The big news overnight is the continued sell off of Japanese Equities which caused the Nikkei to end down 5.15%. Having closed at 13589 it represents an amazing 2500 point fall in the last week and it is on course for its first monthly decline in seven months. May has been one of the most volatile months for trading in currencies, bonds and equities since August 2011. Yesterday the US Stock market was in trouble until the Fed’s Rosengren, speaking on the economy in Minneapolis, said that significant accommodation was still needed and that he wanted to see monthly payroll gains of over 200,000. This helped the S&P recover from a low of 1638 to 1652 before sellers returned. All markets are lower this morning in response to the very weak Nikkei. The US Dollar was hit hard across the board yesterday and this theme has continued this morning. Also overnight the IMF’s Shinohara did not help matters by saying that Europe’s recovery remains elusive. Yesterday German May Unemployment rose by 21,000 versus 5,000 expected and the OECD cut 2013 Global Growth Forecast to 3.1% from 3.4%. This morning the UK Nationwide May House Prices were released and rose 0.4% month on month and +1.1% year on year both in line with expectations.
On the economic front this morning we have Spanish GDP and Euro-Zone Business Climate. Later at 1.30 pm we have the Weekly Jobless Claims and US GDP, followed by Pending Home Sales.
June S&P 500
The S&P worked well yesterday in what proved to be another volatile session. It dropped down to my 1643 buy level yesterday morning and I was able to cover this position at 1650 before the market sold off and then subsequently rallied. I just did the one trade and I am now flat again. The 1630/1638 is crucial support for the S&P as a break and close below here will likely lead to an acceleration lower.
It is interesting to note that last week when we got the 1685 top in the market it was matched with 864 ‘tops’ in individual stocks which was the second highest total in over 9 years since April 2004. Back then it led to a 17% decline in the S&P over the next three months. As tomorrow is month end it is very difficult to short the S&P at these levels and as long as we stay over this 1630/1638 support zone the bulls will still be in control. Today I will be a small buyer on any dip to 1638/1642 with a 1636 stop which is just below yesterdays low. I will also look to sell the S&P on any rally to 1655/1659 with a 1662 stop.
Euro/USD
The Euro continues to frustrate all the bears looking for a big move down but every sell off is met by more aggressive buying. Long term I am very bearish of the Euro but the price action at the moment is telling me not to be short and this is why for the last 2 months I have hardly ever taken short trades and I prefer to buy the dips. This morning the fact the Euro is back over 1.2930 is encouraging and I will be a small buyer on any dip to 1.2930/1.2960 with a tight 1.2910 stop. A break and close over 1.3040 will be short term bullish.
June FTSE
The FTSE quickly stopped me out of my 6675 long position at 6660 and I am now flat. Thus morning, given that it is month end tomorrow, I will be a small buyer from 6590/6610 with a 6575 stop. As long as the FTSE can stay over 6580 the market is fine, however a break and close below here will be bearish and I will be a small seller at 6570 with a 6605 stop.
June DAX
The Dax, on the back of the weak Unemployment Numbers, quickly stopped me out of my 8385 long position at 8360 and I am now flat as unfortunately it just fell shy of my 8290 buy level before rallying this morning. Today I will raise my buy level to 8270/8300 with a 8245 stop. A break and close below 8250 will be bearish.
June BUND
No change as I am still long at 143.50 as the market just fell shy of my 143.90 take profit area this morning. I will raise my stop to 143.40 and if I am stopped out I will be a more aggressive buyer from 142.90/143.10 with a 142.75 stop.
June Nasdaq 100
Once again, with month end tomorrow, I have decided to cover my 3013 short position at 2988 this morning for a small profit and I am now flat. Today I will look to reset my short position on any rally back to 3015/3030 with a 3055 stop.
Silver Rolling Contract
Given how strong Gold is this morning I have bought Silver in small at 22.60. I will leave a 22.20 stop on this position.
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