There has been some significant price action in Commodities to report over the past 24 hours. Yesterday morning Asian LME Metals went into free-fall on the back of no apparent news other than playing catch up with what we have already seen in Oil prices. This led to Copper falling 5.32%. However all changed very late in the US session when Oil did a quick turnaround, with WTI and Brent both closing up 5% and 4.5% respectively, back to levels at the end of last week in what looks like a short squeeze.
US energy stocks recovered most of their earlier losses which carried into the broader market as the Dow at one stage was down nearly 400 points before recovering to close down 186 points. Equity markets fell initially on the much weaker than expected US Retail Sales which fell 0.9% versus an expected decline of just 0.1%. The miss on Retail Sales was notable, enough to weigh on growth sentiment. Markets started to recover after the Beige Book was released. This report described the performance of the US economy in most of the Fed Districts as modest and moderate, adjectives used on many occasions last year. The Dallas District reported growth slowed, lower Oil prices cited as a factor. Noted Fed Hawk Charles Plosser has been on the wires expressing confidence that the US economy is now on a more normal footing and the Fed should follow. He did though say that it would take a while for inflation to move back up to 2%.
This morning on the economic front we have German GDP at 9.00 am. This is followed at 10.00 am by the latest Trade Balance from the Euro-Zone. At 1.30 pm the US will release Weekly Jobless Claims, Empire Manufacturing and PPI. Finally at 3.00 pm we have the Philly Fed Business Outlook.
March S&P 500
Intense short term volatility is accompanying swift moves in the major US stock markets and this theme continued again yesterday with the S&P falling over 40 handles from the morning high at 2021. The market made an early evening low at 1980 and now we are back trading again at the 2025 level this morning. The S&P plan worked out yesterday as after I posted it was trading at my 2011 sell level. After going short, the market subsequently collapsed which enabled me to cover this position at 1993 and I am now flat. The 2016/2031 area is neutral for the S&P and the next major move is dependent on which way we break from here. Today I will be a small seller from 2030/2036 with a wider 2041 stop. Given the head-spinning moves over the last 48 hours, I will also look to buy the market on a dip to 1995/2003 with a 1987 stop.
Euro/USD
My long 1.1790 position worked out well yesterday as after I posted the Euro was spiking higher which enabled me to be able to cover this long position at 1.1840 and I am now flat. Subsequently the Euro was hit hard to the downside before finding support at the 1.1725 level. Given the extreme sentiment reading towards the Dollar, it is only a matter of time before the Euro will leave a buy extreme behind and trade several handles higher. Yesterday’s new low in the Euro was not confirmed by a higher high in the Dollar Index. Today I will again be a small buyer from 1.1740/1.1780 with a 1.1695 stop.
US Dollar Index
No change as I am still short from last week at 92.70. With yesterday’s break of 91.90 I have lowered my stop to 92.50. If I am stopped out of this trade I will again look to go short between 92.70/93.10 with a 93.40 stop.
March DAX
The Dax continues to outperform the other major Indices as the market looks forward to QE starting at next week’s crucial ECB Meeting. The Dax plan worked out very well yesterday as it followed the S&P lower before finally hitting my 9780 buy level. Subsequently the Dax rallied hard which enabled me to cover half of my long position at 9870. I am still long the other half, because as I mentioned yesterday for the moment all dips in the Dax are to be bought. I will raise my stop on this 9780 position to 9850. If I am stopped out of this trade I will again look to go long on any dip to 9740/9790 with a 9695 stop.
March FTSE
The FTSE plan also worked out well yesterday with the market trading lower to my 6310 buy level. After a nice rally overnight I have covered this position at 6390 and I am now flat. Today I will again be a buyer on any dip to 6310/6340 with a 6275 stop which is just below yesterday’s low.
Dow Rolling Contract
Having been left frustrated at not been able to get short the Dow, I was finally able to get short yesterday at 17610 which was near the day’s high. It was subsequently hit hard to the downside which enabled me to cover this position at 17420 and I am now flat. The Dow is back trading over 350 points higher off yesterday’s low which is just incredible. Today I will again be a small seller from 17630/17680 with a 17730 stop.
March BUND
With the sell-off in equity markets yesterday the Bund rallied higher to my 157.30 sell level. I am still short and today I will lower my stop to 157.50 which is just above yesterday’s high.
Gold Rolling Contract
My long 1228 Gold position worked out well yesterday as it had a nice rally when the equity markets got slammed which enabled me to cover this position at 1238 and I am now flat. Gold has decent support at 1216 and today I will again be a small buyer from 1215/1222 with a 1209 stop.
Silver Rolling Contract
No change as I am still long at 16.30 with a breakeven stop. Frustratingly Silver is finding it very hard to close over the now key 17.20 resistance level.
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