Yesterday was another quiet trading session with volatility levels remaining low which provided a lethargic theme all round. US equities ended the day higher whilst European markets were lower. US Bond Yields were mostly higher whilst the US Dollar was a touch lower as the Euro, for a change, outperformed.
The markets lack of direction was not helped by having no economic data although there was more chatter from the ECB, this time from Mersch, who only reiterated what we had already heard ‘that the ECB are considering cutting the Deposit Rate to negative and implement a greater loan scheme’. A Der Spiegel article also suggested that the ECB were not inclined to buy Bonds at this point. Meanwhile the Fed’s Williams was hawkish as usual but did not alter the path of Fed expectations.
Currency volatility is at the lowest that I can remember since I started trading as the world is awash with developed market stimulus which is allowing for more leeway in risk assets as cost of capital is low and less reliant on the usual channels that are driven by economic growth and risk premia. This means that market volatility is low and may not alter until Monetary Policy changes and thus leads to a build up in risk in unusual places as markets are not pricing in risk adequately.
This morning on the economic front we have UK CPI and PPI followed by the ONS House Price Index. Unfortunately we have no data due from the Euro-Zone or the US today.
June S&P 500
The S&P plan worked out well yesterday as shortly after I posted the equity markets started to fall on the news that Pfizers attempt to buy Astra-Zeneca was likely to fail. The S&P fell hard on this news which enabled me to cover my short 1877 position at 1869 and I am now flat.. The market made a low at 1865.75 just missing my 1864 buy level before having a nice rally after the US markets opened and in the process closed over the important 1878/1880 resistance level. This area should now act as good support as I am still looking for the S&P to finally break the key 1900 level before running into trouble. Worryingly, volume yesterday was the second lowest of the year.
Today I will be a small buyer from 1875/1880 with a 1871 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1860 with a 1855 stop. I do not want to be short the S&P at this time.
Euro/USD
The Euro plan also worked okay as the market had a nice rally after the US markets opened which enabled me to cover my long 1.3695 position from last Friday at 1.3725 and I am now flat. I still like the Euro especially ahead of the key ECB Meeting next month and today I will again be a buyer on any dip to 1.3670/1.3695 with a 1.3655 stop. I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still a small buyer on any dip to 79.50/79.80 with the same 79..25 stop.
June DAX
By the time I posted the DAX was trading at the lower end of my buy range which allowed me to go long at 9560 (the market low was 9536) and after a very nice rally after the US markets opened I was able to cover this position at 9630 and I am now flat. I still like the Dax as long as we can stay over the key 9465 support level. Today I will raise my buy level slightly to 9560/9600 with a 9530 stop which is just below yesterday’s low. If I am taken long and subsequently stopped out I will be a more aggressive buyer from 9460/9490 with a 9440 stop. I still do not want to be short the Dax at this time.
June FTSE
Unfortunately I was stopped out of my long 6820 position near the lows of the day at 6795 on the Astra Zeneca news before the FTSE followed the other major Indices higher and I am still flat. However the market is having difficulty breaking the key 6830/6850 resistance level. Today I will again be a small buyer on any dip to 6790/6810 with a 6775 stop. I will only look to set up a short position if we leave a sell extreme from the 6830 level which so far has not happened.
Dow Rolling Contract
I was very unlucky with my Dow plan yesterday as it made a low of 16415 just missing my 16410 buy level before having a very nice rally and I am still flat. I still like the Dow as long as we can stay over the key 16250 support level and today I will raise my buy level slightly to 16400/16440 with a 16370 stop. I still do not want to be short the Dow at this time.
June BUND
After I posted, the Bund traded down to my 146.10 buy level and then had a brief rally from there but is back at this price level this morning and I am still long. I will raise my stop to 145.80 on this position as I do not want to risk to many points.
Gold Rolling Contract
Gold briefly broke back above the 1300 level before selling returned to the market and we are back to where we were 24 hours ago. As I have mentioned over the last few weeks Gold needs to break and close over 1310 for me to turn bullish, and the longer that this break does not happen there is a risk of an acceleration lower to 1250. Today I will leave my buy level the same at 1275/1283 with a 1269 stop.
Silver Rolling Contract
My long 19.40 position worked out okay yesterday as Silver followed Gold higher which enabled me to cover this position at 19.65 and I am now flat. Today I will again be a buyer on any dip to 18.90/19.20 with a 18.70 stop.
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