The Dow and S&P 500 both had Key Day Reversals yesterday which is the second such reversal in a week as the stock markets, having been up nicely in early afternoon trading, were hit hard on more negative Russian/Ukraine headlines. President Obama said that an international order is being tested by the Russian incursion into Ukraine and that Russia cannot ‘run roughshod over its neighbours’. Meanwhile the IMF is preparing a $19 billion rescue package for Ukraine, aiming to start aid payments by the end of April.
The US markets were not helped by Citibank who are one of five banks that failed the latest Fed stress tests whilst Bank of America won approval for its first dividend increase since the start of the financial crisis.
On the currency markets, the Australian Dollar was again the star performer with it now trading comfortably over .9200 versus the US Dollar and over its 200 Day Moving Average, helped by comments from RBA Governor Stephens who said that he expected the Australian economy to continue to improve.
US economic data was disappointing yesterday. Headline Durable Goods came in better than expected but Core Orders fell 1.3% versus +0.3% expected with January revised down to 0.8% from 1.7%, pointing to very little growth in capex spending.
This morning on the economic front we have UK Retail Sales at 9.30 am. This is followed at 12.30 pm by US Weekly Jobless Claims, GDP and Pending Home Sales.
June S&P 500
The S&P had another wild trading session yesterday with the market very strong in the afternoon but quickly fell apart after the President Obama’s news conference. For the second time in a week the S&P has registered a significant Key Day Reversal having made a new high above Tuesday’s high before getting slammed to break Tuesday’s low and then close near the lows of the day. Interestingly in the latest Investors Intelligence Advisors Survey the results showed an uptick in the percentage of bullish advisors to 54.7% which is a new 26 year extreme and higher than anytime since 1987.
Yesterday the S&P plan worked well as at the market traded up to my 1868 sell level before having a nasty sell-off which enabled me to cover this position at 1859. The market continued to fall and after Obama’s comments it traded down to my 1850 buy level before having a quick rally which allowed me to cover this long position at 1855 and I am now flat. We still have the open Gap in the S&P from last Monday week at 1832/1841 which I would expect to be filled and today my only interest in buying the market is on a dip to 1830/1834 with a 1826 stop. Remember a break and close below 1825/1830 will be extremely bearish. Today I will also be a small seller on any rally to 1854/1858 with a 1862 stop.
Euro/USD
After I posted yesterday morning the Euro traded down to my 1.3775 buy level. I am not that comfortable at being long the Euro at this time as the market looks heavy and I will not risk to much on this trade by raising my stop to 1.3745 which is just below the low made over the last couple of days. If I am stopped out of this position I will be a more aggressive buyer on any dip to 1.3690 with a 1.3660 stop. I still do not want to be short the Euro at this time.
US Dollar Index
The Dollar Index continues to trade in a very narrow range and today I will raise my buy level to 79.80/80.00 with a 79.55 stop on any long position.
June DAX
The Dax continued its huge rally off the March 14 low of 8908 as the market traded briefly above 9500 before sellers returned. It is amazing that given President Obama’s comments on Russia last night that the S&P was actually hit a lot harder than the Dax. I do not want to chase the market higher from here and today I will only raise my buy level slightly to 9315/9345 with a 9290 stop. This 9300 level is now key support for the market and if we start to break this level will then look to set up shorts. I will also be a small seller on any rally back to 9490/9520 with a 9540 stop.
June FTSE
The FTSE worked really well yesterday as shortly after I posted the market traded up to my 6585 sell level before having a very nice sell-off which enabled me to cover this position at 6545 and I am now flat. The key level for the FTSE going forward is at 6560 and as long as it can remain below here the market is bearish. Today I will lower my sell level to 6530/6550 with a tight 6570 stop. I do not want to be long the market at this time.
Dow Rolling Contract
The Dow also worked well yesterday as the market traded down to my 16300 buy level before having a quick rally which enabled me to cover this position at 16340 and I am now flat. I still prefer the Dow relative to the S&P especially if we can stay over the key 16200/16250 support zone. Today I will be a small buyer on any dip to 16205/16245 with a 16180 stop. I still do not want to be short the market at this time.
June BUND
The Bund traded up to my 143.55 sell level after I posted yesterday. I am still short and as I do not want to risk to much on this trade I will leave my stop the same at 143.80. If I am stopped out of this position I will be a more aggressive seller on any rally to 144.10/144.30 with a 144.50 stop.
Gold Rolling Contract
Gold continued its recent sell-off yesterday and unfortunately stopped me out of my long 1315 position for a small loss at 1305 and I am now flat. This morning Gold is trading both at the bottom of its Bollinger Band and Williams Index and is now nearly $100 lower than it was 10 days ago. Given how oversold Gold is trading I will again be a small buyer from 1290/1298 with a 1285 stop.
Silver Rolling Contract
No change as I am still long Silver from last Monday at 19.90. This morning the market is also trading oversold and is presently testing my stop at 19.60. Today I am going to lower my stop to 19.40 which is just below key support at 19.50. If I am stopped out I will be a more aggressive buyer on any dip to 18.80/19.10 with a 18.50 stop.
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