Including various sub-series or core measures of US economic releases of interest to markets there was no fewer than 20 data prints to digest during the course of the New York morning prior to an early rush for the exit in front of today’s Thanksgiving Holiday. While none of the numbers individually could be considered important the fact the overwhelming majority of the most closely watched indicators undershot expectations has ensured that the US Dollar has lost ground.
To give a flavour of the extent to which the numbers have underwhelmed the Citi Economic Surprises Index, while still above zero at +6.2, has fallen to its lowest level since late August. The US has just had its coldest November since 1911 implying there is a strong chance that many of the data releases that we will get in December will also prove underwhelming. The next FOMC Meeting is scheduled for December 16/17 and will be the most important event that risk markets will have to face before year-end.
Outside the US the most significant development has been an elaboration by ECB Vice President Constancio of the likely timetable for a move to full-blown QE entailing Sovereign Bond purchases. Speaking at an FT Conference, Constancio says that if current easing measures fall short of desires then then ECB would likely pull the trigger on Q1 next year and if so, it was likely to buy Sovereign Bonds from Member States in proportion to their so-called capital keys meaning they would buy more German Bonds than those of any other Member.
This morning on the economic front we have German Unemployment, GIK Consumer Confidence and Retail Sales at 8.55 am, 12.00 noon and 1:00 pm respectively. Earlier at 10.00 am we have the Euro-Zone Business Climate Indicator.
December S&P 500
Keynes had a famous saying ‘markets can remain illogical longer than I can remain solvent’ and this is certainly the case for the US stock markets currently. Yesterday was the first day in history that the S&P closed over its 5 Day Moving Average for 29 consecutive trading sessions. Something has to give in this market as the economic data release over the last six weeks have been very poor in general.
The S&P had its lowest trading volume day in over three months yesterday and with the markets closed today and only open for a half day tomorrow it will be next week before proper trading resumes. The market again rallied into the close and I was stopped out of my short 2068 position for a small loss at 2073 and I am now flat. Today I will continue with my strategy of selling spikes with a tight stop until we get a decent sell extreme. Today I will again be a seller on any rally to 2072/2077 with a 2081 stop. Given how overextended this market is I do not want to be long at this time. Just for housekeeping the Futures market will close at 4.30 pm.
Euro/USD
The Euro plan of buying dips continues to pay dividends. Yesterday after I posted the Euro traded lower to 1.2440 which enabled me to go long at 1.2460 and after a decent rally I was able to cover this position at 1.2510 and I am now flat. Today I will again be a small buyer on any dip to 1.2440/1.2470 with a tight 1.2420 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1.2370 with a 1.2335 stop.
US Dollar Index
After I posted yesterday the Dollar rallied to my 88.00 sell level. I am still short and today I will lower my stop on this position to 88.30.
December DAX
The Dax again closed higher yesterday. It is still trading outside its Bollinger Band and at the top of its Williams Index and this morning the Dax is trading at my 9945 sell level. I have gone short here in small size and as I do not want to risk to much on this trade I will lower my stop to 9980. If I am stopped out of this trade I will be a more aggressive seller in front of 10020 with a 10060 stop.
December FTSE
The FTSE plan worked well as the market had a nice rally after I posted which enabled me to go short at 6760. As I am already short the Dax I have decided to cover my short FTSE position this morning at 6730 and I am now flat. Interestingly the market continues to underperform the other major Indices which is exactly what happened in August and September before we had the 10 percent fall. Today I will again be a seller on any rally back to 6760/6790 with the same 6810 stop.
Dow Rolling Contract
Today I will lower my sell level for the Dow to 17880/17920 with a 17950 stop. Given how overbought and over extended the Dow is currently trading I do not want to be long the market at this time.
December Bund
As expected, I was unfortunately stopped out of my 152.10 short position at 152.52. The Bund is opening higher this morning and I have gone short again at 152.70 with a tight 153.10 stop.
Gold Rolling Contract
Gold has again rejected the 1200/1204 resistance level and I am still flat. Today my only interest in buying Gold is on a dip to 1165/1173 with a 1159 stop or if we print 1210 I will buy the market with a tight 1195 stop.
Silver Rolling Contract
Silver has traded in a very narrow range over the past two weeks. Presently Silver is finding it very hard to break and close over its next resistance at 16.70. I am still long at 16.25 and today I will raise my stop on this trade to 16.10 which is just below its overnight low. If I am stopped out of this trade I will be a more aggressive buyer from 15.40/15.80 with a 14.95 stop which is just below its low made earlier this month.
January NYMEX Crude
Crude is not able to get anything going on the topside and again had a late sell-off in the last 10 minutes of trading which has filtered overnight and in the process stopping me out of my 74.10 long position for a small loss at 72.95 and I am now flat. Today given how oversold Crude is I will be a small buyer on any further dip to 71.40/71.80 with a tighter 70.85 stop.
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