The major price seller over the past 24 hours was the sizeable pullback in the price of Oil as Oil supply remains well in excess of demand at this time. WTI Oil had its largest daily fall for two months after the US Energy Information Agency revealed that US Crude Oil Inventories climbed 10.95mb, with Daily Output back up again after a pullback in last week’s report. WTI Oil closed down 5.6% while Brent finished 5.08% lower. The Canadian Dollar was the main FX casualty among the majors, off a net 1.0% against the US Dollar that has itself had a whippy session, gaining a little after the releases of the Fed Minutes of the March 19 rate meeting.
The FOMC Minutes have had at most a mildly supportive impact on the US Dollar and short-term Treasury Yields. These Minutes come of course after the release of the Fed’s projections at its March 19 meeting revealed split views on the initial ‘lift off’ and the removal of ‘patient’ before starting to raise rates and of course Ms Yellen’s press conference. And they post-date the much lower than expected employment growth in the March Payrolls Report, leaving the Fed less close to meeting its employment mandate and thus somewhat further away from initial rate ‘lift off’.
Fed Governor Powell has been on the wires yesterday saying that the appreciation of the US Dollar is having a restraining effect on growth. Some Members of the FOMC were also reported in the Minutes as noting that the high Dollar and lower energy prices argued for rate ‘lift off’ not before 2016. In short there is a wide variety of views within the Fed as to when the first rate rise will occur. The final arbiter will be the data, recent data argued for delayed rate ‘lift off’ with the June 18 Meeting now being priced as quite a slim chance.
This morning on the economic front we already had German Industrial Production which rose 0.2% in February after a revised 0.4% drop in January. This rise is giving a nice boost to the DAX. At 9.30 am we have UK Trade Balance ahead of the Bank of England Rate announcement and Asset Purchase Target at 12.00 pm. This is followed at 1.30 pm by the Weekly US Jobless Claims. Finally at 3.00 pm we have US Wholesale Trade Sales.
June S&P 500
The S&P plan worked out very well yesterday as shortly after the US markets opened the S&P rallied to my 2078 sell level before having a nice sell-off which enabled me to cover this position at 2070 and I am now flat. This morning the market is opening higher on the back of the stronger than expected German Industrial Production and I will again be a small seller into the 2079/2085 resistance level with a 2089 stop. The S&P has minor support from 2060/2064 and today I will be a small buyer in this area with a 2056 stop. If I am taken long and subsequently stopped out of any long position I will be a more aggressive buyer on any further dip to 2036/2042 area with a 2032 stop. Remember a break and close below 2035 will be very bearish and will lead to an acceleration lower in the market.
EUR/USD
The Euro had another wild trading session yesterday. Initially the Euro plan worked out very well as just after I posted the Euro was trading at my 1.0850 buy level before having a small rally which enabled me to cover this position at 1.0880. Subsequently the Euro has got hit hard with the market trading lower to my 1.0750 buy level earlier this morning. I must say that I am very surprised by this move lower but obviously the lower peripheral European Bond yields are having an impact. I will leave my stop the same at 1.0690 on this long position.
June US Dollar Index
My short 97.70 Dollar position did not work out so well yesterday as shortly after lunch I was stopped out of this trade at 98.20 and I am now flat. I still believe that the Dollar will have difficulty in breaking and closing over the major resistance at 99.90/100.50. Today I will again look to go short on any further rally to 98.80/99.20 with a 99.50 stop.
June DAX
The DAX is trying to consolidate over 12,000 but at the same time is trading in a volatile fashion. Yesterday the DAX just missed both my sell and buy levels and I am still flat. Today I will leave my buy level unchanged at 11960/12020 with an 11915 stop. Remember the key pivot level to watch is still at 11940 and a break and close below here will be short-term bearish. Today I will lower my sell level slightly to 12170/12220 with a 12250 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 12290 with a 12350 stop.
June FTSE
The FTSE just missed my 6975 sell level by 15 points before having a nice move lower yesterday and I am still flat. I am convinced that the closer we approach the UK Election next month that the FTSE will run into trouble but as yet we are still waiting for a catalyst for this move to happen. Today I will lower my sell level slightly to 6945/6980 with a 7005 stop. Despite the positive price action over the past few weeks I do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow plan worked out very well yesterday as the market had a nice rally shortly after the US markets opened which enabled me to go short at 17960. Subsequently the market got hit hard which enabled me to cover this position at 17880 as I wanted to be flat ahead of the FOMC Minutes. My strategy is to continue to sell rallies in the Dow with a tight stop especially with the three confirmed Hindenburg Omen’s on the clock. Today I will again be a seller on any rally higher to 17940/18000 with an 18040 stop.
June BUND
After I posted yesterday morning the Bund traded higher to my 159.15 sell level. I am still short and today I will leave at 159.40 stop on this position. If I am stopped out of this position I will still be a more aggressive seller in front of 159.70 with a 160.10 stop.
Gold Rolling Contract
Gold is finding it very difficult to break the now major 1220/1230 resistance area and is trading lower this morning. Very late in yesterday’s trading session Gold traded lower to my 1199 buy level. While I expect to get stopped out of this trade at my 1191 stop level I am going to leave this position on. If I am stopped out of this trade I will be a more aggressive buyer in front of 1175 with a wider 1159 stop.
Silver Rolling Contract
Yesterday was not a day to be long the metals as shortly after I posted I was stopped out of my long 16.90 position for a small loss at 16.60. Subsequently Silver traded lower to my 16.40 buy level, and I am still long with the same 15.90 stop.
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