Markets ended the day stronger after the FOMC Meeting last night. The US Federal Reserve announced it would start buying $45 billion of long term US Treasury Bonds each month to replace the expiring Operation Twist program where the Fed has been buying $45 billion of longer term USTs and selling the same amount of short term USTs. The new program is in addition to the ongoing $40 billion per month in mortgage-backed securities and is at the more stimulatory end of market forecasts. But the bigger surprise was the Federal Reserve changed its rate guidance from data-based to outcomes-based. The Fed will keep the Fed Funds Rate near Zero for as long as a) the unemployment rate remains above 6.5%, b) inflation between one and two years out is projected to remain below
2.5% and c) longer term inflation expectations remain well anchored. Previously it had said it would keep rates low until mid-2015. So extremely accommodative US Monetary conditions look set to remain in place for some time. Whilst the unemployment rate at 7.7% is only 1.2 pps from the Fed target it will take significant jobs growth or big falls in the
participation rate before we see 6.5%. The Feds latest set of projections have unemployment still above 6.5% until mid-2015 and so most FOMC officials will expect the Fed Funds Rates to be near zero until then. Meanwhile the range of forecasts for 2013 GDP has been lowered a touch to 2.3%-3.0% from 2.5%-3.0% while inflation remains below 2% for the whole outlook period.
This morning we have Euro-Zone Labor costs and in Germany the IMF and ECB will hold a joint conference on Fiscal Governance. Later in the US we have the Weekly Jobless Nos, Retail Sales and Producer Prices Index.
Dec S&P 500
The S&P worked really well as we traded down to my 1429 level before the FOMC announcement and then rallied to 1438.75 on the new stimulus measures before the market faded and closed on her lows into the close. I took a nice gain on my 1429 long at 1437 and I am now flat. The S&P is at the top of its Bollinger Band and the Williams Index has started to turn down. This morning I am a seller from 1431/1435 with a 1439 stop which is just above yesterdays high and I will also look to buy from 1420/1424 with a 1419 stop. A break back and close below 1420 will be short term bearish but given the seasonal time of the year it is very hard to be short with confidence.
Euro/USD
I was stopped out of my 1.30 short position at 1.3030 and I am now flat. This morning I am going to try one more short position as we are approaching long term resistance at 1.3130/1.3170 which are the highs made last week and on Sept 17th when the Fed introduced its previous stimulus package. So today I will be a seller in small from 1.3070/1.3100 with a 1.3180 stop. If I am taken short I will look to cover in front of 1.3010.
Dec DAX
The Dax worked really well yesterday and after the Fed announcement we traded up to my 7640 sell level with a 7644 high. After the FOMC the Dax traded heavy and I was able to take profit this morning at 7600 and I am now flat. Today I will be a seller on any rally to 7620/7640 with a 7650 stop and I will also look to but the market on any dip to 7530/7545 with a 7515 stop.
Dec FTSE
Unfortunately I was stopped out of my 5925 short position at 5950. This morning as I have had a good month I have gone short again at 5940 and I will leave my stop at 5965 which is just above yesterdays high. I do not want to be long the FTSE at this time.
Gold Rolling Contract
I am very surprised how heavy Gold is trading on the back of the latest Fed stimulus package and this morning I am a small seller from 1700/1710 with a 1715 stop. If I am taken short I will look to cover in front of 1675.
March BUND
No change from yesterday as I am a seller from 145.60./145.80 with a 146.05 stop.
Recent Comments