There were no big moves in the markets yesterday as we count down to the FOMC announcement tomorrow evening. European equity markets were hit by weak data and this weighed on US markets after they opened. However the Dow rallied late on in the trading session to close 0.3% higher whilst the S&P closed down 0.1%. The big mover was the previously strong NASDAQ which closed down 1.1%, led by falls in Facebook and Microsoft.
The OECD released its interim economic assessment which updates its May economic report. The basis of this report shows that the world economies in general continue to expand but at a slower pace. The markets are trading in narrow ranges ahead of the Fed tomorrow and today’s trading session is likely to continue in this vain. Asian stock markets are continuing their recent slide with the markets down this morning for the ninth consecutive day, making this the longest losing streak since 2002.
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 very important German ZEW Survey. At 1.30 pm we have US PPI and then finally, at the later time of 9 pm, we have the latest US TIC flows which will be closely watched by the FX markets to see the level of funds which have piled into the US Dollar over the last month.
September S&P 500
The S&P plan worked well yesterday as shortly after I posted the market traded up to my 1986 sell level before having a nice sell-off which enabled me to cover this position at 1980. I am still short my small macro position at 2001 from last week and I will leave the break-even stop on this trade. I expect the market to trade in a tight range today with an upward bias, ahead of tomorrow’s FOMC. For this reason I will raise my buy level to 1975/1979 with a tight 1971 stop. My only interest in selling the market is on a rally to 1989/1993 with a 1996 stop.
Euro/USD
Shortly after I posted yesterday morning the Euro traded down to my 1.2920 buy level. I am still long as the currency has been declining now for 4 months and with sentiment dropping to such an extreme level, one that has coincided with at least a short term low in prior periods, it usually pays to be looking for opportunities for a trend reversal. I will raise my stop on this long position to 1.2885 and if I am stopped out I will be a more aggressive buyer in front of 1.2850 with a 1.2820 stop.
US Dollar Index
The US dollar rallied to my 84.50 sell level after I posted yesterday morning. I am still short and I will leave my stop the same at 84.90
September DAX
The strategy of buying the Dax on any dip continues to work well. The market started to rally just before I posted yesterday morning which enabled me to cover my 9610 long position from last Friday at 9660 and I am now flat. Today I will again be a buyer on any dip to 9560/9590 with a tight 9535 stop. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer on any further dip to 9450/9480 with a 9435 stop.
September FTSE
My long 6780 FTSE position from yesterday morning also worked out well as the market followed the other European Indices higher, after I posted, which enabled me to cover this trade at 6810 and I am now flat. I still like the FTSE especially if we continue to hold the key 6750/6775 support zone. For this reason I will again look to buy a dip to 6760/6780 with a 6735 stop.
Dow Rolling Contract
The Dow plan also worked well yesterday as the market rallied to my 17000 sell level after I posted. Shortly after the US markets opened the Dow was hit to the downside which enabled me to cover this short position at 16960 and I am now flat. It is now clear that the 16980/17040 is a key level for the market going forward and I have to respect that the Dow managed to close back over 17000 last night. Given that tomorrow is the FOMC announcement I do not want to be short the Dow today and I will look to buy any dip to 16930/16970 with a 16890 stop as I expect the market to have at least a have small rally ahead of tomorrow.
December BUND
At last the Bund worked out for me yesterday after what has been a frustrating last 10 days as the market had a nice rally which enabled me to cover my long 147.80 position at 148.30 and I am now flat. Today I will again be a small buyer on any dip to 147.80/148.05 with a 147.60 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still long Gold at 1229 with the same 1218 stop. The Daily Sentiment Index for Gold has declined now to 7% bulls which is 2% from the December 31 2013 low when Gold fell to 1189 before mounting a huge rally. Gold could well have one more wash out to the down side but a counter trend rally is close to happening, in my opinion.
Silver Rolling Contract
No change as I am still long from last week at 18.60 with the same 18.25 stop.
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