There is finally a whiff of ‘risk off’ in the markets as evidenced by lower stock indices across the US and Europe, a small retracement of the recent step up in US Treasury Yields and weaker Emerging Market Currencies, led by the Turkish Lira (.+2%) and South African Rand (+1%). The Rand weakness comes despite reports that South Africa’s Solidarity Union has reached a wage agreement with Arcelomittal in both the Platinum and Steel sectors. The Turkish Lira’s sharp fall has come after news that Al-Queda militants had stormed the Turkish Consulate in Mosul. So we now have another source of geopolitical tension to add to Ukraine and various parts of East Asia. Also cited behind the weaker equity market tone is the World Bank’s downgrade to its Global Forecast for 2014 to 2.8% from 3.2% which is not something that would normally rate a mention but on another slow day for economic data it did.
Also worth noting is a sharp warning from the IMF saying the world must act to contain risk of another devastating housing crash. It claims acceleration in global house prices from already high levels is a major threat to to economic stability as it cites prices as being well above historical averages for a majority of countries in relation to both incomes and rents.
This morning on the economic front we have the UK RICS House Price Balance. This is followed at 10.00 am by Euro-Zone Industrial Production. The ECB will also publish its Monthly Budget. At 1.30 pm we have the latest US Advance Retail Sales and the Weekly Jobless Claims. At 3 pm we have US Business Inventories.
June S&P 500
Just as I posted yesterday morning the S&P finally started to sell off after the huge rally that the market has had since it closed over 1880 last month. I am still flat the market as we await the very important Advanced Retail Sales data at 1.30 pm. The S&P should find some support at the 1930 level and today I will be a small buyer on any dip to 1931/1935 with a 1927 stop. I will still be a seller on any rally to 1949/1954 with a 1957 stop.
Euro/USD
No change as I am still long at 1.3535 with the same 1.3495 stop. I will give this market one more day to rally or else I will exit and take another look. I will also be a small seller on any rally to 1.3590/1.3620 with a 1.3645 stop.
US Dollar Index
No change as I am still a buyer on any dip to 80.30/80.50 with the same 79.95 stop.
June DAX
The Dax followed both the S&P and the Dow lower yesterday as the market could not stay over the key 10000 resistance level. I do not want to chase this market lower and today I will be a small seller from 9995/10025 with a 10040 stop which is just above contract highs. My target area for putting on a short position is on a rally to 10215/10300 with a wider 1045 stop.
June FTSE
As soon as I posted yesterday morning the FTSE started to trade lower and eventually the market traded down to my 6840 buy level. I am still long and I will leave my stop the same at 6810. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Finally I got to see some light on my short 16920 position taken late last Friday evening and after a nice sell-off yesterday I was able to cover this position at 16850 and I am now flat. Today I will again be a seller from 16890/16930 with a 16975 stop which is just above the all time highs made last Monday. I still do not want to be long the Dow at this time.
September BUND
Just before I posted yesterday morning I was stopped out of my long 145.00 position at 144.70 and I am now flat. It is very frustrating to get stopped out only for the market to turn around and trade higher. Yesterday’s low at 144.59 is key for the bullish case going forward and today I will be a small buyer from 144.75/144.95 with a 144.50 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still long from earlier in the week at 1250. Today I will raise my stop to a break-even as I am looking for Gold to trade higher off these oversold extremes seen last week at 1240. If I am stopped out of this position I will look to re-buy my Gold position on any dip to 1241/1246 with a 1235 stop.
Silver Rolling Contract
Silver is continuing to consolidate over the key 19.00 support level. I am still flat and today I will leave my buy level the same at 18.90/19.10 with a 18.70 stop.
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