Given the news that greeted the markets since I last updated early yesterday morning – that talks between Greece and her creditors in Brussels on Sunday had collapsed after just 45 minutes – we are probably not alone in thinking that the single European currency would have been lower than when I last posted. Not so. EUR/USD sits slightly up on the day (+0.13%) albeit eclipsed by the AUD (+0.45% to 0.7765) and GBP (+0.26%). Whether complacency/belief an 11th (or 13 th?) hour political deal will be struck on Greece (isn’t it always?) or that Greek default and potential Grexit will be a good thing for the rest of the Eurozone, is hard to say.
For anybody following my New Platinum Service it made 285 points yesterday. Last week it made 600 points and the previous week the total was a 955 point gain.
What we can say is that other markets are not behaving with quite the same nonchalance; European equities had another bad day (Eurostoxx 50 – 1.85%), US Treasury yields are lower vs. Friday night’s close, Bund yields are slightly lower and peripheral Eurozone bond yields have blown out (Greece by 37bps at 10 years, other Eurozone peripheral bonds by between 14 and 21bps). And EUR FX volatility, which very often gets driven by spot market moves, not vice versa, has risen to its highest levels since mid-Jan, at 3-months now 50% higher than its Feb. lows. Helpful to the cause of relative EUR stability overnight has been confirmation from the ECB that it is not currently minded to curtail Greek banks’ access to the Emergency Liquidity Facility – implying this will ultimately be a political decision – and Standard & Poor’s saying that neither missed payments to the IMF at month end nor to the ECB next month, would constitute so called ‘Selective Default’ (this because the debt in question pre-dates the 2012 debt restructuring agreement – the ‘PSI’).
The discouraging news is that Greece remains adamant it will not budge on pension cuts, and the IMF that it must, while conciliatory gestures from the IMF on debt relief for Greece remains taboo (publicly at least) in German circles. Conceding on pensions may bring down the Greek government, while conceding on debt relief will greatly damage Angela Merkel’s credibility among her own electorate. Neither side look set to blink, and the chances of a political breakthrough at Thursday’s Euro Group Finance Ministers meeting currently looks slim.
Elsewhere overnight US data has been mixed, with industrial production disappointing (-0.2% vs. +0.2% expected) as too the Empire manufacturing survey (-1.98 from +3.09 and +6.0 expected). Market reactions were partly offset by stronger than expected housing data. The NAHB Housing Market jumped to 59 from 54 and above the 56 expected, resulting in the US Dollar ending the day slightly weaker across the board.
This morning on the economic front we have German CPI at the earlier time of 7.00 am. This is followed at 9.30 am by UK CPI, PPI and the ONS House Price Index. At 10.00 we have the German ZEW Survey for both Current Situation and Expectations. Finally at 1.30 pm we have US Housing Starts and Building Permits.
June S&P 500
My long 2081.50 S&P position worked well yesterday as shortly after the European Markets had opened down the S&P had a nice spike which enabled me to cover this position at 2089 as outlined in my new Platinum Service and I am now flat. I still do not want to be short the S&P as outlined yesterday especially with the two day Fed Meeting starting this afternoon and concluding with the Yellen press conference tomorrow Evening. Today I will again be a small buyer on any dip to 2074/2080 with a 2070 stop which is just below yesterday’s low. Again if I am taken long and subsequently stopped out of this position I will use my ‘5 Handle Rule’ to go long again with a stop below what ever new low is printed.
EUR/USD
Unfortunately the Euro just missed my 1.1180 buy level by 8 points before having a nice 100 point rally and I am still flat. At least we are not short as the idea is still to buy dips especially as long as we can stay over the 1.1050 reaction low from the last Monthly Jobs Report in early June. Today I will raise my buy level slightly to 1.1210/1.1240 with a 1.1175 stop which is just below yesterday morning’s low print.
September Dollar Index
The Dollar worked out well yesterday as shortly after the European Markets opened the Dollar was trading at my 95.70 sell level before having a nice sell-off which enabled me to cover this position at 95.30 as outlined in my Platinum Service and I am now flat. Today I will again be a small seller on any rally higher to 95.40/95.80 with a 96.20 stop.
June DAX
Shortly after the European Markets opened the DAX thankfully was trading near the bottom of my buy range at 11020. I am still long but only in very small size and today I will leave my stop the same 10950. If I am stopped out I will still be a more aggressive buyer in front of 10900 with a wider 10780 stop.
June FTSE
No change as I am still long at 6740 from early yesterday morning with the same 6695 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 6675 with a 6640 stop.
Dow Rolling Contract
My Dow plan also worked well yesterday as shortly after the US Markets opened the Dow traded lower to my 17740 buy level. Subsequently the Dow had a nice rally which enabled me to cover this position at 17790. All my Platinum Members received a separate email at 6.00 pm to cover both their Dow and Bund positions at the same time. I am now flat and just like the S&P above I still expect the Dow to have a rally ahead of tomorrow’s FOMC decision despite the fact that we have a new confirmed Hindenburg Omen on the clock. Today I will again be a small buyer on any dip to 17680/17735 with a 17640 stop.
September BUND
Thankfully the Bund opened at the highs of the day and above my sell level which enabled me to go short at 151.60. Subsequently the BUND had a nice sell-off which enabled me to cover this position at 151.20 and I am now flat. Today I will again be a seller on any rally higher to 151.40/151.80 with a 152.10 stop. As I mentioned yesterday, the upside for the BUND is limited given the fact that so many Funds are caught long well above the market and are now sitting on some pretty significant losses.
Gold Rolling Contract
My Gold plan worked very well yesterday as shortly after the markets opened Gold had a nasty sell-off to an 1173 low which enabled me to go long at 1178 before the market had a nice rally which enabled me to cover this position at 1187 and I am now flat. Today I will again look to buy Gold on any move lower to 1174/1181 with a tight 1165 stop.
Silver Rolling Contract
Finally Silver had a nice rally which enabled me to cover my long 15.90 position at 16.30 which was the high of the day and again a level outlined to my Platinum Members and I am now flat. Today I will again be a small buyer on any dip to 15.70/16.00 with a 15.40 stop.
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