A sharp risk reversal commencing just before noon yesterday saw stock markets plunge and the US Dollar reverse earlier losses. This comes from a combination of rising Euro-Zone concerns and the rapid re-emergence of fears of the US Fiscal Cliff under the status quo Government just returned by the US electorate. Yesterday morning the world appeared thrilled with the prospect of four more years of the current administration but by last night, after a 300 point fall in the Dow, the market is looking terrified at the thought. The markets were not helped by Dragi’s speech in Frankfurt where he noted that Germany was starting to be hurt by the debt crisis. This had been reflected by weak the German Factory Orders, Industrial Production and soft Retail Sales reports over the last two days. Late last night the Greek Parliament passed the latest austerity measures despite mass protests on the streets by her people.
This morning we have Trade No’s from Germany and the UK, followed by the BOE meeting announcement at 12.00 noon and the ECB at 12.45pm. Given the comments from Dragi yesterday his press conference has the potential to add to the volatility. In the US we also have their Trade Balance and Weekly Jobless Nos.
Dec S&P 500
Yesterday was one of the wildest days in trading that I have seen for nearly a year with the market falling 47 handles from the 1431 high made mid morning. Despite the large fall, the McClellan Oscillator is only at -87 and for the market to be oversold this reading needs to be near -250/-300. I went short at 1430 and unfortunately I took profit and went long at 1418 only to be stopped out at 1409 on my 1410 stop. Yesterday is a very good lesson in how important stops are. After I was stopped out I left the S&P alone and I am still flat. The bottom of the Bollinger Band comes in at 1380 and I will be a buyer from 1379/1385 with a 1377 stop. As I have been saying for the last few months we still have an open Gap down to 1362 from August 1st and if I am taken long and subsequently stopped out I will be an
aggressive buyer from 1360/1366 with a 1355 stop which is just below the 200 day Moving Average. On the top side I will be a small seller from 1400/1405 with a 1407 stop.
Gold – Rolling Contract
Despite the strong US Dollar and the hammering that Crude got Gold only fell to 1703. I went long at 1708 and I have taken profit this morning at 1720 and I am now flat. I will still look to buy any dip to the 1695/1705 area with a 1685 stop.
Dec Bund
On the back of the weak Equity markets the Bund entered my sell zone and I went short at 142.35 and I was stopped out at 142.60 and I am now flat. I am very surprised the Bund is not higher and I will look to go short again from 142.90/143.20 with a 143.30 stop.
Dec FTSE
The FTSE finally entered my buy level at 5780. I still like the FTSE and I will leave a breakeven stop on this position. If it continues to rally today I will look to take profit from 5815/5830.
USD/JPY
This currency pair also entered my buy level and I went long at 7995. I will leave a 7970 stop in order to give this position some room.
Euro/USD
The Euro is proving to be one of the most difficult markets to trade and having been stopped out of my 1.2790 long at 12760 I am going to stand aside and see how the market trades over the next few days.
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