Last Friday’s Non Farm Payrolls Report was strong in just about every respect, bar one, Hourly Earnings which was flat. The Payroll Report showed a combination of strong growth without any wages inflation scare, the sweet combination that equity markets love and enough to power the US Dollar higher. Payrolls jumped 248k versus 210k expected as the stronger print came with upward revisions to July and August, totalling 69k, with August now recorded at 160k from 142k. The Unemployment Rate dropped to 5.9% from 6.1%, partly assisted by the fresh fall in the participation rate to 62.7% from 62.8%. Underemployment also fell to 11.8% from 12.0% and that all came with the sweetener of support for ongoing benign wage inflation with unchanged hourly earnings in September. US Trade figures and Non-Manufacturing ISM reading were also somewhat stronger than expected.
The markets had a textbook response, with US Equities powering higher as did short end Treasury Yields and the US Dollar. The US Dollar never looked back throughout the remainder of the session with the Dollar Index closing 1.28% higher, at 86.7, although It is opening a tad lower this morning.
This morning on the economic front we have German Factory Orders and Construction PMI at 8.30 am. This is followed at 9.30 am by the latest Euro-Zone Sentix Investor Confidence. We have no economic data of note due from the US today.
December S&P 500
One thing that we have learned from the S&P trading over the last three years is that the market does not hold any decent sell-off for any length of time. This certainly was the case after it made its intra-day low on Thursday afternoon, at 1919, with the market rallying 50 handles off this low to retrace exactly 50% of the preceeding sell-off. Again both the Daily Bollinger Band Williams Indicator told me not to be short on Thursday and that a rally was imminent.
The S&P plan worked well on Friday as shortly after the Non Farm Payrolls were released the market traded higher to my 1959 sell level. It then had a nice sell-off which enabled me cover this position at 1953 and I am now flat. Friday’s rally has now left an ‘Open Gap’ from the close on Thursday of 1938.50 to Friday’s Chicago low at 1952, which is huge, and I would expect at least some if not all of this gap to be filled over the coming days.
Today I will be a small seller from 1968/1973 with a 1977 stop. A break and close over 1992 will be very bullish and opens up the possibility of a move higher to 2100. Given the large ‘Open Gap’ my only interest in buying the market is on a drop to 1950/1954 with a 1945 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1940 with a 1935 stop
Euro/USD
After the Non Farm Payrolls were released on Friday the Euro had traded through my buy level and stop and as a result I was not able to get on a long position on and I am still flat. If it continues to trade lower, the 78.6% retracement of the July 2012 low at 1.2042 comes in at 1.2460. If this latter level is broken the next key support is at 1.2300 and a break and close below this very strong long term support opens up the possibility of a move lower to 1.1750, and then possibly 1.1200. I still do not believe that the Euro will not keep going lower without having a decent rally back to at least 1.2850/1.2920 first, especially given the record low Daily Sentiment Readings towards the Euro. For this reason I have bought the Euro again this morning at 1.2530 and I will leave a wider 1.2450 stop on this position.
US Dollar Index
After the Non Farm Payrolls were released on Friday the Dollar traded higher to my 86.20 sell level before stopping me out of this trade for a small loss at 86.50 and I am now flat. Whilst doing some technical research over the weekend I discovered that the Dollar Index has an ‘Open Gap’ from the 11th June 2010 at 87.28 which amazingly has stayed open for nearly 4 1/2 years. The market may well close this gap first before finally trading lower. Today I will again be a seller from 86.85/87.15 with a 87.40 stop.
December DAX
Very frustrating that I was stopped out of my long position on Thursday near the lows of the day before the Dax had this nearly 200 point rally – I am still flat. Today I will raise my buy level to 9240/9270 with a 9185 stop. I still do not want to be short the Dax at this time.
December FTSE
After I posted last Friday the FTSE just missed my buy level before following the other stock markets higher and I am still flat. The market is still trading oversold after the hammering it got following the Scottish Referendum still making it difficult for me to go short at this time. For this reason I will raise my buy level to 6470/6500 with a 6455 stop.
Dow Rolling Contract
Having gone long on Thursday near the low of the day I should have kept this long position but as most members know I don’t hold positions into key economic data releases like the Non Farm Payrolls. Today the key resistance for the Dow is at 17145 which is the September 30 high and today I will be a small seller on any further rally to 17105/17145 with a 17170 stop. Given my concerns for the Dow going forward I do not want to be long the market at this time.
December BUND
No change as I am still flat as I await for the Bund to make ups its mind as to which way it is going to break given that we are still trading at this key 150 level.
Gold Rolling Contract
As expected, I was finally stopped out of my long 1214 position from last week at 1199. Overnight, Gold has traded down to my 1187 buy level and I am now now long in reasonable size at this level with the same 1173 stop.
Silver Rolling Contract
No change as I am still long at at 16.95 with the same 16.45 stop Silver is now down nearly 25% since its July 10 high at 21.63 and the longer term 21 Day Moving Average of the Daily Sentiment Index is now at 8.62% bulls which is a record low that dates back to the data’s start in 1987.
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