US Equities ended yesterday’s session with slight gains supported by better Chinese data which has offset concerns that the Fed might start tapering next week. Chinese CPI released yesterday morning showed a slowing to 3% from 3.2% last month thus easing fears that the PBoC would start tightening policy soon. St Louis Fed President Bullard said that the odds of tapering had risen following the labour market gains but did add that any reduction should be small as inflation has surprised to the downside. Meanwhile Dallas President Fisher was much more hawkish saying that tapering should start at the earliest opportunity as the cost of QE3 far exceeds its benefits.
In Europe Equity markets gained despite disappointing data in Germany where Industrial Production fell for the second consecutive month, down 1.2% in October against expectations of a 0.7% rise. The Euro briefly fell on the news but overall ended the day firm and is now around 1.3750 this morning. Sterling has been the strongest currency over the past 24 hours after Bank of England Governor Carney spoke in New York and said that recent UK economic news has been positive thus pushing ‘Cable’ (USD/GBP) to 1.6450 from 1.6370 earlier.
This morning we have a lot of economic data due from the UK at 9.30 am,including Retail Sales, Industrial Production, Manufacturing Production and the Trade Balance. We have no data of note from the Euro-Zone whilst at 1.30 pm we have US NFIB Small Business Optimism.
December S&P 500
The S&P had a very quiet trading session yesterday with prices more or less where I marked them 24 hours ago. Worryingly form a bearish stance the S&P has now retraced 94% of its recent selloff and the odds are now increasing that we will have a move to at least 1840 by year end unless something dramatic happens to knock the market lower. For this reason I have decided to cover my 1807 short position at 1809.50 this morning for a small loss and I am now flat. I will still be a buyer on any dip to 1798/1802 with a 1795 stop and if the S&P can break 1815 I will also be small buyer with a 1809 stop. My only interest in selling the S&P today is on a rally to 1823/1827 with a 1829 stop.
Euro/USD
The Euro continues to trade higher despite the weak Industrial Production data from Germany yesterday and in the process has stopped me out of my small 1.3715 short position at 1.3740 and I am now flat. The Euro is now approaching its yearly highs at 1.3800 and if this level does not hold we could see the Euro trade up to key resistance at 1.3950/1.4000. I prefer to be short the Euro by been long the US Dollar Index which is not as volatile and I am still long the Index at 80.25. I will leave my stop the same at 79.80. Even though the Euro is extremely overbought, and at the top of the Bollinger Band and Williams Index, I prefer to trade the US Dollar Index at this time and I will stay flat the Euro today.
December DAX
Shortly after I posted yesterday the Dax traded lower on the weak Industrial Production to my 9185 buy level and after a small rally I was able to cover this position at 9210 and I am now flat. The Dax is underperforming the US markets and this is not surprising after yesterdays shocking Industrial Production numbers and to be honest I would have expected the Dax to trade a lot lower on this news but so far the market has held. Today I will lower my buy level to 9100/9130 and my only interest in selling the Dax is on a rally to 9250/9270 with a 9305 stop.
December FTSE
The FTSE traded down to my 6540 buy level after I posted yesterday morning and after a nice rally in the afternoon I was able to cover this position at 6560 and I am now flat. Today I will lower my buy level to 6490/6510 with a 6475 stop on any long position. My only interest in selling the FTSE is still on a rally to 6595/6620 with a tight 6630 stop.
Dow Rolling Contract
No change as I am still a small buyer on any dip to 15940/15960 with a 15910 stop. I will also still be a seller on any rally against the 13 year trendline from 16120/16150 with a 16180 stop which is just above the highs made on Black Friday.
March BUND
The Bund had one its quietest trading sessions of the year yesterday with very little movement. I am still a buyer on any dip to 139.60/139.80 with a 139.35 stop. The Bund needs to hold 139.40 for this market to stay bullish.
Gold Rolling Contract
Gold just missed my 1220 buy level before trading a lot higher late yesterday and this morning as we are now trading at 1245. I still like Gold at these levels and today I will raise my buy level to 1232/1240 with a 1228 stop on any long position. If Gold can break and close over 1260 it will be short term bullish.
Silver Rolling Contract
Unfortunately Silver is also spiking higher this morning without me being able to get into a long position. I am beginning to wonder if we have seen the low in Silver that I have been looking for at 18.87. Today I will raise my buy level to 19.60/19.90 with a 19.30 stop on any long position.
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