Yesterday was a quiet news day but what there was was on the negative side. This was enough to reverse the currency moves of recent days, drive European Equity markets lower and leave US Markets flat after another wild day for equity indices. Bond Yields were lower in the main except periphery yields which again ended the day higher. Overall there was a more circumspect tone as we await more clarity on the outlook for a range of issues including Geopolitics, M&A activity, economic cycles, stress tests to name a few.
There were a range of reasons for the poor mood. In Europe there was a negative GDP print for Italy, meaning it is technically in recession, following on from a very poor Factory Orders Number for Germany. There was also a sell-off in Greek banks and a rise in periphery Bond Yields. This wasn’t based on any particular news rather just concerns about the stress tests to come. Russia and Ukraine tensions remain in the background and this is also weighing on sentiment.
In the UK, Sterling underperformed after weaker than expected Industrial Production and Manufacturing Data whilst the Japanese Yen was the strongest currency after a big spike down very late in the day as investors finally fled into the safety of the Yen.
The withdrawal of a number of high profile M&A proposals did weigh on sentiment but the US market was relatively stable in comparison to its EU counterpart. In positive news the US Trade Deficit was better than expected as Oil imports are dropping.
This morning on the economic front we have the Bank of England rate decision and Asset Purchase Target at 12 pm. This is followed at 12.45 pm by the ECB Announcement and Dragi Press Conference that follows at 1.30 pm. Also at 1.30 pm we have the US Weekly Jobless Claims whilst at the later time of 8 pm we have the US Consumer Credit Report.
September S&P 500
The S&P plan worked well yesterday, as shortly after I posted it started to sell off aggressively and eventually traded down to my 1908 buy level with a 1903 low. It then dramatically reversed course and traded back to the 1923 area before a late sell-off took the market back to 1914 near the close. After I went long I covered this position at 1917 and I am now flat.
As I have mentioned over the last few days the 1900/1910 area is very strong support for the S&P but we have now tested this level three times and each time we have had a large bounce from this point. Today I will still be a seller from 1928/1933 with a 1938 stop which is just above Monday’s high. I will also be a very small buyer on any dip to 1904/1909 with a 1899 stop. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1894 with a 1887 stop.
Euro/USD
Unfortunately I was stopped out of my long 1.3375 position for a small loss at 1.3345. This was near the low of the day before the Euro staged a late come-back as the US Dollar started to give up some ground especially against the Japanese Yen. I am still flat and I am going to stay flat especially with the ECB Rate announcement and Dragi press conference this afternoon. Today I will be a small seller on any rally to 1.3410/1.3440 with a 1.3470 stop. My only interest in buying the Euro today is on a drop to 1.3280/1.3310 with a 1.3250 stop.
US Dollar Index
No change as I am still a small buyer from 81.10/81.30 with the same 80.75 stop.
September DAX
The DAX has not been my friend over the last few days as just as I posted yesterday morning I was stopped out of my long 9100 position at 9060 which I put on early. I was stopped out near the low of the day only to watch the market rebound strongly but at least I was still long the S&P and Dow. The Dax is still extremely oversold but remember it did have a huge rally off its March 14 low at 8905 before trading over 10000. I am still flat and I am going to stay flat until we get Dragi’s press conference out of the way. If the Dax rallies on the ECB news then I will still be a small seller from 9185/9235 with a 9275 stop. I will also be a buyer on any dip to 9010/9040 with a 8975 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 8925 with a 8875 stop.
September FTSE
Just like the Dax, as soon as I posted yesterday morning I was stopped out of my small 6695 long position at 6575 and I am now flat. Today I will be a small buyer on any dip to 6540/6560 with a 6515 stop. Given how oversold the FTSE is trading I do not want to be long the market at this time.
Dow Rolling Contract
The Dow plan worked well yesterday, as shortly after I posted the market started to sell-off aggressively and eventually traded down to my 16375 buy level before having a nice rally allowing me to cover this position at 16450 and I am now flat. Today I will again be a buyer on any dip to 16340/16380 with a 16290 stop. Given how oversold the Dow is trading I still do not want to be short the market at this time.
September BUND
The Bund started to rally hard after I posted yesterday and eventually traded up to my 148.55 sell level before stopping me out of this position for a small loss at 148.80 and I am now flat. The Bund is now trading again at record low yields as traders rush to it for safety. The next target for this market is 149.60/150.00 and if we trade this high I will again be an aggressive seller with a 150.25 stop.
Gold Rolling Contract
Finally Gold started to rally, as it one would expect, following the sell-off in risk assets over the last week. I am still flat and today I will raise my buy level to 1292/1299 with a 1279 stop which is just below this week’s low. Gold really needs to break and close over 1325 for the market to turn bullish again.
Silver Rolling Contract
When I saw Gold start to rally I bought Silver at 19.90. I am still long and I will leave a 19.45 stop on this position.
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