The US Government shutdown continues with no progress over the weekend to end the budget impasse. However there was some good news on Saturday after US Defense Secretary Chuck Hagel announced that he was ordering all of the 350,000 furloughed defence workers back to work. Hagel said that he based his decision on a Pentagon interpretation of the ‘Pay Our Military Act’ which was passed just a few weeks ago.
Meanwhile the House of Representatives voted 407-0 to pass legislation that ensures all furloughed workers will receive full back pay back dated to the start of the shutdown, once the Budget is passed, which should lessen the overall hit to the economy.
Despite the fact there was no payroll data released last Friday, Equity markets closed higher with the Dow and S&P ending the day up 0.5% and 0.7% respectively. Supporting the markets were reports that House Speaker, John Boehner, had told colleagues that he would not allow the current impasse to trigger a US debt default. Despite the US Fiscal uncertainty the US Dollar found support towards the end of the US session on Friday with the Euro closing at 1.3560, down from 1.3640 earlier in the day.
This morning on the economic front we have Euro-Zone Sentix Investor Confidence Index whilst later from the US we have Consumer Credit numbers.
December S&P 500
The S&P is back on the defensive this morning as so far there is no sign of a resolution to the budget impasse. The S&P rallied on Friday in anticipation of a deal over the weekend and when no deal emerged traders started selling equities across the board especially with the Debt Ceiling Deadline only 10 days away on October 17. Today I will still be a small buyer between 1662/1666 with a 1659 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1642/1650 with a 1638 stop. Remember if we get a Budget deal there will be a large sharp rally which will probably be sold into by traders especially if the Debt Ceiling is not raised simultaneously.
Euro/USD
The Euro traded down to my 1.3570 buy level on Friday. I am still long and I will leave my stop the same at 1.3535. I will look to take profit on any rally over 1.3600. I will also look to go short from 1.3670/1.3700 with a 1.3720 stop.
December DAX
Very frustrating as I was stopped out of my short 8590 position on Friday at 8620 and the market is 100 points lower this morning! Today I will be a seller on any rally back to 8570/8600 with a 8620 stop whilst I will also be a small buyer on any dip to 8440/8460 with a 8420 stop.
December FTSE
The FTSE is following the other equity markets lower this morning and today I will be a small buyer from 6350/6370 with a 6335 stop.
Dow Rolling Contract
The Dow is still very oversold and the market is due a bounce. The Dow is at the bottom of its Daily Bollinger Band and Williams Index and today I will be a small buyer from 14900/14930 with a 14825 stop.
December BUND
The Bund plan worked well on Friday as shortly after I posted the market was trading at my 139.90 buy level. I have covered this position this morning at 140.25 and I am now flat. I still like the Bund and I will use any dip to 139.60/139.85 to reset my long position with a 139.40 stop.
Gold Rolling Contract
Gold worked well on Friday as shortly after I posted it traded down to my 1310 buy level with a 1307 low before having a nice rally and I was able to cover this position at 1322 and I am now flat. I still like Gold as long as we stay over 1290 and today I will be a small buyer on any dip to 1298/1305 with a 1287 stop.
Silver Rolling Contract
Silver also traded down to my 21.50 buy level on Friday and after a nice rally I was able to cover this position at 21.80 and I am now flat. I still like Silver as this market is trading stronger than Gold and today I will be a small buyer on any dip to 21.25/21.50 with a 20.95 stop.
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