Yesterday was a deathly quiet trading session with very little for markets to move on. Investors seem to be bracing themselves for the main events later today, in particular Fed Chair, Yellen’s, speaking engagements in front of the US Congress and Senate this afternoon and then tomorrow when she addresses the House of Representatives.
Equity markets rose with Europe playing catch-up after last week’s sharper losses and of course the 1.2% rise in the DAX boosted by Germany’s World Cup win. The Euro Stoxx 50 gained 0.9% against the S&P 500’s 0.5% rise.
ECB President, Dragi’s, appearance at the European Parliament came and went without any waves. He highlighted the targeted LTRO Lending Programme for cheap bank funding tied to bank lending, to support the Euro-Zone Economy. Separately, this year’s IMF Article IV Consultation for the Euro-Zone was quiet and sober assessment highlighting downside risks to growth and weakness in banks’ balance sheets and limited policy space thus increasing vulnerability to further negative shocks.
This morning on the economic front we have UK CPI and PPI at 9.30 am. This is followed at 10.00 am by the German ZEW Survey. At 1.30 pm we have US Retail Sales and at 2 pm we have Business Inventories. This afternoon the Fed Chair will give her Semi-Annual Testimony to the Senate Committee.
September S&P 500
After I posted yesterday morning the S&P traded in a very narrow range on very low volume as the market waits for Fed Chair Janet Yellen’s Testimony to the Senate Committee this afternoon. None of my parameters were hit yesterday and I am still flat. If the market sells-off following her Testimony I will be a buyer on any dip to 1959/1963 with a 1952 stop which is just below last Friday’s low as Yellen will then address the House tomorrow and, depending on market reaction, she can change the tone of what she might say. My only interest in selling the market is on a rally to 1982/1987 with a 1991 stop.
Euro/USD
The Euro plan worked well as shortly after I posted it had a nice spike which enabled me to cover my 1.3600 long position at 1.3630 and I am now flat. It was interesting that following Dragi’s speech to the European Parliament that the Euro did not sell-off – this must be really frustrating for the ECB at this stage. Today I will again be a small buyer on any dip to 1.3560/1.3590 with a 1.3535 stop. I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still long from earlier this month at 80.30. Today I will raise my stop to 79.95.
September DAX
In hindsight I should have kept my long Dax position from last Friday as at that time it was trading at the bottom of its Bollinger Band and Williams Index. It is now trading nearly 200 points higher from last week’s low, again highlighting how important the Bollinger Band and Williams Index indicators are. Late yesterday the Dax rallied to my 9780 sell level and I am still short. I will raise my stop to 9825 on this position as 9800/9820 is key resistance going forward. I will also be a small buyer on any dip to 9700/9730 with a 9680 stop.
September FTSE
Just before posting yesterday, the FTSE started to rally hard to the upside and missed my entry point – I am still flat. The next key resistance is at 6710 and a break and close above here will be very bullish. On the other hand a break and close below 6660 will be bearish. With the FTSE trading in the middle of this range I am going to stay flat today until I see which way this market breaks.
Dow Rolling Contract
The Dow did indeed close the July ‘Open Gap’ at 17024 before trading up to my 17080 sell level. I am still short and I will raise my stop slightly to 17120 on this position. If I am stopped out I will be a more aggressive seller on any rally to 17150/17190 with a 17230 stop. I still do not want to be long the Dow at this time.
September BUND
No change as I am still a small buyer on any dip to 147.10/147.30 with a 146.90 stop. My only interest in selling the Bund is on a rally to 148.20/148.50 with a 148.75 stop.
Gold Rolling Contract
Gold had a really bad day yesterday as the market fell nearly $40 to bottom just in front of important support at 1300. I was stopped out of my long 1320 position at 1309 and I re-bought the market at 1303. I am still long but only in small size and I will leave my stop the same at 1289. I will look to exit this position on any rally back to 1314/1320.
Silver Rolling Contract
Silver also followed Gold lower yesterday but interestingly did not fall as hard. I was stopped out of my long 21.15 position for a small loss at 20.90 and I am now flat. Today I will still be a buyer on any dip to 20.45/20.75 with a 20.25 stop.
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