Equity markets gained ground yesterday, despite another run of soft data, seemingly pleased that weak activity means that Monetary Policy will remain very accommodative for some time and in China’s case more stimulus may be required. US Retail Sales were flat in July, versus +0.20% expected, with the core measures up just 0.1% in the month. It represents a poor start to Q3 Consumer Spending after the subdued consumption growth seen in the first half of the year and amid wages growth it once again reaffirms why the Fed is in no hurry to raise rates.The US Dollar Index fell from 81.60 to 81.36 after the data but did not claw back its losses by the end of the US trading session.
In the UK, the Bank of England Inflation Report did not back up Governor Carney’s June assertion that rates may need to rise as soon as November. An imminent tightening does not look likely and indeed with the housing market cooling and the BoE cutting its wages forecast, the hurdle to a rate increase looks to be higher. Sterling plunged on this report and is now trading at 1.6690 from over 1.7000 last week. Euro-Zone Industrial Production also disappointed, falling 0.3% in June, sending the Euro lower initially before rebounding strongly after the US Dollar started to weaken.
This morning on the economic front we have German GDP. This is followed at 9.00 am by the latest ECB Monthly Report. At 10.00 am we have the Euro-Zone CPI and GDP. Finally at 1.30 pm we have the latest US Weekly Jobless Claims.
September S&P 500
The S&P plan worked out yesterday but you had to be quick. As I mentioned yesterday, I do not want to be long for any length of time given that this Friday is options expiration day. This strategy was borne out as shortly after I posted, the S&P traded up to my 1940 sell level before having a quick sell off on the weak US Retail Sales data which enabled me to cover this position at 1935 and I am now flat. The market is testing resistance at the 1950 area and a break and close over this level will again be bullish. So far it has retraced 50% of the previous week’s sell-off and today I will be again be a small seller from 1949/1954 with a 1958 stop. My only interest in buying the market is on a dip to 1937/1942 with a 1933 stop which is just below yesterday’s low.
Euro/USD
My long 1.3350 Euro position worked well yesterday as after the US Dollar started to weaken I was able to cover this position at 1.3400 and I am now flat. Despite all the bad news thrown at the Euro the market is holding in very well and it will take and close below 1.3280 for me to turn bearish again. Today I will again be a small buyer from 1.3320/13350 with a 13295 stop. I still do not want to be short the market at this time.
US Dollar Index
The Dollar tried to test my 81.30 buy level before again rebounding and I am still flat. Today I will raise my buy level to 81.20/81.45 with a 80.95 stop.
September DAX
The Dax managed to rally yesterday despite the awful economic data that continues to be released from Germany and one of the golden rules of trading ‘is to respect a market that will not weaken on bad news’. Yesterday, after I posted, the Dax rallied to my 9160 sell level and as I did not want to have a position overnight I covered this trade at 9190 near the New York close for a small loss and I am now flat. Today I will be a small buyer on any dip to 9120/9150 with a 9095 stop. My only interest in selling the Dax is on a rally to 9250/9280 with a 9310 stop.
September FTSE
The FTSE continued to rally after I posted, helped by the Bank of England Inflation Report where it looks more and more likely that rates will stay on hold in the UK for longer than anticipated. Today I will raise my buy level to 6610/6635 with a 6585 stop which is just below yesterday’s low. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Just like the FTSE the Dow continued to rally after I posted yesterday morning. It eventually traded up to my 16650 sell level. I am still short but only in small size and for that reason I want to raise my stop on this position to 16720. I still do not want to be long the Dow at this time.
September BUND
After I posted yesterday morning the Bund started to rally after the weak economic releases. It traded up to my 149.80 sell level. I am still short and I will leave my stop the same at 150.10. The market is extremely overbought and if I am stopped out of this position I will again be a seller on any further rally to 150.25/150.50 with a 150.75 stop.
Gold Rolling Contract
Finally after I posted yesterday Gold traded down to my 1306 buy level and after a nice rally near the New York close I was able to cover this position at 1315 and I am now flat. Gold is definitely trying to build a base over 1300 and if it can break and close over 1325 it will be short term bullish. Today I will again be a buyer on any dip to 1304/1310 with a 1299 stop.
Silver Rolling Contract
Silver is so far struggling to follow Gold higher. I am still long from last week at 19.90 and I will leave my stop the same at 19.45.
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