It was an exceptionally quiet trading session yesterday which was overdue after six breath-taking sessions sandwiched between the Bank of Japan’s surprise easing and the US Labour Market reports. In FX the post-payrolls squeeze lower continued in the US Dollar for much of the morning before reversing in the afternoon and continuing this morning. Given that the US Employment Reports showed a rather positive outlook it was only a matter of time before the US Dollar upswing resumed.
The US 10-Year Treasury Yield largely reflected a similar dynamic gaining late in the session to 2.36% after drifting lower for most of the session. There was an absolute dearth of top-tier data adding to the quiet session. The one big mover yesterday was Gold which gave back 1.7% of Fridays 2.5% gain and is back trading at $1150 this morning.
The markets are opening higher this morning on the back of the Nikkei which posted a 2% gain after speculation that PM Abe will delay a sales tax increase. Crude Oil is also lower after Kuwait’s Oil Minister said there will not be any cut in production.
Today is another very quiet day for economic releases with the only data of note due from either side of the Atlantic being US Small Business Optimism at 1.30 pm.
December S&P 500
The S&P traded in a very narrow range yesterday but still closed up another 0.3%. It has now closed higher in 13 of the last 18 trading sessions since the October 15 low for an incredible 225 handle rally. Interesting that the internals are not as strong as last week with the McClellan Oscillator falling 8 points yesterday to close at +162. The S&P is again opening stronger this morning on the back of the stronger Nikkei and is now trading at my 2038 sell level. I am now short and I will leave my stop the same at 2044. If I am stopped out of this position I will look to go short again in front of 2050 with a 2055 stop or I will use my 5 handle rule to to go short again with a stop just above whatever new high is put in. My only interest in buying this market is still on a dip to 2018/2023 with a 2012 stop.
Euro/USD
After I posted yesterday morning the Euro started to reverse last Friday’s large gains with the market eventually trading lower to my 1.2430 buy level. I am still long and I will leave my stop the same at 1.2380. If I am stopped out of this position I will look to go long again in front of the key 1.2350 support with a 1.2295 stop.
US Dollar Index
After I posted yesterday the Dollar Index started to rally with the market eventually taking me out of my 88.25 short position at 88.00 and I am now flat. I still believe the Dollar is due a decent correction and today I will again be a small seller from 88.20/88.40 with a 88.70 stop. I still do not want to be long the Dollar at this time especially with sentiment at extreme levels.
December DAX
The Dax is opening stronger this morning but I do not trust this market given both the situation in Ukraine and the awful economic mess that Germany is currently experiencing. This morning I will be a small seller from 9390/9430 with a 9460 stop. I still do not want to be long the Dax at this time.
December FTSE
The FTSE traded in a very narrow range and today I will still be a small seller from 6610/6630 with the same 6655 stop as the market is due a correction after the 9% rally in the last three weeks.
Dow Rolling Contract
The Dow has now closed higher in 14 of the last 18 trading sessions since it made its low on October 15 at 15855. Incredibly it has now rallied 1800 points in the last three weeks and at the very minimum is due for some sort of correction. I will continue with my strategy of selling spikes with a tight stop and today I will still be a small seller from 16630/16680 with a 16720 stop.
December BUND
No change as I am still a seller on any further rally to 151.40/151.70 with a 151.95 stop.
Gold Rolling Contract
I was very surprised by yesterday’s action in Gold especially with sentiment at lows not seen since 1987. After I posted yesterday morning the market continued to sell-off and eventually taking me out of my long 1140 position from last week at 1155 and I am now flat. Today I will again be a small buyer from 1142/1148 with a 1129 stop which is just below last week’s low as I still look for Gold to bottom here and eventually trade back above 1200.
Silver Rolling Contract
No change as I am still long from last week at 15.30 and 15.80 with the same 15.25 stop. Just like Gold, I was very surprised by the price action in Silver yesterday and if the market manages to rally back above 16.25 I will raise my stop to 15.75.
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