The FOMC Meeting has done nothing to stop the rot in Emerging Markets.All of the knee-jerk reactions in the Turkish Lira following yesterday’s aggressive rate hikes have been unwound and the South African Rand failed to respond favourably to an unexpected 0.5% hike to the Central Band Lending Rate. In Europe the Hungarian Foint has been the EM whipping boy, as it finished down 2.5% yesterday.
The FOMC’s decision to taper by a further $10bn was widely expected, as was the decision to maintain the existing language on forward guidance that the Fed expects to keep the Funds Rate where it is well beyond the point where Unemployment declines below 6.5%. The language about the Economy changed from last month as the Fed acknowledged a pick up in growth in Household spending and Business investment alongside less Fiscal restraint. The voting for the new taper was unanimous.Market fallout from the FOMC has so far been mild with the S&P Futures market having made a low of 1764 after the event currently trading at 1776 and helped overnight by the better than expected Earnings results from Facebook after the close.
Today is another very busy day for economic data. This morning we have UK Consumer Credit and Mortgage Approvals at 9.30. This is followed at 10.00 by German Unemployment and Euro-Zone Consumer Confidence.At 1.30pm we have US GDP,the Weekly Jobless Claims and Pending Home Sales.
March S&P 500
What a wild day yesterday was as volatility again picked up as after I posted yesterday morning the S&P was trading at 1798 before the Emerging markets started to wobble again and the S&P just opened lower and traded in this fashion right into the FOMC. Yesterday was the first time that I can remember in a very long time that the Dow was down nearly 180 points going into an FOMC Meeting. For the third time in a week the S&P has left another Gap which runs from approximately 1785/1793. Unfortunately I cut my 1801 short position early yesterday morning as I wanted to be flat ahead of the FOMC and after the announcement the S&P traded twice down to my 1760/1767 buy level with a 1764 low before having a rally overnight helped by Facebook Earnings. I bought the market at 1766 and I covered this position at 1775 and I am now flat. As I mentioned over the last two days the 1760/1767 is key support as a break and close below 1760 tomorrow will signal a Key Month Reversal which technically is very bearish. Today I will be a small buyer on any dip to 1765/1770 with a wider 1758 stop. Given the volatility I have to leave a wider stop on these positions. I will also be a seller on any rally into the 1788/1793 open Gap from yesterday with a 1795 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller from 1804/1810 with a 1813 stop.
Euro/USD
The Euro worked well yesterday as shortly after I posted the Euro traded down to my 1.3630 buy level before again having a nice rally out of ths zone enabling me to cover this position at 1.3665 and I am now flat. The 100 Day Moving Average comes in at 1.3600 and the Euro will need to break 1.3580 for me to start to change direction. Today I will be a small buyer from 1.3590/1.3610 with a 1.3570 stop. I still do not want to be short the Euro at this time as I am still long the US Dollar via the Dollar Index.
US Dollar Index
No change as I am still long at 80.50 from last week. The Dollar Index has hardly moved since I put this position but I still believe the US Dollar will start to strengthen.The key level for the Index is 81.50 as a break and close over this level will be very constructive. I will still leave my stop the same at 79.80.
March Dax
The Dax has had a wild last week as volatility has picked up big time. Shortly after I posted yesterday morning the Dax was trading at the top of my sell level at 9530 before incredibly trading down to a low of 9230 at 3pm. Given the volatility I am trading in very small size. I sold the Dax yesterday at 9510 and I covered this position way to early at 9408 before the Dax traded down to my 9320 buy level before quickly stopping me out of this position at 9275 and I am now flat. The Dax is trading a lot higher this morning. Today I will be a small seller from 9440/9470 with a 9495 stop. The key levels on the downside are yesterday’s low at 9230 and 9140/9180 which should act as very good support. Today I will also be a buyer on any dip to 9240/9270 with a 9225 stop.
March FTSE
As I mentioned the 6450 is critical for the Ftse going forward as a break and close below here opens up a test of the next major support at 6225. The Ftse needs to break 6550 for me to turn bullish. Tomorrow is month end which seasonally is a good time for stocks. Today I will be a small buyer on any dip to 6420/6440 with a 6395 stop. Given how oversold the Ftse is trading I want to see how the Ftse handles this 6450 support level before looking at levels to go short.
Dow Rolling Contract
Thankfully I said to go into the FOMC Meeting flat as the Dow had already had a 300 point range by the time the FOMC announcement took place. The Dow is still trading very heavy and at the bottom of the Bollinger Band and if and when we do get a rally it will be short and violent. Today my only interest in buying the Dow is on a dip to 15720/15745 with a 15695 stop which is just below yesterday’s low. The key level to watch on the upside is at 16200 and if we do get a violent rally I will be looking to go short against this major resistance.
March BUND
After the FOMC announcement the Bund traded up to my 143..00 sell level before quickly stopping me of this position at 143.25. I do not like the Bund at these lofty levels and today I will be a small seller from 143.15/143.40 with a 143.55 stop.
Gold Rolling Contract
Following the FOMC last night Gold again spiked up to my 1270 sell level before trading lower overnight and I have covered this position at 1258 and I am now flat Godl continues to have trouble breaking this key 1275 level where the 100 Moving Average comes in. Today I will lower my sell level to 1268/1275 with a 1280 stop which is just above the highs made earlier in the week. I will still leave my buy level the same at 1235/1242 with a 1229 stop.
Silver Rolling Contract
Silver also is trading heavy and today I will still leave my buy level the same at 19.10/19.40 with a 18.80 stop.
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