It is really something when the US Bond market reacts more to the UK ‘s Inflation Report and ECB chatter rather than its own inflation indicator but that is the nature of markets at present. Yesterday, US 10 Year Yields slipped 7 basis points to 2.52% after the UK’s Bank of England was dovish in it’s outlook and the ECB continued to outline possible easing measures. Equities were lower in the US whilst Commodities were supported.
The US Dollar ended the day a little lower but the currency markets were not really following the story as closely as bond yields. Sterling was lower but the Euro has heard it all before and was slightly stronger.
The UK Inflation Report indicated no change to inflation or GDP outlook despite better domestic data and an improved labour market. The Bank of England retain the view that interest rates will be raised in late quarter 1, 2015 or early in quarter 2. There was some market expectation that this would be brought forward with the better economic data and suggestions of broad member unease. The release of the BoE Minutes next week will be particularly interesting.
This morning on the economic front we have Euro-Zone GDP and CPI at 10.00 am. This is followed at 1.30 pm by the US Weekly Jobless Claims and Empire Manufacturing. At 2.15 pm we have US Industrial Production . This is followed at 3 pm by Existing Home Sales and the NAHB Housing Market Index. Later this afternoon Fed Chair Yellen will speak to the US Chamber of Commerce in Washington.
June S&P 500
The S&P had its expected sell-off yesterday after trading at the top of its Bollinger Band and Williams Index but unfortunately just fell shy of my 1902 sell level before trading lower. Just after the US markets opened it traded down to my 1888 buy level and after a brief rally I was able to cover this position at 1892 and I am now flat. Even though the S&P is overbought I still expect a small rally to develop ahead of the Monthly Options Expiration tomorrow and so today I will be a small buyer on any dip to 1878/1883 with a 1874 stop. I will also move my sell level lower to 1895/1900 with a 1904 stop.
Euro/USD
No change as I am still a buyer on any dip to 1.3665/1.3695 with the same 1.3645 stop. The Euro is still oversold and at the bottom of the Bollinger Band and despite all the talk from the ECB about taking measures to fight inflation the Euro refused to trade lower making next month’s ECB Meeting one of the key events of the year so far.
US Dollar Index
I am still long with half of my position at 79.20 from last week having cut the other half last Monday at 79.90. I will leave my stop the same at 79.75 and if I am taken out of this position I will be a more aggressive buyer on any dip to 79.25/79.55 with a 78.80 stop which is just below last week’s low.
June DAX
The Dax continues to consolidate above the key 9630/9660 support zone having broken this level last Monday and I am still flat. I do not want to chase it higher as the market is still overbought and today I will leave my buy level the same at 9640/9670 with a 9620 stop. I will still be a small seller on any rally to 9820/9850 with a 9870 stop.
June FTSE
As expected, I was quickly stopped out of my 6830 short position at 6860 after the UK Inflation Report was released and I am now flat. The key level to watch for the FTSE is at 6820 and as long as we can stay over this level I believe that it will trade higher as unlike the other major indices the FTSE is not overbought. Today I will be a small buyer on any dip to 6815/6840 with a 6795 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow traded down to my 15610 buy level late yesterday afternoon. I am still long and I will leave my stop the same at 16560. The market just missed my 16750 sell level yesterday morning before trading lower and if the Dow rallies I will still be a seller from 16750/16780 with a 16820 stop.
June BUND
Just as I posted yesterday morning the Bund start to rally hard as it followed the US Bond market higher. It was trading at my 144.70 sell level and I entered the short position – I am still short with a 146.05 stop. The Bund is very overbought and is trading at the top of its Bollinger Band and Williams Index and if I am stopped out of this short position I will be a more aggressive seller fro 146.25/146.50 with a 146.70 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold rallied up to 1310 yesterday before again finding good sellers at this level. As I mentioned yesterday a break and close over 1310 will be short term bullish. I am currently flat however today I will raise my buy level slightly to 1283/1291 with a 1275 stop on any long position.
Silver Rolling Contract
I am flat Silver as the market just missed my buy level earlier in the week before trading higher. Today I will raise my buy level to 19.30/19.60 with a 18.90 stop.
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