Stock markets rebounded strongly off their opening levels yesterday morning after more than $500 billion was wiped from Global markets after concern that Europe would plunge back into crisis. There was general panic in response to the Cypriot deal but now after some reassessment markets are realizing that it is a special case and the risk of contagion is low.Japan’s Nikkei has advanced 1.9% this morning after the Yen weakened against the US Dollar. The Dow Industrials rebounded off opening lows to close down 0.4% after reaching a record high last week. The FOMC is scheduled to begin a two day meeting today. The committee, in December, agreed to link its zero-interest rate to thresholds for unemployment and inflation so investors and households know what conditions will prompt the Central Bank to consider raising borrowing costs. In an interview this morning Lowe from the Australian Central Bank said he was very surprised at recent developments in Cyprus, with small depositors been taxed, as something that had not being countenanced before. He said that with many deposits insured this move has broader implications and raises the issue of the integrity of deposits elsewhere. What would Bank depositors think elsewhere?
Today is a very busy one on the economic front. This morning we have UK PPI and the ONS House Price Index, followed in the Euro-Zone by Construction Output. At 10.00 am we have German Zew Survey which is always a market mover. Finally at 12.30 pm we have US Housing Starts.
June S&P 500
It is good to see volatility back in the markets after what has been a very quiet month so far. The S&P did manage to almost close its down Gap yesterday as we reached a high of 1552.50 before sellers returned. I took profit at 1545 on my 1532 long position and I went short at 1551. I have covered this position this morning at 1547 as I do not want to be short ahead of the two day FOMC meeting which is starting this afternoon.. Today I am a buyer on any dip to 1540/1545 with a 1537 stop. Until this meeting is out of the way I do not want to be short the market.
June DOW
The Dow had a huge rebound off the lows made early Monday morning and traded up to my 14430 sell level with a 14448 high. I took profit on this short position last night before the close at 14385 and I am now flat. Just like the S&P I do not want to be short ahead of the FOMC meeting and this morning I will be a small buyer on any dip to 14350/14380 with a 14320 stop.
June BUND
The Bund finally traded down to my 14390 buy level. I will leave a break-even stop on this position and I will look to take profit on any rally to 14425/14440. If I am stopped out I will look to go long again on any dip to 143.40/143.65 with a 143.25 stop.
Euro/USD
The Euro also worked very well as after I posted yesterday morning we traded down to my 1.2920 buy level. I took profit at 1.2965 and I am now flat. As I have been saying for the last two weeks this 1.2875/1.2900 is very important support as a break and close below here will be very bearish.Today I will look to go long in this area with a 1.2860 stop.
GBP/USD (Cable)
Cable has traded very well off the 1.4825 lows made last week as rumours of large investment from Qatar continues to circulate. If we get bad No’s from the UK this morning I will look to go long Cable on any dip to 1.4990/1.5020 with a 1.4965 stop.
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