Equities rallied yesterday after the White House indicated that Janet Yellan was about to be nominated by President Obama as the next Fed Chair. Stocks were rising before the minutes from the 17-18 September FOMC Meeting were released and were little moved by their contents. They showed the decision not to start winding back (tapering) the bond buying programme had been close and that the majority of participants still thought that tapering could begin by the end of the year and be completed by mid 2014. However they did point to the potential for fiscal issues to cause a setback to the recovery, noting the tightening in financial conditions in recent months as well as the considerable risks surrounding Fiscal Policy. Hence the delay in tapering could be prolonged given subsequent, more recent events.
Risk aversion is rising in the US with the S&P 500 VIX Index spiking to around 20, the highest since June 28 and the yield on Treasury Bills (the lowest risk short term financial asset) rising to levels not seen since 2008.
The latest news on the Budget impasse is that President Obama is finally holding informal meetings with Democrats and Republicans from Congress. These meetings took place overnight and there is no news out so far on how these talks are progressing.
This morning on the economic front we have the Bank of England rate decision at 12.00 noon where the latest Bank of England Asset Purchase target will be announced. Later at 1.30 pm we have the Weekly Jobless Claims in the US whilst later this afternoon the Fed’s Bullard and Williams speak on the Economy and Monetary Policy.
December S&P 500
The S&P had another wild trading day yesterday as the markets were reacting to every piece of news to hit the wires. After a strong opening the market sold off aggressively and the S&P traded down to my 1645 buy level with a 1640.5 low before having a large rally on the ‘Yellan for Fed Chair’ announcement. I covered my long 1645 position at 1653 and I am now flat. The Williams Index has finally given a small buy signal for the S&P and today I will be a buyer on any dip to 1645/1651. Given the volatility I have to leave a wider 1639 stop on any long position which is just below yesterday’s low. I will also be a seller on any rally to 1665/1670 with a 1673 stop. A break and close back above 1672 will be very bullish.
Euro/USD
No change as I am still short from 1.3600. Today I will lower my stop to 1.3550 and if I am stopped out of this position I will be a more aggressive seller on any rally to 1.3590/1.3620 with a 1.3640 stop. A break and close below 1.3480 will be bearish for the Euro and if this happens I will look for the Euro to trade back to the important 1.3350 support level.
December DAX
The Dax worked well yesterday as shortly after I posted the market was trading at the high of the day at 8590. I sold the Dax at 8580 and after a nice sell-off I was able to cover my position at 8530 and I am now flat. The Dax made a new low of 8487 before the market rallied strongly off these lows. Today I will be a small buyer from 8550/8570 with a 8525 stop. If the Dax can break and close above 8610 it will be short term bullish.
December FTSE
The FTSE is trying to hold the very important 6300/6325 support zone and the good news is that the Williams Index has finally given a buy signal for the FTSE. The market traded down to my 6295 buy level and after a short rally I covered half my position at 6330 and I am still long the other half. I will leave a breakeven stop at 6295 on this position and if the FTSE can break 6360 I will raise my stop to 6330.
Dow Rolling Contract
The Dow also worked well yesterday as the market traded down to my 10750 buy level with a 10715 low before spiking higher on the Yellan news. I covered my position at 10820 and I am now flat. The Dow is trading higher this morning on the hope the Budget impasse will be resolved soon and today I will be a buyer of the Dow on any dip to 10790/10810 with a 10745 stop. I do not want to be short the market at this time given how oversold it is.
December BUND
The Bund traded down to my 140.25 buy level yesterday before unfortunately stopping me out of my position early this morning near the lows of the day at 139.85 and I am now flat. Today I will be a small buyer on any dip to 139.40/139.60 with a tight 139.25 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Shortly after I posted yesterday morning Gold was hit hard and after buying it at 1307 I was quickly stopped out of this position at 1299 and I am now flat. As long as Gold can hold 1290 the market is ok but a break and close below 1290 will be very bearish. Today I will be a small buyer on any dip to 1287/1292 with a 1283 stop.
Silver Rolling Contract
Silver traded down to my 21.80 buy level after I posted yesterday and I am still long I will leave my stop the same at 21.45 and if I am stopped out I will be a more aggressive buyer in front of 20.60 with a 20.25 stop.
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