Equity markets have powered ahead on both sides of the Atlantic over the past 24 hours, led by Germany’s DAX. Unlike most stock Indices, the DAX is flattered by the inclusion of dividend payments in its calculation. Nevertheless, it was less than a month ago on Feb 20 that we were lauding the break above 11,000 for the first time. Yesterday soon after the open it crossed and held the 12,000 barrier for a cool 2.24% gain on the day and is now up an incredible 24% YTD. In contrast the S&P 500 is up less than 1% YTD, including the 1.35% gain at the close last night. This is the impact what ECB QE and a sharply lower EUR/USD can have.
Another trio of downside US Economic data surprises look to have been supportive of US Bond markets yesterday as well as contributing to a retracement of most of Friday’s US Dollar gains. 10 Year Treasuries are 2.5 bps lower at 2.09% while the narrow Dollar Index closed 0.7% lower.
The standout release was February Industrial Production, less so for the 0.1% monthly gain versus 0.2% consensus, as the big downward revision to January, now put at -0.3% from +0.2% previously. A surge in utilities output due to the severe East Coast weather was unable to compensate fully for a 2.5% drop in mining output, while manufacturing also looks to have suffered. Whether the latter was from the weather or the impact for US Dollar strength is a topic the Fed will no doubt be debating when it convenes this afternoon. The upshot if the production data is that many US economists tracking estimates for Q1 GDP, are struggling to generate a forecast above 2%.
Also disappointing expectations were the NAHB Housing Index which printed 53 versus 56 expected and is now back to the level of mid-2014, while the Empire Manufacturing Index came in at 6.90 versus 7.78 expected. The effect of yesterday’s data releases is to pull the Citibank US Economic Surprise Index down another 3.7 points to -63.8 which is the lowest level since Mid-July 2012.
This morning on the economic front we have the very important German ZEW Survey at 10.00 am. At the same time the Euro-Zone will release its latest CPI. Finally at 12.30 pm we have US Housing Starts and Building Permits.
March S&P 500
The idea of not to be short at the beginning of a FOMC Meeting week certainly proved to be the case yesterday with the S&P rising over 25 handles from where I marked prices 24 hours ago. The US markets rose on expectations that the Fed will not raise rates for a while yet especially after the very weak economic data that was released yesterday. This week is further complicated by the fact that we have the March Futures and Options Expiration on Friday and yet again the low in the market has so far been put in on the Thursday/Friday in the week ahead of the Quarterly Expiration with last Friday’s 2040 low print. I am still flat the S&P as thankfully I had no sell level yesterday. I have to respect the fact that the S&P managed to close over the key 2067/2072 level and today I will be a small buyer from 2063/2068 with a 2058 stop. As you know all ‘Open Gaps’ get filled at some stage in the market and yesterday the 2062/2077 ‘Open Gap’ from last week was finally filled. Interestingly yesterday’s move higher has left another ‘Open Gap’ from last Friday’s close at 2047.5 to yesterday’s Chicago low at 2062. I still do not want to be short the S&P at this time.
EUR/USD
Unfortunately the Euro had a significant rally yesterday but did so without me been able to get a long position on board and I am still flat. Today I will raise my buy level to 1.0520/1.0565 with a 1.0495 stop. Given how oversold the Euro is, I do not want to be short the market at this time.
US Dollar Index
No change as I am still a small seller on any further rally to 100.30/100.70 with a 101.10 stop.
March DAX
Thankfully I was not short the market for yesterday’s incredible 300 point rally and I am still flat. The DAX is extremely unbalanced after its 24% rally so far in 2015 and today I will only raise my buy level slightly to 11920/11980 with an 11870 stop. I will also be a small seller in front of 12400 with a tight 12470 stop.
March FTSE
The FTSE plan worked out very well yesterday as shortly after I posted the FTSE was trading at my 6760 buy level. This morning the FTSE is finally playing some catch-up with its European partners and this has enabled me to cover my long position at 6825 and I am now flat. The fact that we are trading over 6800 is short-term bullish and today I will again be a buyer on any dip to 6785/6805 with a 6765 stop.
Dow Rolling Contract
The big news yesterday was that we got a confirmed Hindenburg Omen as we got a second HO yesterday. This means that we now have three confirmed Hindenburg Omens’ since last December. This is not a healthy situation for the Dow at this time but as I mentioned over the last few days that this week is not the week to be short ahead of the FOMC Meeting and press conference tomorrow and the Triple Witching Expiration on Friday. I am still flat the Dow and today I will raise my buy level slightly to 17770/18820 with a tight 17720 stop. I will also be a small seller in front of 18010 with an 18060 stop.
June BUND
No change as I am still flat the Bund with the same 158.15/158.40 sell level. If I am taken short I will leave my stop the same at 158.60.
Gold Rolling Contract
After I posted Gold traded lower to my 1152 buy level. I am still long and I will leave my stop the same at 1139.
Silver Rolling Contract
Silver has literally stopped trading over the last two weeks. I am still long at 15.75 with the same 14.90 stop.
Recent Comments