Stock markets were generally weaker across the board yesterday with a variety of news weighing them down but the underlying tone continues to be risk averse in the run up to the Fed’s final FOMC Meeting of the year next week. The S&P fell 1.1% yesterday and in the process posted its biggest back to back drop in two months as the Congressional Budget Accord fueled speculation the Fed may trim stimulus next week. Volume picked up with $6.5 Billion shares changing hands which is 6.5% above the three month average.
Congressional negotiators yesterday agreed to a Budget deal that would ease automatic spending cuts by about $60 Billion over two years and will reduce the deficit by $20 Billion to $23 Billion. The Budget compromise which needs to pass both Houses does not raise the Debt Ceiling setting up the prospect of another potential Fiscal shutdown after February. The Chicago Board Options Exchange Volatility Index, the gauge of S&P options known as the VIX, rose 11% yesterday to 15.42 for the biggest gain since October 15.
This morning on the economic front we have Euro-Zone Industrial Production and the ECB publishes its Monthly Report. Later at 1.30 pm we have the Weekly Jobless Claims from the US and Advance Retail Sales.
December S&P 500
The S&P closed to its lowest level since the market peaked at 1812 on November 29 last and so far the market is holding the 1775/1780 support zone. Next week the December Contract expires and this is known as triple witching expiration as all the options also expire for the December contracts next Friday. Normally whatever low is put in on the Thursday/Friday this week is the low ahead of the expiration but next week is not a normal week as we have the FOMC Meeting on Tuesday and Wednesday next. As most members know I do not want to be short ahead of any FOMC Meeting as the S&P tends to squeeze higher ahead of the announcement. Yesterday the S&P just missed my 1807 sell level before trading down to my 1794 buy level. After a brief pause I was quickly stopped out of this position at 1789 and I am now flat. The S&P is trading at the bottom of the Bollinger Band but not the Williams Index and today I will be a buyer on any dip to 1773/1777 with a 1769 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1760/1765 with a 1758 stop. I do not want to be short the market at this time.
Euro/USD
No change as I am still a seller on any rally to 1.3825/1.3850 with a 1.3870 stop. I was stopped out of my long US Dollar Index position at 79.80. The Index has now rolled to the March Contract which is trading roughly 17 points higher. I have gone long this contract at 79.90 and I will leave a 79.50 stop on this position.
December DAX
The Dax worked really well yesterday as shortly after I posted the Dax was trading at my 9120 sell level. The Dax had a nice sell-off and I covered my position to early at 9070 and I am now flat. This morning the Dax is trying to test the 9000 important support level and today I will be a small buyer from 8980/9010 with a tight 8965 stop.
December FTSE
The FTSE also worked well yesterday as after I posted the FTSE was trading at my 6540 sell level and after a nice sell-off I was able to cover this position at 6500 and I am now flat. This morning the FTSE is lower and my only interest in buying the market is on a dip to 6410/6440 with a 6395 stop. I do not to be short the FTSE at this time as the market is getting oversold.
Dow Rolling Contract
The Dow traded lower all day yesterday and after hitting my 15915 buy level I was quickly stopped out of this position for a small loss at 15880 and I am now flat. The Dow is also at the bottom of the Bollinger Band but not the Williams Index and today I will be a small buyer on any further dip to 15740/15770 with a 15710 stop. I do not want to be short the Dow at this time.
March BUND
The Bund has traded down to my 140.05 buy level this morning and I am now long with a 139.75 stop. If I am stopped out of this position I will still be a buyer on any further dip to 139.30/139.50 with a 139.15 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip to 1240/1248 with a 1235 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip to 19.90/20.10 with a 19.70 stop.
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