Hard to know where to start this morning with extremely whippy and severe movements across nearly all asset classes in the past 24 hours. Oil, which opened on a very positive note by being up 3%, reversed course during the day to close down anther 4%. The fall in Oil prices weighed on Equity markets led by the Geman DAX which fell nearly 3%. The fall in European equities was not helped by comments from the Bank of Greece Governor who said that the ‘Greek crisis has taken on serious proportions’. This led to another dramatic fall in US stocks with the Dow falling 300 points from its opening highs to eventually close down 0.5%. US data was again mostly strong with the exception of the regional Empire State Manufacturing Report for December which printed 57 versus 58 expected. However Industrial Production rose much stronger than expected, at +1.3%, with Capacity Utilisation the highest since 2008. The NAHB Home Builders Index gave up a point to a still strong 57.
In the Currency World, the selling of mainly Oil linked currencies looks to have spread to emerging markets with some EM currrencies falling to record lows against the US Dollar. The Turkish Lira is 3% weaker aided by by a rising political risk premium. However that is nothing compared to the Russian Ruble which fell another 10.8% and is now down 49% for the year while the Indonesian Rupiah weakeened to a 16 year low against the US Dollar.
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 latest German ZEW`Survey. At the later time of 1pm we have German and Euro-Zone Manufacturing/Services PMI. At 1.30 pm we have US Housing Starts and Building Permits. Finally at 2.45 pm we have US Manufacturing PMI.
December S&P 500
This is the last day that I will be trading the December Contract as tomorrow I willl roll to the March Contract.
The S&P plan worked out well yesterday as after I posted the S&P rallied to my 2015 sell level which enabled me to cover my 2001 long position from late Friday and also go short at at this level. Subsequently the S&P plunged on the weaker Oil prices which enabled me to cover this short position at 1999. The S&P continued to plunge with the market eventually hitting a 1981.50 low which saw me go long at 1988. Following a nice rally off the lows I was able to cover this latest long position at 1997 and I am now flat. Following the 8 Hindenburg Omens in 9 trading sessions the S&P is now very oversold as shown by the McClellan Oscillator which closed with a negative reading of -260. The MO printed a similar reading just before the market made its bottom on October 15, so the risk reward is to look to go small long here especially with the FOMC Meeting tomorrow. The Meeting promises to be very interesting especially with the hammering that Crude has taken since the last Meeting. The S&P is now trading at the bottom of its Bollinger Band and Williams Index after six consecutive down days and is due a bounce.
Today I will again be a small buyer from 1983/1988 with a 1975 stop. If I am taken long and subsequently stopped out I will use my 5 handle rule to go long again with a stop put in at whatever new low is printed. Given how oversold the S&P is currently trading I do not want to be short the market at this time.
Euro/USD
The EURO plan also worked out well yesterday as after I posted the Euro traded lower to my 1.2420 buy level before having a nice rally which enabled me to be able to cover this position at 1.2470 and I am now flat. It is only a matter of time before the Euro breaks this key 12480/1.2520 resistance level and trade higher. Today I will again be a buyer on any dip to 1.2410/1.2440 with a tight 1.2385 stop. I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still short at 88.65 with the same 89.05 stop.
December DAX
Yesterday was another great example of how important it is to have stops in the market. After I posted yesterday morning the Dax which was trading at 9660 reversed course and started to plunge as the market hit my 9560 buy level before stopping me out of this trade literally a few minutes later at 9515 and I am now flat. The Dax traded down to a 9300 low before finding some support but with Oil prices again weaker this morning the Dax is again getting hit hard. The next big support for the Dax ìs from 9200/9250 and I would expect this level to provide decent support. Just like the S&P above the Dax is trading outside its Bollinger Band and Williams Index and today I will be a small buyer from 9210/9260 with a wider 9140 stop. I have to use a wider stop given the volatility.
December FTSE
The FTSE has yet again been the downside leader for the major Indices as the market refused to participate in the huge move up from the Ocober 15 low that the other main Indices experienced. It is a very long time since I have seen the amount of two way volatility for the FTSE that happened yesterday. After I posted, the FTSE continued to trade higher which enabled me to cover my long 6270 position at 6340. Subsequently the FTSE plunged with the market dropping to my 6240 buy level before stopping me out of this position near the Cash close at 6190. Then between 4.40 pm and 5.00 pm the FTSE made a new low at 6120 before trading back to 6200. One thing that we traders have to remember is that liquidity is going to dry up for the Christmas/New Year period and this will inevitably lead to increased volatility. Given how oversold the FTSE is, today I will be a small buyer from 6090/6140 with aa wider 6030 stop.
Dow Rolling Contract
My good run in the Dow came to an end yesterday as after the market had been up hard after the US markets opened the Dow reversed course which saw me go long at 17270 only to be stopped out of this trade àt 17190 and I am now flat. The Dow is extremely oversold and I would expect a decent bounce ahead of the Yellen press conference tomorrow evening. For this reason I will be a small buyer on any further dip to 17090/17140 with a wider 16990 stop.
March BUND
No change as I am still short at 154.70 with the same 155.05 stop.
Gold Rolling Contract
Gold was unable to hold the 1205/1210 support level as the market fell 3% yesterday. I was stopped out of the other half of my 1215 long position for a small loss at 1205. Gold subsequently traded lower to my 1193 buy level, and I am still long with the same tight 1183 stop.
Silver Rolling Contract
Silver got hit hard yesterday with the precious metal closing down a hefty 5%. In the process I was stopped out of my long 15.10 position at 16.50 and I am now flat. Today I will again be a small buyer on any further dip to 15.40/15.90 with a 14.95 stop.
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