Yesterday was a quiet trading session where many traders were struggling to see a theme or pattern to work with. The lack of data, together with holiday time, has markets drifting and this is likely to last a few more days. Yesterday European equity markets caught up with the US markets from Friday and although US equities rallied they then drifted lower in the afternoon. US Bond Yields were relatively unchanged whilst European Bond Yields outside the periphery were a little higher. The US Dollar rose against the under performing Euro whilst Oil and Gold were a little lower.
Stanley Fisher, the Fed’s new Vice-Chairman, gave a speech entitled ‘the Great Moderation Moving Ahead’ an interesting but very open-ended speech which does not provide answers but we do get an idea of what he is thinking. Generally there was a lot of focus on the supply side of the economy, low labour supply, capital investment and productivity and whether these problems are structural or cyclical. He feels that Monetary Policy may prevent an issue becoming long-term or structural but deciding what is short or long term is crucial and an open question at present. As such he does not believe that the US Unemployment Rate is misleading in the way that Janet Yellen does.
Geopolitical risks continue to trickle through but this is been largely ignored by the markets. Russia has offered humanitarian aid to Ukraine but there remains questions about troops at the Border.
This morning on the economic front we have German ZEW Survey at 10.00 am and this is followed at 12.30 pm by the US NFIB Small Business Optimism Report.
September S&P 500
Yesterday, the S&P continued to build on last Friday’s ‘Key Day Reversal’. The trading plan worked well as shortly after I posted the market was trading at my 1937 sell level and after a nice sell-off in the late US trading session I was able to cover this position near the close at 1932 and I am now flat. As I mentioned yesterday the 1940/1950 is key resistance and it will take a break and close over 1950 for me to turn bullish and start to put on a more macro long position again. Today I will raise my buy level slightly to 1921/1926 with a 1917 stop. I will still be a seller on any rally to 1939/1944 with a 1948 stop.
Euro/USD
The Euro traded in a very narrow range yesterday and I am still a small buyer on any dip to 1.3345/1.3375 with a 1.3325 stop. My only interest in selling the Euro is on a rally to 1.3440/1.3470 with a 1.3490 stop.
US Dollar Index
The Dollar also continues to trade in a very narrow range. I do not want to chase the Dollar higher and I will leave my buy level the same at 81.10/81.30 with a 80.75 stop on any long position.
September DAX
The Dax plan also worked well yesterday as shortly after I posted it was trading at my 9190 sell level and after a nice sell-off near the New York close I was able to cover this position at 9160 and I am now flat. The ZEW Survey at 10.00 am this morning is going to be key for the Dax going forward. It is now 300 points higher than it was last Friday and has big resistance from 9200/9240 where I will be a seller with a 9275 stop. I will also raise my buy level to 9080/9110 with a 9055 stop as I do not want to risk to much on any long position given the tense geo-political situation in Ukraine.
September FTSE
No change as I am still waiting for the FTSE to make a break either over 6610 which it tested yesterday but then immediately sold off to close below 6500/6520 which should be bearish. For these reasons I am still going to stand aside and let the market make up its own mind which way we are going to break.
Dow Rolling Contract
The Dow traded heavier than both the S&P and the NASDAQ yesterday buy eventually traded up to my 16600 sell level. I am still short both only in small size and I will leave my stop the same at 16660 on this position.
September Bund
No change as I am still a seller on any rally to 149.60/149.90 with the same 150.15 stop.
Gold Rolling Contract
I am still long from last Friday at 1307 with the same 1299 stop.
Silver Rolling Contract
No change as I am still long from last week at 19.90 with the same 19.45 stop.
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