Equity markets ended the day on the defensive as the effects of the People’s Bank of China refraining from adding funds to the money market early yesterday morning caused interest rates to rise to their highest level since July.The Dow finished down 0.3% whilst the S&P 500 closed down 0.5% with European Equities also losing an average of 0.5%.
In the UK, the combination of a surge in british banker loans for house purchases in September (boosted by the ‘Help to Buy’ Scheme) and a more optimistic tone from the Bank of England has steadied Sterling after some earlier losses. In it’s MPC Minutes released yesterday the Bank of England set a more upbeat tone, upgrading their labour market outlook which they say is expected to improve ‘faster than anticipated’. The UK is now benefiting from a more robust recovery in activity with the result that the market now has an ever so slightly tightening bias built in for the year ahead.
This morning on the economic front we have UK Business Optimism followed by Euro-Zone and German PMI Manufacturing Services. Later at 1.30 pm we have the Weekly Jobless Claims from the US along with New Home Sales and the Kansas Fed Manufacturing Activity Index.
December S&P 500
The S&P finally broke its winning streak as the market closed down 0.5%. The one reservation that I have that we might not have not reached a top in the market is the Daily Sentiment Index which has a reading of 84% bulls for the stock market and I really need to see this with a 92/93% reading before I am really confident that we have reached the top that I am looking for. I still believe that the S&P will top out between 1750/1770 but we may need to go higher first. I have decided this morning to cover my short 1750 position at 1744 and I am now flat. Today I will be a small buyer on any dip to 1736/1740 with a 1733 stop while I will move my sell level higher to 1755/1759 with a 1762 stop.
Euro/USD
After I posted yesterday morning the Euro had a nice sell off and I covered half my short 1.3780 position at 1.3745 and I will leave the same 1.3820 stop on the other half. The Daily Sentiment Index for the Euro is also at 84% and I would also like to see this with a 92/93% before I would be really confident that the Euro would start to finally fall.Today I will be a small buyer on any dip to 1.3700/1.3720 with a 1.3685 stop.
If I am stopped out of the rest of my short Euro position at 1.3820 I will look to buy the December US Dollar Index from 79.00/79.15 with a 78.75 stop.
December DAX
European Equity markets are opening higher this morning and are retesting the highs made last Tuesday. The Dax did not hit my sell level yesterday, fortunately, with the market trading near 9000 this morning. The Dax is overbought and at the top of the Bollinger Band and Williams Index. This morning I will be small seller from 8990/9020 with a 9060 stop. Given the volatility I have to use wider stops. A break and close over 9060 will be bullish and opens up the possibility of a move to 9500.
December FTSE
No change as I am still a seller on any rally to 6690/6720 with a 6735 stop. I do not want to be long the FTSE unless we traded back to 6540/6570 with a 6520 stop.
Dow Rolling Contract
For the first trading day in nearly two weeks the Dow was stronger than both the Nasdaq and S&P however it did not reach my sell level yesterday. Today I will raise my sell level to 15480/15510 with same 15530 stop. As long as the Dow does not break its September 19 high of 15710 this market is bearish but a break and close over 15710 will be very bullish. I still do not want to be long the Dow at this time.
December BUND
No change as I am still a buyer on any dip to 140.25/140.50 with a tight 140.10 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
After I posted yesterday morning Gold traded down to my 1330 buy level and after a nice rally overnight I have covered this position at 1340 and I am now flat. I still like Gold as long as we can hold the 1325/1330 major support and today I will be a buyer on any dip to 1329/1334 with a 1323 stop.
Silver Rolling Contract
Silver also traded down to my 22.55 buy level after I posted yesterday. I am still long and I will leave my stop the same at 22.15. If Silver can close again above 22.50 it will be very bullish and opens up the possibility of a retest of the 25.15 highs made a few weeks ago.
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