The FOMC Minutes from the April 29-30 Meeting reported that the Fed has started to discuss which tools it might use to control short term borrowing costs once they decide to begin raising the Federal Funds Rate. A staff presentation said the Fed’s options included overnight repo agreements, term deposit facilities and interest on excess reserves. However the Minutes stress that an increase in the Fed Funds Rate is not imminent as continued stimulus to support employment growth does not risk higher inflation in the near future whilst some participants are concerned about the housing outlook. Members also discussed the need to improve their guidance on the likely path of interest rates as we get closer to the first interest rate rise.
With the Fed not concerned about the inflation outlook and the first rate rise not expected until mid to late 2015 the US Dollar lost ground whilst US stocks gained, with the Dow rising 150 points or 1%. Elsewhere, overnight Sterling has outperformed after a strong UK Retail Sales Report which rose 1.3% in April versus 0.4% expected. Also supporting Sterling were the Bank of England Minutes where some members thought that the Monetary decision was becoming more balanced suggesting that they are edging towards tightening.
This morning on the economic front we have UK GDP and CBI Trends at 9.30 am. This is followed at 10.00 am by Euro-Zone and German Manufacturing Services PMI. At 1.30 pm we have the US Weekly Jobless Claims followed by US Manufacturing PMI. At 3 pm we have US Existing Home Sales.
June S&P 500
The S&P had a very positive trading session yesterday with the market again closing over the 1878/1880 key resistance level which should now act as good support going forward. As I have mentioned over the last few weeks I still expect the S&P Future to finally take out the 1900 level before running into trouble somewhere between 1930/1950. I stayed flat yesterday until we got the FOMC announcement which saw the market rally to my 1884 sell level before having a brief sell-off which allowed me to cover this position at 1879.50 and I am now flat. Today I will be a buyer on any dip to 1877/1882 with a tight 1874 stop. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1862 with a 1857 stop. My only interest in selling the market is on a rally to 1898/1902 with a 1905 stop.
Euro/USD
After I posted yesterday the Euro spiked higher to 1.3725 which allowed me to cover my long 1.3685 position at 1.3715 and I am now flat. It then spiked lower after the FOMC but again stabilised and closed back above the key 1.3650 support level. The Euro is still trading near the bottom of its Bollinger Band and today I will again be a small buyer on any dip to 1.3640/1.3660 with a 1.3620 stop. I still do not want to be short at this time.
US Dollar Index
The Dollar is trying to consolidate over the key 79.50/80.00 support level as the market waits for the next ECB Meeting in June. Today I will raise my buy level to 79.60/79.90 with a tighter 79.40 stop.
June DAX
Just before I posted yesterday morning the Dax started to rally hard and this rally continued all day as the market again closed over the key 9630/9660 resistance level. As I have mentioned over the last few weeks that I still expect this market to break the key 10,000 level before running into trouble. I will look to put on a more macro short position on any rally to 10085/10200 over the next weeks. Today given the fact that we have closed over this key 9630/9660 level I will raise my buy level to 9650/9690 with a 9625 stop.
June FTSE
This morning the FTSE has followed the other major indices higher as the market has traded up to my 6825 sell level. I am now short and I will not risk to much on this trade especially given the fact that I am bullish on the other major indices. For this reason I will leave my stop at 6865 which is just above the 6830/6850 resistance level that I have outlined over the last two weeks.
June BUND
My long 146.10 position looked good for a while yesterday morning buy unfortunately I was greedy, didn’t take my profit and this resulted in this position being stopped out for a small loss at 145.80 and I am now flat. I am going to stay flat in the Bund today as I want to see if it can trade back above the key 146.00 level or look to trade lower.
Dow Rolling Contract
This morning the Dow is approaching the key 16600/16640 resistance level as the market had a very nice rally after the FOMC Minutes were released. I am still flat as none of my parameters were hit and thankfully I have not been short this market over the last few weeks as every sell-off is met by strong buying. Today I will raise my buy level to 16480/16520 with a 16450 stop. I still do not want to be short the Dow as I am still looking for the market to eventually take out the key 17000 resistance before running into trouble.
Gold Rolling Contract
The Gold plan worked well yesterday as it traded down to my 1283 buy level before having a nice rally which has continued this morning. I have covered this position at 1295 and I am now flat. Today I will raise my buy level to 1283/1290 with a 1279 stop. A break and close over 1310 will be very bullish.
Silver Rolling Contract
After I posted yesterday morning Silver traded down to my 19.25 buy level. I am still long and I will leave my stop the same at 18.70.
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