There was no data of note yesterday but that did not stop the US stock markets having their worst day since October 10 with the Dow closing down nearly 300 points. Oil was again the big story with WTI and Brent closing down another 4% while the US Dollar continued to weaken. While the Shanghai stock market recovered by 2.9% after its 5+% plunge the previous day, European equities had another down session led again by the Greek stock market which fell 1% on top of its 12.4% plunge on Tuesday. Just to put the huge decline in Greece on Tuesday in perspective, it was its largest fall since the 1987 crash. Both Greek and Portuguese Bonds again rose by 14bps and 39bps respectively while highly rated Bond Yields fell.
The vote to elect a new Greek President is next Wednesday December 17. If we get a +200 seat majority it would avoid a General Election, if not there are more votes scheduled on Dec 23 and 29 with the possibility of a General Election early in the new year.
Oil prices continued to plunge after the Weekly Crude Inventories were reported and showed a rise of 30.56m bpd in November, again above its 30m pre-and -post November target. Crude was also not helped by comments from Saudi Oil Minister Ali Al-Naimi who was quoted as saying ‘Why should I cut production?’
This morning on the economic front the ECB will publish its Monthly Report at 9.00 am. At the same time the ECB’s Likanen will speak at the Bank of Finland briefing. At 1.30 pm we have US Retail Sales and the Weekly Jobless Claims.
December S&P 500
The S&P fell hard yesterday down another 1.5% on top of Tuesday’s 0.8% fall. Certainly the dynamics have changed this week after the massive move up since the October 15 low of 1812. Yesterday was a 90% down day meaning the selling was broad based and intense as shown by the McClellan Oscillator which closed with a reading of -160. The S&P plan worked well as after the market broke 2045 I went short at 2043 and after a nice move lower I covered this position at 2025 and I am now flat. One of the main reasons that I covered my position is the fact we have the FOMC Meeting next week followed by the December Contract expiration on Friday December 19. Traditionally whatever low is put in on the S&P on the Thursday/Friday in the week before expiration is the low and obviously I will be looking for a low either today or tomorrow.
However I have to respect the fact that the S&P finally broke and closed below the key 2045/2050 level which should now act as strong resistance. For this reason I will be a small seller on any rally back to 2040/2045 with a 2051 stop. I will also be a reasonably aggressive buyer on any dip to 2005/2014 with a 1998 stop as I look for the market to then rally into next week.
Euro/USD
Frustrating, as I am still flat the Euro having called this rally over the previous two weeks. After I posted yesterday morning the Euro just missed my 1.2350 buy level before rallying over 120 points. Today I will raise my buy level slightly to 1.2390/1.2420 with a 1.2365 stop. I still do not want to be short the Euro at this time.
US Dollar Index
The Dollar Index is again testing the key 88.20 support level. A break and close below here is bearish and will then see me look to set up another short position. I am still flat and today I will lower my sell level to 88.50/88.80 with a 89.05 stop.
December DAX
I was very unlucky with my Dax call yesterday as after I posted the Dax just missed my 9930 sell level with a 9914 high before falling nearly 180 points and I am still flat. The Dax is rebounding this morning and today I will lower my sell level to 9870/9920 with a 9950 stop. A break and close below 9770 will be very bearish.
December FTSE
As expected I was stopped out of my 6535 long position for a small loss at 6495 and I am now flat. However the Ftse is rebounding strongly this morning and for this reason I will again be a small buyer on any dip to 6470/6490 with a 6445 stop.
Dow Rolling Contract
The Dow plan of selling rallies over the past few weeks with a tight stop is finally paying dividends. Yesterday was the first time since the whole up move occurred since the October 15 low that the Dow fell three days in a row. As mentioned above I am worried about a rally next week and for this reason I covered half my 17970 short position from last Friday at 17580. As I want to try and keep a macro short position on especially as this market has the potential of a serious move lower given the extreme sentiment bias towards the bulls I have decided to retain the other half. I know that December is one of the best months of the year for the stock market but to me this market is extremely dangerous and I want to have some exposure to the downside. Today I will lower my stop slightly to 17820 on the other half of my position.
March BUND
No change as I am still short at 154.00 with the same 154.30 stop.
Gold Rolling Contract
No change as I am still long half my position at 1215 with the same 1205 stop. Gold is trading lower this morning and given the mood in the market I no longer want to be a buyer again from 1215/1221.
Silver Rolling Contract
No change as I am still long from last Monday Week at 15.10 with the same 16.50 stop. The next big resistance for Silver is from 17.70/18.10.
January NYMEX Crude
I cannot remember seeing a market as oversold as Crude currently trades. After I posted yesterday Crude traded lower to my 62.30 buy level before stopping me out of this position at 61.60. Subsequently Crude traded down to a 60.60 low. I went long again in small size at 61.10 and I will leave a wider 59.85 stop on this position. The next major support for Crude is from 58.00/58.50 and if the market eventually trades lower to test this support I will be an aggressive buyer in this area with a 56.80 stop.
Recent Comments