The US Equity Markets continued their recent good run after Friday’s Non Farm Payrolls beat expectations, rising by 195k versus 165k expected and with upward revisions worth 70k in April and May. The Unemployment Rate remained at 7.6% whilst average hourly earnings rose 0.4% in the month. With the average employment gain running at 202k for the first half of 2013, the Payrolls Report has reinforced the view that September is the likely start date for an initial tapering of the Fed”s monthly bond buying programme. US Equity markets ended an incredibly volatile day with a gain of 1% whilst Bond yields rose sharply with the 10 Year rising 24 basis points to 274%, further bolstering fundamental support for the US Dollar. The Dollar Index broke its 84.10 mid-May high to close at 84.53 which is the highest close since July 2010. However after a very weak German Factory Orders Report (which fell 1.3% from +1.2% expected) the Dax fell 2.4% and this weighed on other European markets. Overnight the Nikkei fell 1.4% despite the weak Yen.
On the economic front, this morning we have German Industrial Production and German Trade Balance and it will be interesting to see what effect these reports will have on the Dax. Later today we have US Consumer Credit followed by the European Finance Ministers who are meeting in Brussels with Greece high on the agenda.
September S&P 500
The S&P worked really well after the Non Farm Payrolls were released on Friday. Having hit a high of 1630.75 after the report was released the market spent the next couple of hours in very thin trading due to the absence of traders who were still away following the 4th July Holiday. It closed the ‘up’ gap to make a low of 1608.25 before rallying strongly especially in the last hour of trading to close near the highs of the day. It dropped down to my 1610 buy level and I was able to cover this position at 1620 and I am now flat. The next key resistance area for the S&P is from 1635/1640 and I will be a small seller here with a 1643 stop. I will also be a small buyer on any dip to 1619/1623 with a 1616 stop. The July positive seasonal bias generally continues for the rest of this week.
Euro/USD
The Euro also worked well on Friday as the market dropped down to my 1.2800 buy level with a 1.2782 low. I covered this position at 1.2840 and I am now flat. The key level for the Euro is the 1.2750 support zone and a break and close below this level will be very bearish. ECB President Dragi is due to speak in Brussels this afternoon at 3 pm and this may have a bearing on the Euro later. The Euro is very oversold here and today I will be a small buyer on any further dip to 1.2780/1.2810 with a 1.2740 stop. I do not want to be short the Euro at this time as I want to see how the market reacts to the 1.2750 support zone first.
September DAX
The Dax is probably the most difficult market to trade at this time as the incredible volatility continues. The Dax managed to close below the 7860 support zone at 7805 and yet this morning is a 100 points higher and back over this key 7860 level as I write this commentary. Today I will be a small buyer on any dip to 7840/7870 with a 7795 stop. I will also be a small seller on any rally to 7970/8000 with a 8020 stop which is just above the high made after the Non Farm Payrolls were released.
September FTSE
The FTSE plan also worked well on Friday as the market dropped down to my 6340 buy level with a 6317 low before following the S&P higher. I was able to cover this position at 6390 and I am now flat. I still like the FTSE as long as we stay over 6340 and today I will be a buyer on any dip to 6330/6360 with a 6310 stop which is just below Friday’s low. I do not want to be short the FTSE at this time.
Gold Rolling Contract
Very unlucky as after the market dropped down to my 1225 buy level I was quickly stopped out of this position at 1208 with a 1206 low before Gold rallied strongly off this low and I am still flat. I still like Gold down here and today I will be a small buyer again on any dip to 1215/1222 with a 1199 stop.
Silver Rolling Contract
Just like Gold I was stopped out of my 19.20 long position at 18.80 for a small loss and Silver also went on to have a nice rally off this low. I still believe Silver is trying to put in a bottom and over the medium term, being long Silver at these levels will pay off going forward. Today I will be a small buyer on any dip to 18.70/18.90 with a 18.40 stop.
September BUND
The Bund just missed my 142.50 sell level with a 142.43 high before selling off aggressively after the Non Farm Payroll No’s were released. Today I will lower my sell level to 14210/142.40 with a 142.55 stop. I will also be a small buyer on any dip to 141.00/141.30 with a 140.85 stop.
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