Last week it was the events in Ukraine/Crimea. This week the focus has switched back to Asia and more specifically China where we have bond defaults and talk of Iron Ore being used as ‘can collateral’ and of course the price of Iron Ore itself. You can throw Copper volatility into the mix as well. Speaking of the Russian/Crimean/Ukraine situation we have the secession vote this Sunday which created nervousness in Russian and Ukrainian Stock markets yesterday which fell 2.6% and 5.6% respectively.
Despite the Euro-Zone Industrial Production data coming in better than expected, European stocks markets were hit hard as they lost, on average, another 1% whilst the US stock markets, having been down earlier in the day after the gas explosion in New York, ended their trading session flat. At the moment investors are seeing everything ‘US’ as a safe haven apart from the Dollar which is continuing to get hit against the Euro. In commodities, Gold ended the day up another 1.6% whilst Oil fell over 2% after the US released some of their Oil reserves into the market.
Today is a very busy and important day for economic data. This morning we have the UK RICS House Price Index. This is followed by the ECB publishing its Monthly Report. At 12.30 pm we have the US Weekly Jobless Claims and Advance Retail Sales which will be closely watched by the markets especially with the FOMC Meeting next Wednesday where another $10 billion of tapering is expected.
March S&P 500
As expected, the S&P closed a good portion of the 1844/1862 Gap left open from early last week but unfortunately just missed my 1852 buy level with a 1853.75 low before the market again rallied into the close. The US stock market is now seen as a safe haven as no matter how weak the economic news is or how weak the European stock markets are trading investors are still putting money to work in the US markets especially in stocks and Bonds as shown by their outperformance over the last 10 days. I still believe the S&P is an accident waiting to happen but not at the moment as the price action is telling you not to be short. After the S&P made its low yesterday, shortly after the US markets opened, the market traded up to my 1868 sell level only to stop me out of this position overnight at 1873 and I am now flat.
Today the plan is to be a small buyer on any dip to 1861/1866 with a 1857 stop. My only interest in selling the S&P is on a rally to 1882/1887 with a 1889 stop which is just above last Friday’s high.
Euro/USD
This morning the Euro is trading at the top of the Bollinger Band and Williams Index. The Daily Sentiment Index is approaching 90% and this sentiment indicator has been a good barometer for picking turns in the Euro over the last 5 years. However we need to see a ‘sell extreme’ first before I will feel confident of shorting the Euro as the price action all year has been to buy the Euro on dips and this trend will continue until it ends. Unfortunately I covered my long position yesterday morning at 1.3850 for a breakeven and now we are trading 100 points higher. Yesterday afternoon the Euro traded up to my 1.3910 sell level before stopping out of this position overnight for a small loss at 1.3940 and I am now flat. I am only trading the Euro in small size as I am trying to get my edge back. Today I will again be a small seller on any further rally to 1.3975/14.005 with a 1.4020 stop. Given how overbought the Euro is trading I do not want to be long at this time.
US Dollar Index
Last November when the Euro was trading at 1.3840 the Dollar Index was trading at 78.90 and despite the fact that the Euro is trading at 1.3950 currently the Dollar Index is only trading at 79.40 which shows positive divergence for the Dollar especially if it does not break the 78.90 low from 4 months ago. I am still long from 79.80 and I will leave my stop the same at 79.30. If I am taken out of this position I will be a more aggressive buyer in front of 79.00 with a 78.70 stop. The Dollar Index is also currently trading at the bottom of its Bollinger Band.
March DAX
The Dax worked well yesterday as shortly after I posted it traded down to my 9180 buy level. Fortunately the market did not take out my 9135 stop and after nice rally I was able to cover this position at 9240 and I am now flat. The Dax is trading at the bottom of its Bollinger Band and Williams Index and so far is holding the key support at 9150. Today I will again be a small buyer on any dip to 9145/9175 with a 9125 stop. Given how oversold the Dax is trading I do not want to be short the market at this time.
March FTSE
The FTSE also worked well yesterday as shortly after I posted it traded down to my 6600 buy level before also having a nice rally which enabled me to cover this position at 6640 and I am now flat. Just like the Dax, the FTSE is also trading at the bottom of its Bollinger Band and Williams Index and today I will be a buyer on any dip to 6580/6600 with a 6565 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
I was very unlucky with my buy level in the Dow yesterday which made a low of 16258 against my 16250 level before the market rallied over 100 points and I am still flat. Today I will raise my buy level to 16260/16300 with a 16245 stop on any long position. I still do not want to be short the Dow at this time.
June BUND
The Bund rallied as expected on the back of the weak equity markets yesterday which enabled me to cover my long 142.30 position from Tuesday at 143.00 and I am now flat. The price action for the Bund continues to tell me to buy the dips and this trend will continue until we get a serious sell extreme in the market. Today I will be a buyer on any dip to 142.55/142..80 with a tight 142.40 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold has now rallied nearly $40 this week and is approaching its next key resistance at 1380. Gold is trading at the top of the Bollinger Band and Williams Index and today I will be a very small seller from 1381/1387 with a tight 1392 stop.
Silver Rolling Contract
I am very disappointed at how weak Silver is trading in comparison to Gold and for this reason I have decided to cover my long 20.80 position from last Friday at 21.40 this morning and I am now flat. Today I will again be a small buyer on any dip to 20.70/21.00 with a 20.50 stop which is just below this week’s low.
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