The big news yesterday was the the leaks coming out of the ECB which were suggesting that they will announce details of a bond buying program after their meeting this morning. The leaks are saying the ECB will not put an explicit cap on peripheral country bond yields but neither will they put a limit to the amount they will purchase. This boosted European Equity markets and caused peripheral country yields to fall. In the US, FEDEX the huge delivery company, projected its first quarterly decline in 3 years sending its stock down over 7%. The New York PMI was also softer hence the US stock market under performed versus European Equities. Later this moring we have the ECB and BOE meetings. Before this we have Euro-Zone preliminary GDP and Spain has a bond auction which will be very interesting. Later at 1.30pm we have the Weekly Jobless No’s in the US which will be well watched ahead of tomorrows Non Farm Payrolls as well as the ISM Non Farm
Manufacturing Index.
Sept S&P 500
The S&P followed my gameplan perfectly as we dropped down to my buy level with a 1397 low and then rallied back to the 1408 where we are this morning. It is amazing how every time we have a major announcement or Central Bank meeting, the market nearly always rallies into this event. I bought the S&P at 1398 and took profit at 1406 and I am now flat and I will stay this way until we see what the ECB does. Then if the market rallies after the meeting to the 1420/1425 area I will go short with a 1427 stop. Alternatively if the market does not like the news from the ECB I will be a small buyer from 1390/1394 with a 1386 stop ahead of tomorrows Non Farm Payrolls.
EURO/USD
The Euro also worked well as we dropped in my buy zone with a 1.2500 low. I went long at 1.2515 and took a nice gain at 1.2585 and I am now flat. I still think we will test the 1.3000 level before we start to fall again, however the 1.2700/1.2750 is critical to this strategy and I will look to sell in this area the first time we test this range with a 1.2760 stop. Again given the larger range to go short I will only trade in small. I will also look to go long on any dip from 1.2510/1.2550 with a stop below yesterdays low at 1.2490.
Dec BUND
The Sept Bund worked really well on the back of the very weak 10 Year Bond Auction in Germany. The bid to cover ratio was only 1.1, down from 1.8 as a sign of investors preferring peripheral country debt. I took a nice gain at 143.00 on my 143.60 short. As you will note in the heading to this section, the market has now rolled to the December contract at a discount of 173 pips and we are working with that. Today I am going to stay flat as we have to get used to the new pricng levels and I will have new ideas on the Bund tomorrow.
Sept DAX
The Dax worked really well as we dropped down to my buy zone with a 6892 low before we rallied 100 points. I managed to make a nice profit on this move and I am now flat. Today I will be a seller on any rally to the 7070/7100 level with a stop above last weeks key day reversal at 7120. I will also be a buyer if we drop back down to the 6870/6900 area which has held for the last 2 weeks.
Sept FTSE
The FTSE has not worked as well as the other markets as it continues to under perform. However we dropped into my buy area with a 5634 low and I went long at 5441. I took profit this morning at 5675 and I am now flat. As we are still at the bottom of the Bollinger Band I will look to reset my long from 5620/5640 with a 5595 stop. I do not want to be short at this time.
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