The big surprise yesterday was following the release of the very poor US Retail Sales Number that US Treasury Yields would end the trading session 5bps higher. There was plenty of commentary suggesting that the full effect of the harsh US Winter weather has not yet played out, and that the dividend from lower Gasoline prices may not show up until well into Q2. That may well be so, but as things stand the Atlanta Fed’s latest ‘GDP NOW’ estimate for Q2 GDP sits at just 0.7% post yesterday’s Retail Sales. With Q1 GDP likely to be revised down, there is currently a decent chance the US economy will record no growth in H1 2015.
Currencies are really where all the action took place in the past 24 hours, with the US Dollar smartly lower across the board and with losses led by the Aussie and Kiwi Dollars, which closed up 1.73% and 1.63% respectively. Though still closing up on the day versus the beleaguered US Dollar and where the narrow DXY Dollar Index is off 1% to 93.68, Sterling is the underperformer of the G10 Currencies. This after the Bank of England downgraded its full year economic growth forecasts through 2017 in its latest Quarterly Inflation Report, citing higher Market Interest Rates, a stronger Sterling, less home building and weaker productivity growth versus February.
The Bank also sees downside risks to Inflation over the first half of the 3-year forecast period. The Euro meanwhile came to no harm after Q1 GDP printed at 0.4%, in line with expectations despite Germany coming in weaker than expected. The Euro rallied back to recent highs to stand just below 1.14 after the US Retail Sales data. Remember a break and close over 1.14 opens up the possibility of a substantial move higher to 1.18/1.20.
Also worth noting this morning, Saudi Arabia tells the FT that its strategy of squeezing high cost rivals such as US Shale producers is succeeding, as the World’s largest Crude exporter seeks to reassert itself as the dominant force in the Global Oil market. There is no doubt about it, the price fall of the last several months has deterred investors away from expensive Oil including US Shale, deep offshore and heavy Oils a Saudi Official told the Financial Times in Riyadh.
This morning we have no economic data of note due from either the Euro-Zone or the UK. The only US data release is at 1.30 pm when we have PPI and the Weekly Jobless Claims.
June S&P 500
The much weaker Dollar is holding up the S&P in comparison to the German DAX which itself had another wild trading session yesterday. The S&P plan worked well as shortly after the US Markets opened the S&P traded lower to my 2093 buy level before having a nice rally back to 2100 which enabled me to cover this position at 2099 and I am now flat. Nothing has really changed with regards to the S&P over the past 24 hours as the market tries to hold support at 2085/2090,2065/2070 and then finally the major support at 2035/2040. I will continue with my recent strategy of buying dips until we get a sell extreme that last for more than a few hours and starts to take out the support levels listed above. Today I will again look to buy the market on any dip lower to 2089/2094 with a 2084 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 2075 with a 2064 stop. My only interest in selling the S&P is on a rally higher to 2116/2121 with a 2125 stop. Remember a break and close over 2118 is very bullish short-term as it opens up the possibility of a move higher to 2190/2210.
Please note that as some of my Members only trade the Cash S&P please adjust the above levels by adding 5.5 handles to the price levels mentioned in my commentary.
EUR/USD
I was very lucky yesterday that the Euro plan worked well as shortly after I posted the Euro traded lower to my 1.1210 buy level before spiking higher on the US Retails Sales release which enabled me to cover this position at 1.1300. This morning the Euro is finally testing the key 1.14001.1430 resistance area. As I am still flat the Euro I will be a small buyer from 1.1360/1.1390 with a tight 1.1330 stop. If the Euro can manage to close over 1.14 this evening when the US Markets close it will be very bullish as most traders are still caught short after the huge move down from August to February.
June Dollar Index
Just like the Euro above I was very lucky with my Dollar Index plan yesterday as shortly after I posted the Dollar spiked higher to my 94.70 sell level before having a huge move lower which enabled me to cover this position at 94.00 and I am now flat. The Dollar has reasonable support at 92.50 and today I will be a small buyer on any further move lower to 92.30/92.75 with a 91.95 stop.
June DAX
What a wild trading session the DAX had yesterday with the strong Euro really hitting the market especially after the US Retail Sales data was released. Yesterday my DAX plan worked really well but you had to be quick as shortly after the DAX traded lower to my 11440 buy level the DAX had a nice spike higher to 11520 which enabled me to cover this position at 11510 and I am now flat. As I mention in yesterday’s commentary the DAX has decent support at the 11170/11210 level which so far this morning the DAX has just missed this buy zone. I am still a buyer in this area and I will leave a 11140 stop on any long position. Despite the rising Euro I do not want to be short the DAX at this time.
June FTSE
This morning the FTSE has traded lower to my 6880 buy level. I am still long and I will leave my stop the same at a tight 6840. Remember the 6850/6880 level should act as reasonable support as this is where the market gapped higher following the release of the exit polls showing the Conservative party had won the General Election last Thursday.
Dow Rolling Contract
I am still flat the Dow as the market just missed my 18190 sell level after I posted yesterday morning. Today I will lower my sell level slightly to 18170/1820 with an 18250 stop. I will continue with my strategy of selling rallies especially as we still have two confirmed Hindenburg Omen’s on the clock.
June BUND
The Bund plan worked out very well on what was another extraordinary volatile trading session as both my buy and sell levels got triggered. Soon after I posted yesterday morning the Bund traded higher to my 154.00 sell level before having a huge 200 point move lower to 152.00 which enabled me to cover this position way too early at 153.40. Subsequently after the market dropped further I went long at 152.45. I am still long and I will leave my stop the same at 151.95. If I am stopped out of this trade I will be a more aggressive buyer on any further dip to 150.60/151.40 with a wider 149.90 stop.
Gold Rolling Contract
Unfortunately Gold just missed my 1186 buy level with a 1191 low after I posted yesterday morning before exploding higher. This morning Gold is testing the key 1220/1230 major resistance area as a break and close over this level will be very bullish as the downtrend will then have been broken. Today I will move my buy level higher to 1200/1210 with a tight 1193 stop on any long position.
Silver Rolling Contract
Finally after holding my long 16.40 position for the past three weeks Silver traded higher yesterday which enabled me to cover this position at 17.10 and I am now flat. I am not comfortable in been flat as I still believe that Silver is due a substantial move higher. Today I will again be a buyer on any dip to 16.90/17.10 with a 16.60 stop.
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