Just before I posted yesterday morning a proposal was announced for a ceasefire between Ukraine and Russia which is to begin as early as tomorrow. That news fired up both European Equities and the Euro but some of that enthusiasm was dented as the trading session wore on especially after comments from the Ukrainian leadership which poured scorn and cynicism over the proposal.
In the US the NASDAQ was particularly heavy after Apple Shares fell 4.2% after its main competitor, Samsung, introduced new smartphones following on from Apple having been criticised for the recent celebrity photo hacking. The Euro also rose ahead of today’s ECB Meeting.
All in all the US Dollar has given back about half the ground made up in the first part of the week with the Index closing down 0.2%.. The weakness in the Dollar was surprising given the very strong Auto Sales Report, which is the highest since 2005, and a Beige Book still pointing to growth across the country although with no acceleration. The Fed also reported that ‘none of the individual districts pointed to a distinct shift in the overall pace of growth’.
On the economic front, as mentioned above, the big focus is the ECB Meeting where the results will be announced at 12.45 pm. I expect the ECB to cut the main Refinancing Rate by 5/10 basis points thus bringing the rate down to 0.10% or even 0.05% and also reducing the Marginal Lending and Deposit Rates by similar amounts. Following this meeting Dragi will hold a press conference at 1.30 pm where I would expect a lot of volatility to follow. Earlier, at 12.00 pm the Bank of England will announce its Bank Rate and APP Target. Also at 1.30 pm the US will release its latest ADP Employment Numbers which will be closely watched ahead of tomorrow’s Non Farm Payrolls. The Weekly Jobless Claims and Trade Balance will also be released at 1.30 pm. Then at 3 pm we have the ISM Non Manufacturing Composite. Finally at 5.30 pm the Fed’s, Mester will speak on Monetary Policy in Pittsburgh.
September S&P 500
Unfortunately by the time that I posted yesterday morning the S&P had already backed away from my 2010 sell level with a high of 2009 following which the market had a nice sell-off especially after the US Markets opened with the main indices weighed down by the 4.2% fall in Apple Shares. Today and tomorrow we will have a lot of economic data to digest as normal trading resumes after the summer vacation.
The key short term support for the S&P is from 1987/1992 and as long as we can hold this area I would expect the market to be fine but a break and close below 1985 will be short term bearish. Today I will be a small buyer on any further dip to 1990/1995 with a 1985 stop. My only interest in selling the S&P is on a rally to 2009/2014 with a 2017 stop.
Euro/USD
My long Euro position finally worked out yesterday as the market had a nice rally off its 1.3110 lows which enabled me to cover my 1.3120 position at 1.3150 and I am now flat. I plan to stay flat until we get the Dragi press conference out of the way. The Euro has key long term support at 1.2990/1.3200 which is right in the middle of the current trading range A break and close below 1.2990 for 2-3 days opens up the possibility of a serious move lower. However, short term, we are oversold and as I mentioned yesterday the Williams Index has given a short term buy signal coupled with the extreme Daily Sentiment Index reading. For these reasons I do not think we are going to break this long term support now and today I will be a small buyer on any dip to 1.3060/1.3090 with a 1.3030 stop. Given how oversold the Euro is trading I do not want to be short the market at this time.
US Dollar Index
No change as I am still short at 82.75. Today I will lower my stop slightly to 83.20 on this position.
September DAX
Thankfully I have not been short the Dax over the last week as the market tried to play some catch-up with the other major Indices after yesterday’s surprise ceasefire announcement. With QE due to be announced later this morning by the ECB and ending next month in the US, a strong case could be made for buying the Dax and selling the S&P going forward. Given the impact that QE has had on the US Indices it makes it very difficult to short the Dax now. Today I will raise my buy level to 9510/9550 with a 9465 stop. For all the above reasons I do not want to be short the Dax at this time.
September FTSE
My long 6815 FTSE position worked well yesterday as the market had a nice rally after the ceasefire announcement which enabled me to cover this position at 6885 and I am now flat. Today I will again be a buyer on any dip to 6840/6860 with a 6810 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow continues to under-perform the other major US Indices as the 17150 level is proving extremely difficult to break and close above. The Dow just missed my sell level yesterday before selling off after the US Markets opened and I am still flat. Today I will plan to be a seller on any rally to 17150/17190 with a 17220 stop. Again in contrast to the Dax and FTSE I do not want to be long the Dow at this time.
September BUND
Unfortunately shortly after I posted I was stopped out of my long 150.95 Bund position near the lows of the day at 150.65 and I am now flat. Today I will still be a seller on any further rally to 151.40/151.70 with a 152.05 stop which is just above contract highs at 151.92. I do not want to be long the Bund at this time.
Gold Rolling Contract
The Gold plan worked well yesterday as shortly after I posted it traded down to my 1263 buy level. With such key economic data due later I have decided to cover this position at 1271 this morning and I am now flat. Today I will again be a buyer on any further dip to 1258/1263 with a 1249 stop.
Silver Rolling Contract
I am still long Silver from last week at 19.40. Given the importance of today’s economic data and the fact that I am flat in Gold I am going to lower my stop in Silver to 18.80 in order to give this trade some room. If I am stopped out of this position at 18.80 I will be a more aggressive buyer in front of 18.50 with a 17.95 stop.
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