Markets ended the day stronger as a relief rally ensued after last week’s dramatic sell-off. Equity markets were stronger across the board with the S&P and German DAX both closing up over 1%. Bond Yields were higher whilst Gold lost some of its safe-haven appeal and was lower. Most other commodities ended the day lower with the exception of Copper.
The US data did not meet expectations in all cases but showed improvement in general. Industrial Production came in very strong with prior months also revised higher showing a rebound post the severe weather. The Home Builder’s Index (NAHB) was not as positive, at 47 against 50 expected, whilst the Empire Survey of Manufacturing came in soft but better than some had feared given the severe weather conditions in New York over the last two months.
In Europe the final CPI Inflation outcome was lower than the initial result, which may raise concern about the ECB’s outlook with this series now at its lowest since 2008. In the Crimea, Russia has said it will negotiate on Ukraine as it takes Crimea under its wing. The US and Europe imposed sanctions on a list of prominent Russians but not on President Putin’s inner circle as the markets wait on Putin’s speech to Parliament today.
This morning on the economic, front we have the very important German ZEW Survey at 10.00 am. This is followed at 12.30 pm by US CPI.Housing Starts and Building Permits.
March S&P 500
This will be my last day trading the March Contract as it expires on Friday, instead I will roll to the June Contract tomorrow. The S&P had a huge rally yesterday on the Crimean news with the markets then helped by the much stronger Industrial Production data. In the process we have another Gap left from last Friday’s close at 1839 to yesterday’s US low of 1852. As I mentioned yesterday this not a week that I like to be short given the fact we have the FOMC Meeting tomorrow at 6 pm followed by Fed Chair, Janet Yellen’s first press conference.
The S&P plan worked well yesterday as shortly after the US opened it traded up to my 1859 sell level before we had a small sell-off which enable me to cover this position at 1854 and I am now flat. Today I will be a buyer on any dip to 1846/1850 with a 1843 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of the key 1836 support with a 1829 stop. My only interest in selling the S&P is on a rally to 1864/1868 with a 1871 stop.
Euro/USD
The Euro continues to be a ‘buy on dips’ and this trend will continue until we get a sell extreme. The market traded up to my 1.3940 sell level yesterday and after a small sell-off overnight I was able to cover this position at 1.3920 and I am now flat. It looks like it wants to take out the key 1.4000 resistance level and this is the reason I have covered my short position this morning. The Daily Sentiment Index for the Euro is still over 90% bulls and today I will be a seller on any rally to 1.3980/1.4010 with a 1.4030 stop. I will also be a small buyer on any dip to 1.3850/1.3880 with a 1.3830 stop.
US Dollar Index
No change as I am still long from last week at 79.45 I will leave my stop the same at 78.80.
March DAX
The DAX plan worked out okay as the market traded up to my 9188 sell level and after a nice sell-off I was able to cover this position at 9148 and I am now flat. The key resistance level for the Dax comes in at 9275 and as long as we sty below this level it is bearish. The market has had a nice 300 point rally off the bottom of its Bollinger Band and Williams Index as indicated last Friday. Today I will be a small buyer on any dip to 9080/9110 with a 9060 stop. I will also be a seller on any rally to 9220/9250 with a 9280 stop.
March FTSE
The FTSE is trading weaker this morning on the back of Gold being lower as we have a lot of Mining stocks in the FTSE. Today I will lower my buy level to 6510/6530 with a 6490 low which is just below last week’s low. I still do not want to be short the market at this time.
Dow Rolling Contract
As expected yesterday the Dow had a very strong rally as the market had been down for the previous 5 straight trading sessions which is the first time that this happened in almost 2 years. None of my parameters were hit yesterday and I am still flat. The Dow also closed at its 14 year trendline and it will be interesting to see if we can take out this resistance level or sell off again. Today I will raise my buy level to 16140/16180 with a 16090 stop. Given that it is contract expiration week and the fact we have the FOMC Meeting announcement tomorrow I do not want to be short the Dow at this time.
June BUND
No change as I am still a buyer on any dip to 142.90/143.20 with a 142.75 stop.
Gold Rolling Contract
After I posted yesterday morning Gold tried to rally but just ran into a brick wall as the equity markets rallied and it lost some of its safe-haven status. I am still flat and today I will be a small buyer on any further dip to 1343/1351 with a 1339 stop. My only interest in selling Gold is on a rally back to 1385/1392 with a 1396 stop.
Silver Rolling Contract
I am glad that I have not chased Silver higher over the last few days as it is approaching my buy level this morning. I will leave my buy level the same at 20.65/20.95 with a 20.40 stop on any long position.
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