It was a relatively steady trading session yesterday with little newsflow moving volatility back towards its lows. Equities were mixed but in the main higher and every day seems to bring a new high to the S&P at some point during the day. Yields were relatively steady and the US Dollar was stronger.
The Bank of England Minutes were perhaps a little more dovish than the market expected with an early focus on their concern about low wages and less concern about CPI, with an attribution towards the timing of Sales. They did note that the decision to keep policy unchanged was ‘more balanced’ for some members in the past few months, but whilst no one dissented the market perhaps believes the rate hiking cycle is not as soon as they had previously thought. Governor Carney was less explicit about when rates might rise but said they will need to rise as the economy normalises. He was not giving much away this time which allowed Sterling to underperform.
This morning on the economic front we have UK Retail Sales at 9.30 am. This is followed at 10.00 am by German and Euro-Zone Manufacturing/Services PMI’s which will set the tone for trading today. At 1.30 pm we have the Weekly Jobless Claims and this is followed at 3 pm by New Home Sales. Finally at 4 pm we have the Kansas City Fed Manufacturing Index.
September S&P 500
The S&P traded in a very narrow range yesterday with little or no news to move the market. I still believe that it will trade up to the now key 2000 resistance zone with small pull-backs along the way. It is trading at the top of its Bollinger Band and today I will still be a small seller on any further rally to 1986/1991 with a 1993 stop. Again if I am taken short and subsequently stopped out I will be a more aggressive seller in front of 1998 with a 2003 stop. I will raise my buy level slightly to 1968/1973 with a 1965 stop. The S&P needs to break and close below 1945 for me to start to turn bearish.
Euro/USD
The Euro is trading at the bottom of its Bollinger Band and Williams Index and today I will be a buyer from 1.3405/1.3430 with a 1.3375 stop. Given how oversold the market is trading my only interest in selling the Euro is on a spike higher to 1.3520/1.3550 with a 1.3570 stop.
US Dollar Index
No change as I do not want to chase the market higher today given how overbought the Dollar Index is trading and therefore I will leave my buy level the same at 80.45/80.65 with a 80.20 stop.
September DAX
The French PMI has just been released and came in a lot weaker than expected, at 47.6 versus 48.1 last month, driving the DAX and CAC lower. The DAX plan worked well yesterday as just after I posted it was trading near the highs of the day but crucially was also at the top of its Bollinger Band and Williams Index. I went short at 9795 and after a nice sell-off in the afternoon I was able to cover this position at 9750 and I am now flat. Today I will be a small buyer on any further sell-off to 9630/9670 with a 9610 stop which is just below last week’s low. I will also be a seller on any rally back to 9760/9790 with a 9805 stop.
September FTSE
No change as I am still a small buyer from 6700/6720 with a 6675 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow continues to lag both the S&P and the NASDAQ and yesterday was no exception in this regard. After I posted yesterday the Dow just missed my 17145 sell level by a few points before trading lower and I am still flat. Today I will lower my sell level slightly to 17120/17160 with a 17180 stop. Given the price action I still do not want to be long the Dow at this time.
September BUND
No change as I am still a seller between 148.35/148.65 with the same 148.80 stop.
Gold Rolling Contract
Gold continues to trade heavy and this morning has traded down to my 1297 buy level. I am not confident that it will rally back from here and for that reason I am going to raise my stop on this position to 1289 as I want to limit my risk.
Silver Rolling Contract
Still no change as I am long from earlier this month at 20.85. I will also raise my stop on this position to 20.70 and If I am stopped out I will be a more aggressive buyer in front 20.35 with a 19.90 stop.
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