Oil prices have again been the stand out story over the last 24 hours with Brent now clearly below $50/bbl, having tested below $50 last week. Brent and WTI are both 5/5.5% lower since I marked prices yesterday morning. Nothing new fundamentally seems to have triggered the further step lower this week other than the absence of any break in the growing deadlock between OPEC and US Shale producers, on who is going to blink first and cut production.
Goldman Sachs and Societe Generale both took their knife to their Oil price forecasts, following the spot price lower, thus adding to the bearish mood. US Energy stocks fell 3% yesterday and this helped the Dow and S&P to close down 0.55% and 0.8% respectively on what was another wild trading session for the US stock market.
There wasn’t too much by way of economic releases yesterday. Atlanta Fed President Denis Lockhart was speaking late yesterday evening, expressing some caution and the need to be conservative on rate lift-off timing. He notes that wages will be a swing factor going forward and offered his outlook saying that he believes lift-off will be justified by the middle of 2015, believing inflation will rise gradually after a weak 2015 start.
This morning on the economic front we again have no data of note due from the Euro-Zone. At 9.30 am the UK will release its latest CPI, PPI and the ONS House Price Index. Finally at the earlier time of 12.30 pm we have the US NFIB Small Business Optimism.
March S&P 500
The S&P had another wild trading session yesterday and I certainly believe this theme is going to continue for the year. After I posted, the S&P was up 15 handles at 2048 in the Futures and five hours later just after the US markets opened the S&P was down 18 handles for a huge 33 handle move. Interestingly the KBW Banking Index, which has been persistently down so far this year, and at the day’s low print this Index had wiped out all of its 2014 gains. There is no doubt the behaviour of the banks reflects the building credit stress that is ongoing in the performance of high-yield debt. Remember the 2007/2008 crash was caused by the Banks and their exposure to the credit markets.
It is amazing that every time the S&P leaves a substantial ‘Open Gap’, that this Gap is nearly always filled and yesterday was no exception with the market eventually closing the 2020 ‘Open Gap’ from last week before attempting another rally. When the S&P started to drop hard I went long at 2024 before being very quickly stopped out of this position at 2017. Given the speed of the sell-off yesterday I used my ‘5 handle rule’ to go long again at 2020. Subsequently after the market continued to rally I covered this position at 2027 which in turn covered my earlier loss and I am now flat. So far the 2016 support level is holding the S&P and this level is now going to be important going forward.
Today I will again be a small buyer on any further dip to 2015/2020 with a 2011 stop. If the S&P breaks and closes below this key 2016 support level, I will then look to start to set up a short strategy. Given how close we are to this key support level I do not want to be short the market at this time.
Euro/USD
The Euro plan worked out well again yesterday as the idea of buying weakness with a tight stop is certainly paying dividends at this time. After I posted, the Euro was again getting hit. I went long at 1.1810 and after a nice rally I have been able to cover this position at 1.1850 and I am now flat. Given the extreme sentiment reading towards the Euro, I will again look to buy the Euro on any dip to 1.1780/1.1820 with the same 1.1745 stop.
US Dollar Index
No change as I am still short from last week at 92.70 with the same 93.20 stop. If the Dollar breaks 91.90, I will then lower my stop to 9250.
March DAX
The Dax plan worked out well yesterday as the 9640 key support level again held the market. Following the open lower in the US stock markets, the Dax traded lower to my 9660 buy level before reversing course near the European close which enabled me to cover this position at 9760 and I am now flat. Today I will again be a small buyer on any dip to 9660/9700 with a 9615 stop which is just below yesterday’s low. My only interest in selling the Dax is on a rally higher to 9870/9910 with a 9950 stop.
March FTSE
No change as I am still flat the FTSE as even though it is trading below 6480 this morning I am still not convinced by this move as so far all ‘sell-offs’ are being bought by the market. I am going to wait one more day before deciding my next move.
Dow Rolling Contract
The US markets produced another Hindenburg Omen yesterday which is the third one already this month. We also had nine of these Hindenburg Omen’s last month and this is a very worrying development for the stock markets going forward especially the way the Banking Index is getting hit. As it stands, I am very worried for the markets going forward as despite 7 years into this recovery and with Trillions of Dollars spent on QE we are still in a deflationary environment.
I am still flat the Dow and today I will lower my sell level slightly to 17740/17790 with a 17830 stop.
March BUND
When the equity markets started to sell-off yesterday afternoon the Bund rallied with the market eventually trading higher to my 156.90 sell level. I am still short and I will leave my stop the same at 157.30 which is just above the contract highs made earlier this month.
Gold Rolling Contract
The expected rally in Gold is now occurring but unfortunately without me on board as it just missed my 1216 buy level with a 1218 low before rallying. If Gold can again close over 1230 this evening, it will be very positive. Today I will raise my buy level to 1224/1232 with a 1216 stop which is just below yesterday’s low.
Silver Rolling Contract
No change as I am still long from last week at 16.30. Silver has finally broken the key 16.70 resistance level and just like Gold, if it can close over this level it will see me look to add to my long position.
Recent Comments