Optimism reigned overnight as markets were encouraged by the prospects of policy makers, yet again, adding liquidity in order to stave off the inevitable economic and financial restructuring. There isn’t any guarantee that these events will happen but in the traditional response of the last four years, markets rallied. Germany will have no other choice than to cooperate and accept rapid institutional reforms as their bargaining position is very weak. In the event of a breakup Germany would suffer greatly because of the appreciation of its currency and resulting loss of competitiveness. The easing of Germany’s stance is a positive but I would anticipate a few more hiccups before we get to the June 28th summit. Yellan said overnight that more QE was possible and this helped fuel the rally. Later today Bernanke is speaking at the Congressional hearing. Before he speaks we have the BOE meeting and we have the Weekly Jobless No’s from the US at 1.30pm which will be closely watched after last Friday’s poor Payroll No’s.
June S&P 500
I was stopped out very quickly on my short position from 1305 at 1309 and I am still flat. Yesterday is a very good example of why I do not like to be short markets in these uncertain times because, as the poor economic news continues the more there is talk of QE which, in turn, leads to these massive rallys – the S&P is now up 60 full points from the lows of Monday morning. I am only trading in small size with wider stops. Today I will look to short from 1325/1330 which is the next area of resistance with a 1335 stop. I will also look to buy from 1305/1310 with a 1299 stop.
June EURO
The Euro worked out very well as it dipped into my buy zone below 1.2450. I took profit at 1.2550 and I am now flat. Initial support today is at 1.2520 and I will look to buy any dip to this area with a 1.2495 stop. On the bigger picture the 1.2650/1.2700 area is the main resistance and I think we will have a test of this area before we go lower again. If we trade up to 1.2650 I will go short using a 1.2720 stop.
June Gold
I will leave my buy area the same at 1610 with a 1598 stop. If we do get more QE then Gold will rally hard.
June Cable (USD/GBP)
I want to buy the Cable from 1.5420/1.5450 with a 1.5395 stop as I look for a move back to 1.5550/1.5600 where I will cover my long and go short with a 1.5630 stop.
June FTSE
The FTSE is the only stock market that did not break its low after the French and Greek election results which was 5220. I like the FTSE and I will look to buy from 5375/5400 with a 5360 stop looking for a move back to 5450/5470 where I will look to take profit if I am taken long.
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