Overnight, Sterling took a hit after a Sunday Times Poll, ahead of September 18 Referendum on Scotland’s Independence, showed the ‘Yes Vote’ continuing to make gains. This latest poll shows the yes vote in a slight ascendancy at 51% and 8% undecided with many expecting the uncommitted voters to stay with the status quo. The impact on the currency market had the Cable (USD/GBP) down over a big figure to below 1.6200.
The Ukraine ceasefire seems to be holding in general although the details on troops pull back and disarmament are still to be worked out. On Friday, the Eurostoxx 600 Index closed 0.5% lower although a stronger than expected rise in German Industrial Production, in July, at least lifted German Investor Sentiment.
The other big news on Friday was a softer than expected gain in US Non Farm Payrolls for August with Payrolls rising 142k and also coming with some downward revisions. Even the fall in the Unemployment Rate from 6.2% to 6.1% was flattered by a decline in participation. More broadly though the report portrayed a still improving US Labour market, as average hourly earnings rose 0.2% and the broad US Underemployment declined to 12.0% from 12.2%, signifying less labour market slack.
This morning on the economic front we have UK Lloyds Employment Confidence and Euro-Zone Sentix Investor Confidence. The only other data of note is US Consumer Credit which will not be released until 8 pm this evening.
September S&P 500
The S&P plan worked well on Friday as shortly after the US markets opened it traded down to my 1990 buy level and after a nice rally I was able to cover this position at 1998 and I am now flat. As I mentioned on Friday, the 1985/1990 is key support and this level again held up throughout the day. For me to turn bearish we will need to see a break and close below 1985. It is very difficult to short this market despite the fact that we are very overbought for this stage of the Monetary Cycle as no matter what bad news, whether geopolitical or economical, the market still manages to trade higher. Today I will leave my sell level the same at 2008/2012 with a 2015 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 2020 with a 2024 stop. I will raise my buy level to 1994/1998 with a tight 1989 stop.
Euro/USD
I am still flat the Euro as, despite the weak payroll data on Friday, the market traded in a very narrow range. It has now dropped nearly 8.0% since its May 8 high at 1.3993 and the Daily Sentiment Index is now at its lowest reading, at 4.0%, since July 5, 2013 and which subsequently day led to a six week uninterrupted rally. In my view the Euro is on the verge of a strong rally and for this reason I have bought the market this morning at 1.2935 with a 1.2880 stop.
US Dollar Index
No change as I am still a small buyer on any dip to 83.30/83.60 with a 82.95 stop.
September DAX
I was very unlucky with my planned Dax trade on Friday as the market just missed my 9680 buy level by a few points before having a 100 point rally and I am still flat. Although the Dax is overbought and trading at the top of the Bollinger band I do not want to short given what the ECB did on Thursday with their version of QE. Today I will raise my buy level slightly to 9565/9595 with a 9535 stop.
September FTSE
The FTSE plan worked out well on Friday as shortly after I posted it was trading at my 6840 buy level and after a nice rally, as the market followed the S&P higher, I was able to cover this position near the close at 6870 and I am now flat. The market is opening a lot lower this morning following the Sunday Times Poll and today I will again be a buyer on any further dip to 6790/6810 with a 6765 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow as the market just missed my 17150 sell level on Friday. Today my only interest in selling the market is on a rally to 17170/17210 with a 17240 stop. I still do not want to be long the Dow at this time.
December BUND
We have now moved to the December Contract which rolls with a discount of 195 points. I am still flat and today I will be a seller on any further rally to 149.50/149.80 with a 150.05 stop. Given how overbought the Bund is trading I do not want to be long the market at this time.
Gold Rolling Contract
My long 1259 Gold position from early Friday morning worked out well as after I posted it started to rally which enabled me to cover this position at 1270 and I am now flat. Today I will again be a buyer on any dip to 1260/1265 with a tight 1253 stop.
Silver Rolling Contract
No change as I am still long from two weeks ago at 19.40. Today I will raise my stop on this position to 19.05. If I am stopped out of this trade I will be a more aggressive buyer in front of 18.80 with a 18.45 stop.
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