Lacking fresh data or major events, yesterday was a relatively subdued trading session where with a couple of exceptions markets have partially – or more than fully – retraced some of the moves we saw in the aftermath of last Friday’s US Employment Report. Thus equities are mostly lower with the main US Indices closing down 0.5% following similar weakness in Europe and Bond Yields are smartly higher – 10 Year US Treasuries +13bps to 2.28% and 10 Year German Bunds +10 bps to 0.65%.
The latter is despite a fresh rise in Greek Yields (+20bps) amid reports of no substantive progress in the talks currently in train between Greece and her EU Creditors. Reuters reported late yesterday afternoon that Greece had executed an order for EUR750mn payment due to the IMF today, though this looks to be coming out of cash otherwise designated to pay pensions and wages later this month.
The only two currencies worth mentioning in terms of action over the past 24 hours are Sterling and the New Zealand Dollar. The post-election rally in all things Sterling continued with no reaction to the widely expected no-change decision from the Bank of England. NZD bears meanwhile continued to gorge on the now seemingly consensus expectation that the RBNZ will be cutting rates, starting as early as next month. NZD/USD that was under pressure within minutes of yesterday’s Wellington open has continued with the currency loosing over 2% in the past 24 hours.
This morning on the economic front we have UK Industrial Production at 9.30 am. This is followed at 2.00 pm by US NFIB Small Business Optimism. Finally at 3.00 pm we have the JOLTs Job Openings which is a series favourite of Fed Chair Yellen. Later at 5.45 pm the Fed’s Williams who is the San Francisco President speaks at the New York Association for Business Eco. His view on how last Friday’s Employment Report sits with his last stated Fed view that July or perhaps still June was a possible start date for Fed tightening will be worth watching.
June S&P 500
The whip/saw action in the S&P continued yesterday as the market yet again rejected the now key pivot and resistance at 2108. The reason this level is so important is that an upside break through here and especially if we can close over 2118 opens up the possibility of a move higher to 2190/2210 and that is why we are getting so much whippy action around the 2100 level. On the other hand a break and close below 2065/2070 and especially if we close below 2035 opens up the possibility of a move lower to 1860. Unfortunately after I posted yesterday morning the S&P traded lower to my 2101 buy level before stopping me out of this position at 2094 and I am now flat. The S&P has short term support from 2082/2087 and today I will be small buyer in this area with a tight 2078 stop. I still do not want to be short the market at this time until we break and close below the 2065/2070 now major support level.
EUR/USD
The Euro plan worked well yesterday as shortly after I posted the Euro was trading at my 1.1160 buy level before having a nice rally this morning which has enabled me to cover this position at 1.1210 and I am now flat. It will be really interesting to hear the speech from San Francisco Fed President Williams this evening to see if he changes his mind as to when the first rate hike will take place. My view is still that it will be at least the end of this year of early 2016 before we see the first hike and if this is correct then the Dollar is going to sell off. Today I will again be a buyer on any dip to 1.1160/1.1190 with a 111.25 stop which is just below yesterday’s low. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1.1080 with a 1.1025 stop.
June US Dollar Index
My short 95.30 Dollar Index position from early yesterday morning has worked out today with the Index now trading at 94.70 which has enabled me to cover this position at 94.85 and I am now flat. Today I will again be a seller on any rally higher to 95.10/95.40 with a 95.65 stop.
June DAX
Luckily the DAX missed my 11610 buy level before the market closed last night and is opening sharply lower this morning on more Greek woes. My own view is that Greece will some- how cobble together a deal as the ramifications of not getting a deal are too great. With this view in mind I will again be a small buyer on any further dip to 11430/11490 with a wider 11395 stop. I still do not want to be short the DAX at this time.
June FTSE
The FTSE plan also worked well yesterday as shortly after I posted the FTSE was trading at my 7040 sell level before having a nice sell-off which enabled me to cover this position at 6995 before the close last night. Unfortunately the FTSE has opened well lower this morning which has seen me go long the market at 6960 only to just stopped out of this trade at 6925 and I am now flat. Obviously the feel good factor of the Conservative Election victory has now evaporated into thin air as the focus now returns to the economy. The 6860/6890 area should act as good support as this is the level where the market gapped higher once the exit polls were announced last Thursday evening and today I will again be a buyer in this area with a 6840 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my 18240 sell level with a 18200 high before having a 170 point sell-off and I am still flat. As most members know I am really bearish of the Dow but just like the S&P above the big question is the Dow going to have one more decent rally higher before we start this mega bear market. My strategy all year has been to sell rallies with a tight stop and whether we get this initial rally or not I will continue with this plan. Today I will lower my sell level to 18110/18170 with a 18210 stop. Naturally I still do not want to be long the Dow at this time.
June BUND
Unfortunately the Bund started to move lower as soon as I posted yesterday morning and while we did get an afternoon rally the market stopped shy of my 154.80 sell level at 154.55 before having another nasty sell-off and this has continued this morning with the Bund trading as low as 152.83. Today I will lower my sell level to 153.75/154.15 with a 154.35 stop. If the Bund tests last Thursday’s low print at 151.45 I will be a very aggressive buyer at this level with a 150.90 stop.
Gold Rolling Contract
No change as I am still a small buyer from 1170/1178 with a 1163 stop.
Silver Rolling Contract
No change as I am still long at 16.40 with the same 15.90 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 15.60 with a 15.25 stop.
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