The Minutes from the last FOMC Meeting played out a little bit like a teenage television drama with a good degree of angst sprinkled throughout. The market immediately jumped on the admission that some members were concerned that inflation might persist below the 2% target for quite some time. Also, on the dovish side, the Committee also discussed the softening economic outlook in Japan, China and Europe and the impact that might have on the US economy. Lastly the Committee discussed the turbulence in financial markets in Mid-October. Recall the October Statement itself was largely seen as a endorsement of a constructive US economic outlook with a degree of confidence expressed about well-anchored inflation expectations, along with the fact that Global growth fears were not mentioned at all was taken positively. Last night the revelation that these issues were discussed was initially interpreted as suggesting the FOMC is less upbeat than originally thought.
But in the end the Minutes noted that the FOMC decided not to include those concerns in the Statement proper because that would imply a greater level of concern or pessimism than the Committee actually felt. I think this is important as Central Bankers are obliged to discuss two-way risks to their outlook but in the end the Statement itself is the best expression of their central view. Thus the Dollar started to rally again after selling off initially on the release of the Minutes.
Today is a really busy day for economic releases which should add to market volatility. This morning we have German Manufacturing/ Services PMI at 8.30 am. This is followed at 9.00 am by the Euro-Zone equivalent. At 9.30 am we have UK Retail Sales. This is followed at 1.30 pm by US CPI and the Weekly Jobless Claims. Finally at 3 pm we have Existing Home Sales, Consumer Confidence and the Philly Fed Business Outlook. Lastly at 6.30 pm the Fed’s Mester will speak on forward guidance in London.
December S&P 500
The S&P plan worked out well yesterday as after I posted the market traded higher to my 2049 sell level and after a nice sell-off on the weaker than expected US Housing Starts the market dropped which enabled me to be able to cover this position at 2042 and I am now flat. The market just missed my 2036 buy level before trading higher on the FOMC release. Volatility should pick up today given the sleuth of economic data due between 1.30 pm and 3 pm. Interestingly the McClellan Oscillator closed in negative territory yesterday at -9 so this indicator will be worth keeping an eye on over the next few trading sessions especially given the S&P is trading near all time highs yet the MO is negative.
Today I will again be a small buyer on any dip to 2033/2038 with a 2029 stop. I will also still be a seller on any rally back to 2051/2056 with a 2061 stop.
Euro/USD
Given that the FOMC Minutes were more hawkish that I expected in relation to economic growth I decided to cover the rest of my long 1.2480 position at 1.2560 and I am now flat. Today I will again be a small buyer on any dip to 1.2470/1.2510 with a 1.2445 stop. I still do not want to be short the Euro at this time especially with all the economic releases due later today.
US Dollar Index
No change as I am still short the Dollar at 87.90 with the same 88.20 stop. I will give this trade one more day to perform or else I will exit.
December DAX
The Dax is getting hit hard as I write on the back of the much weaker PMI which printed 50.0 versus 51.5 expected. Unfortunately I was stopped out of my short 9450 position after I posted yesterday morning, at 9495, and I am now flat. As I have mentioned over the last few months Germany is in a bad way economically making it very difficult for me to buy this market. Today I will again be a small seller on any rally back to 9460/9490 with a 9530 stop which is just above yesterday’s high.
December FTSE
No change as I am still short the FTSE at 6710 from earlier in the week. Today I will lower my stop to 6720. Again if I am stopped out of this trade I will be a more aggressive seller in front of 6745 with a 6780 stop.
Dow Rolling Contract
No change as I am still short at 17720 with the same breakeven stop. I am encouraged by the fact that the McClellan Oscillator is in negative territory despite the Dow trading near all time highs.
December BUND
The Bund trade finally worked out well yesterday as the market had a nice drop which enabled me to cover my 151.78 short position from last week at 151.20 and I am now flat. The Bund is trying to rebound this morning on the weaker PMI print. Today I will again be a seller on any rally back to 151.75/152.05 with a 152.25 stop. The next main support comes in at 150.85 and I will also be a small buyer from 150.95/151.20 with a 150.70 stop.
Gold Rolling Contract
Unfortunately Gold could not break the key 1200/1204 resistance level before trading lower and eventually stopped me out of my long 1157 position from last Friday at 1180 and I am now flat. I am going to stay flat today as I want to see how the market reacts to all the economic releases due later. Remember a break and closer over 1204 is short term positive.
Silver Rolling Contract
After I got stopped out of my long Gold position I decided to cover my two long Silver positions at 16.15 and I am now flat. Silver is trying to hold in better than Gold and today I will again look to buy Silver on any dip to 15.60/15.90 with a 15.35 stop.
Nymex Crude December
No change as I am still a small buyer on any dip to 73.60/74.10 with a 72.95 stop.
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