Yesterday’s news was generally good, Equity markets certainly thought so as did the US Dollar. Equity Indices were higher across the board whilst remarkably the US Dollar was up against all currencies in the G10 and the majors in emerging markets. US Bond Yields ended the day higher whilst Portuguese Bond Yields were at a post crisis low. Gold could not take out the 1250/1255 resistance level and ended lower whilst Oil recovered some of last week’s losses with a $2 gain.
These moves are characteristic of a belief in the US Economic recovery and comfort with the idea that Fed tapering will continue without too much pressure elsewhere. That belief was certainly helped along by the very strong catch-up in the US Empire Manufacturing Survey along with the Fed’s Beige Book which saw the economy continuing to expand at a moderate pace. With US Earnings coming along nicely all factors were singing from the same hymn sheet.
Germany was not quite so lucky with GDP, again disappointing, but with the forward indicators of the IFO and PMI still holding up the DAX still ended the day with a 2% gain.
On the economic front this morning we have the UK RICS House Price Balance which is expected to rise to its highest level since 2002. Last night the Bank of England’s Governor Carney discussed the Housing Market strength in a speech in which he sees further improvement during the year. At 10.00 am we have German and Euro-Zone CPI, followed at 1.30 pm by the latest US Weekly Jobless Claims which will be closely watched after last week’s disappointing Non Farm Payroll Report. The US will also release it’s latest NAHB Housing Market Index and the very important Philly Fed Index.
March S&P 500
Yesterday was one of the unluckiest trading days that I have had in a long time as, just as I posted, the various stock markets all took off to the upside without me being able to get a long position on. At least I had no plans to sell which is probably the first time this has happened since I started writing my market commentary. The S&P also came close to making a new high in the March contract as I have suggested over the last two weeks. This is the wrong time of the year to be bearish as we are seasonally in one of the strongest times for the markets. Today I will raise my buy level to 1835/1839 in small size with a 1831 stop which is just below yesterday’s low. I will also be a small seller on any rally to 1852/1855 with a 1857 stop.
Euro/USD
Just as I posted yesterday morning the Euro was trading at my 1.3615 buy level. Unfortunately I was stopped out of this position for a small loss at 13590 and I am now flat. As I mentioned in my commentary, the US Dollar rose against all major currencies and I would still prefer to be long the US Dollar via the US Dollar Index instead of against the Euro. Today my only interest in buying the Euro is on a dip to 1.3530/1.3550 with a 1.3510 stop.
US Dollar Index
The US Dollar Index again just missed my 80.60 buy level before trading higher. I believe that we have very strong support in the Index at 80.50 and for this reason I have bought the market at 80.95. I will leave my stop at 80.45 as I look for it to finally take out the very strong resistance at 8150 over the next week.
March DAX
I was very frustrated with the Dax yesterday as just as I posted it took off to the upside despite the very weak GDP data. As I have said in the past a market that cannot sell off on weak data has got to be respected and the Dax certainly earned my respect yesterday. The market is very overbought and is trading at the top of both the Bollinger Band and Williams Index. The next main resistance area is from 9850/9900 and I will be a seller in this area with a 9920 stop. Today I will raise my buy level to 9705/9735 with a 9680 stop.
March FTSE
The FTSE was also very frustrating to trade yesterday as the market just missed my 6720 buy level with a 6723 low before trading a lot higher. At least I was not short and today, even though the FTSE is overbought, I will raise my buy level to 6720/6745 with a 6680 stop. The Dax/FTSE spread is now trading at an incredible 3000 points and I will certainly start to look to sell this spread over the next few days.
Dow Rolling Contract
Whereas the S&P almost made a new high yesterday, the Dow is still nearly 100 points below its Dec 31st high at 16589. If the Dow can break and close above this level it will be very positive for the Equity markets going forward but if we cannot break this level over the next few days the market could start to turn lower very quickly as we saw last Monday. Today I will be a seller on any rally to 16570/16600 with a 16620 stop. I will also raise my buy level to 16360/16390 with a 16320 stop which is just below yesterday’s low. I do not want to chase the market here as I want to see if we have any follow through after the last two up-days in the markets.
March BUND
Today I will lower my sell level to 140.75/141.00 with a 141.15 stop. I will also be a small buyer on any dip to 139.95.95/140.20 with a 139.70 stop.
Gold Rolling Contract
Gold is finding it very difficult to break the key 1250/1255 resistance area. I still believe we will break this level sooner than later but the Williams Index has started to turn down and we may need to trade lower before attempting to break this key resistance area. I was stopped out of my 1225 long position near the low of the day at 1235 and I am now flat I am not going to chase this market and I will still be a buyer on any dip to 1221/1227 with a 1215 stop which is just below last week’s low. I will still look to reset my long position if we break 1256 with a 1242 stop.
Silver Rolling Contract
No change as I am still long at 20.20 with the same 19.80 stop. If I am stopped out I will be a more aggressive buyer on any dip to 19.30/19.60 with a 19.10 stop.
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