US Equities fell yesterday with the S&P 500 halting a four day positive streak after the Federal Reserve fueled the belief that it will begin to cut stimulus, even as expected it maintained the pace of monthly bond purchases. The S&P closed down 0.5% after closing on Tuesday to a third straight record high. The Fed, in it’s FOMC Meeting, decided to press on with its $85 billion monthly bond purchase programme that has helped to propel the the S&P higher by more than 160% from a 12 year low in 2009. The index has also surged 5% in October and is heading for the biggest monthly gain in two years.
Whilst Fed policy makers said that fiscal policy is restraining economic growth, the Central Bank said that it sees signs of underlying growth. The Fed removed a sentence from its previous policy statement that said that tighter financial conditions could slow the improvement in the economy thus sparking speculation that it could cut stimulus in the coming months. The US Dollar rose to its highest level in almost two weeks against the Yen.
This morning on the economic front we have German Consumer Confidence and Retail Sales. This is followed by Euro-Zone CPI. Later at 12.30 pm we have the US Weekly Jobless Claims and Chicago PMI. This afternoon Treasury Secretary Lew is due to speak.
December S&P 500
The S&P plan worked well yesterday as shortly after I posted we were trading in the middle of my sell range at 1772. As soon as New York opened the market dropped and I covered my short position at 1762 ahead of the FOMC statement release. The S&P subsequently traded down to my 1755 buy level with a 1752 low before having a late rally and I was able to cover this long position at 1760 and I am now flat. The positive seasonal trends that I have mentioned all week will dissipate either tomorrow or Monday and hopefully this will remove any tailwind to the market’s rally. I am hoping that we have put in at least a temporary high at the 1773 made early yesterday morning. Today I will be a seller on any rally to 1765/1770 with a 1774 stop. I will also be a small buyer on any dip to 1749/1753 with a 1746 stop.
Euro/USD
Even though I did not manage to get short the Euro, at least I am long the US Dollar Index and this position is beginning to pay dividends. If the US Dollar Index can break 80.00 I will raise my stop to 79.75 on my long 79.15 position.
December DAX
The Dax, having been strong all day, proceeded to follow the S&P lower. The market traded down to my 8990 buy level and I am still long with the same 8955 stop. I still do not want to be short the Dax at this time unless we can break and close below 8930.
December FTSE
The FTSE was also very strong all day until the late sell-off of the S&P. The market did not reach my buy level and today I will leave it at 6680/6700 with a 6660 stop. Given the fact that it is month end I do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately after I posted my blog yesterday morning the Dow stopped me out of my short 15680 position at 15720 which was almost the high of the day before selling off. The market then sold off to my 15600 buy level and I am still long in small size. Given the fact it is month end I will lower my stop to 15560 to try and give this trade some room to move. I will also be a seller on any rally to 15700/15730 with a 15760 stop.
December BUND
The Bund finally saw some profit taking after the FOMC released its latest statement. I am still not going to chase this market higher and I will leave my buy level the same at 140.60/140.80 with a 140.35 stop. I do not want to be short the Bund at this time.
Gold Rolling Contract
Gold worked well yesterday as the market dropped to my 1337 buy level before having a late rally and I was able to cover this position at 1344 and I am now flat. However I am disappointed that Gold did not have a larger rally after the Fed announced it was keeping its Bond Purchase programme unchanged. Today I will lower my buy level to 1330/1336 with the same 1328 stop. A break and close below 1330 will be bearish.
Silver Rolling Contract
Silver also worked well yesterday as the market spiked higher before lunch and I was able to cover my 22.30 long position at 23.00 and I am now flat. I still like Silver and today I will be a buyer on any dip to 22.20/22.60 with a 21.95 stop.
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