The Dow worked well last Friday as the market finally traded down to my 16440 buy level before having a nice rally enabling me to cover this position at 16490 near the close and I am now flat. Today I will still be a small seller on any rally to 16550/16580 with a 16610 stop whilst I will still look to buy the Dow on any dip to 16390/16420 with a 16360 stop.
March BUND
The Bund also worked well on Friday as it traded down to my 139.00 buy level before having a small rally and I was able to cover this position at 139.20 and I am now flat. The Bund is still oversold and I still believe that dips are to be bought rather than rallies to be sold. Today I will be a small buyer from 138.60/138.90 with a 138.40 stop.
Gold Rolling Contract
Gold continues to trade higher off the 1182 low made last Tuesday and a break and close over 1245 will be very bullish and I would then expect Gold to re-challenge the key 1320/1350 resistance level. Today I will raise my buy level to 1220/1230 with a 1215 stop.
Silver Rolling Contract
No change as i am still long half of my position from 18.90 with the same 19.50 stop. If Silver can break and close over 20.34 coupled with Gold closing over 1245 I would then look for Silver to retest the key 22.50/23.00 resistance zone.
Recent Comments