For anyone starting to get a bit blasé about some of the most volatile intra-day currency market volatility that we have seen since the early day days of the Global Financial Crisis, then they might like to look to the current state of the Oil market for a bit more excitement. The active WTI Crude Contract has rallied over 13% since yesterday morning. It hit the day’s lows soon after the latest data from the EIA showed a much more than expected 8.17mn barrels of crude inventory build in the week through last Friday, only to recover on news from the same source that US Oil production growth slowed to just 3,000 barrels a day last week, the smallest increase since January.
Trumping all this has been news of President Hadi of Yemen had fled the country amid reports that an Iran-backed Shite rebels were mounting a violent takeover of the tiny Gulf State. The prospect of Saudi and other Sunni led Gulf States getting drawn into fresh Middle East conflict has produced a level of geopolitical stress that has supported Oil prices for the first time in many years.
This bears watching, since any sustained rise in Oil prices like we are seeing this morning with WTI back trading above $52.00, would probably have spill over effects to many other Commodities where the energy intensity of production is high, and where the Macroeconomic effects of past Oil price weakness has yet to fully feed through.
Also supportive of Commodities in the past 24 hours is some further slippage in the US Dollar Index which closed 0.25% lower, led mainly by the rise in EUR/USD which is back trading above 1.10 this morning. This has come on a combination of a modest upside surprise in the German IFO Business Climate Index shortly followed by a significant downside miss in US Durable Goods Orders on both the headline and underlying measures. In doing so the latter has prompted at least a temporary interruption to what has been a significant bounce in Citigroup’s Economic Surprise Index since the start of last week.
Greece related tail-risk meanwhile also bears close watching. Greek Central Bank chief Stourmaras is out saying the ECB has stabilised the situation for Greek banks and that they could soon resume the waiver on accepting Greek Government Debt as collateral, but this comes as the ECB provides another EUR1bn to Greek banks, symptomatic of ongoing deposit flight. For now this is having scant impact.
The US equity markets had there worse day’s trading for quite a while with the Dow falling nearly 300 points and the VIX closing over 15 for the first time since the FOMC Meeting.
This morning on the economic front we have UK Retail Sales at 9.30 am. This is followed at 12.30 pm by the US Weekly Jobless Claims. Finally at 1.45 pm we have the Markit US Services PMI. This afternoon the Fed’s Lockhart will speak on the Economy and Monetary Policy and this will certainly have a market impact.
June S&P 500
When I wrote me commentary 24 hours ago I said that a break and close below 2074 would be significant and this is exactly what has happened with the June S&P trading at 2042 this morning. Thankfully after I posted yesterday morning the S&P had a decent rally first which enabled me to cover my long 2083 position at 2088. Subsequently when the S&P broke 2070 I went short at 2068 and I have covered half of this position at 2043 this morning and I will leave a breakeven stop on the balance. As most members know at this stage I am very worried about the geopolitical and economic developments that are happening at this time and that if it was not for QE these markets would be trading much lower. This morning the S&P should have small support at the pre FOMC Meeting low at 2038 but I still believe this market is heading much lower. Today I will add to my short position on any rally higher to 2056/2062 with the same 2068 stop that I now have on my Macro short position. Even though I believe that the 2038 level will offer some decent support I do not want to be long the S&P at this time especially as we still have three confirmed Hindenburg Omen’s on the clock.
EUR/USD
No change as I am still a small seller from 1.1040/1.1070 with a wider 1.1120 stop.
June US Dollar Index
The Dollar is opening much weaker this morning as we approach the key support at 95.80/96.20. Today I will still be a small buyer from 96.00/96.40 with a tight 95.70 stop.
June DAX
Having gone long the DAX yesterday evening at 11890, I was stopped out of this position overnight at 11830 and I am now flat. The movements across all markets yesterday proved yet again how important it is to have stops in the market. This morning the DAX has support at 11680 and today I will again look to buy the market on any dip to 11650/11690 with an 11620 stop. If I am taken long and subsequently stopped out of this trade I will be a more aggressive buyer in front of 11520 with a 11470 stop.
June FTSE
After last week’s 5% rally in the FTSE the market is continuing to hold in despite the other major Indices sharply lower. The move lower yesterday has led to me going long the market at 6920 and today I will lower my stop slightly on this position to 6855. I still do not want to be short the market at this time.
Dow Rolling Contract
It is very frustrating for me to see the Dow trading over 450 points lower since yesterday morning and that despite me calling for this move lower that I have no position having taken profit way too early on my 18160 position on Tuesday at 18100. Thankfully we have not been long for this move lower and I will use any rallies in the market to re-establish my short position. Given the extent of yesterday’s move and the follow through this morning I am going to stand aside in the Dow today as I want to see how this market reacts to this aggressive move overnight. However if the Dow continues to trade lower I will be as small buyer from 17430/17480 with a 17380 stop.
June BUND
With the hammering that the Stock markets have taken over the past 24 hours I am very surprised that the Bund is not higher. I am still flat and today I will raise my sell level to 158.85/159.15 with a 159.40 stop.
Gold Rolling Contract
Unfortunately I am still flat Gold and I am reluctant to chase this market too much higher as the market should encounter some decent resistance at 1220/1230. Today I will raise my buy level to 1188/1199 with a 1179 stop.
Silver Rolling Contract
No change as I am still long from last Tuesday at 16.90 with the same 16.40 stop. If Silver breaks 17.60, I will raise my stop to 17.30 on this position.
Recent Comments