US Equity markets ended the day higher despite some early weakness. Strong performances from Microsoft and Caterpillar drove the uplift whilst commodity stocks were supported by another rise in Gold, up for the fifth consecutive session after big falls early last week. It finished up 1.8% to close at $1425. The earlier weakness in US Equity markets followed disappointing Existing Home Sales which fell 0.6% in March against expectations for a 0.4% rise although in trend terms, Home Sales continue to move higher. In Europe, market sentiment was supported by the surprise news that Italian President Giorgio Napolitano has agreed to stand for a second term which is seen as a precursor to a new Coalition Government being in place as early as later this week. A marginally less negative than expected Euro-Zone Consumer Confidence reading also brightened the mood as did more dovish ECB comments from Constancio and Knot saying that further easing is possible. The Italian Mib rose 1.7%, kick starting a broader rally in European Bourses.
I came across some interesting comments from former Reserve Chairman Paul Volcker (who has a reputation of been the best Central Banker to date) who warned about the potential dangers of the unorthodox and aggressive moves by Central Banks around the world. He said that Central Banks, including the Fed, could eventually inflict more harm by what they are doing to their portfolios in trying to save the world economy. Central Banks are no longer Central Banks said Volcker. I think it gets dangerous when they lose sight of their basic function. He said that rather than trying to stay out of the market as much as possible, Central Banks have been aggressively trying to influence economic growth and even inflation and once you have the idea that a little bit of inflation is a good thing then it is very hard to get rid of it – he finished by saying that the Fed is the worlds largest financial intermediary.
Today is a busy one on the Economic front as this morning we have Euro-Zone PMI Manufacturing Services(including Germany and France) and later in the US we have House Price Index, Richmond Fed Manufacturing Index, New Home Sales and US PMI. Then later in the evening Apple reports its earnings.
June S&P 500
The S&P worked perfectly yesterday as both my buy levels and sell levels were triggered. After the weak opening in the US, the market traded down to my 1546 buy level with a 1542.5 low. I took profit on this position at 1554 and then it traded up to my 1558 sell level with a 1560.5 high. I have taken profit this morning at 1552 on this short position as I want to be flat ahead of Apple’s results later. Therefore, after the announcement, I will look to be a small seller on any rally back to the 1559/1564 resistance area with a 1567 stop and I will also look to buy the S&P on any further dip to 1542/1546 with a 1539 stop.
One of these days, just like Gold, this S&P market is going to fall hard and this is why it is so important to have stops in the market. Remember 1530 is the key level as a break and close below this level and it will start to turn bearish.
Euro/USD
The Euro worked well as we traded down to my 1.3025 buy level with a 1.3010 low. I took profit before the close last night at 1.3060 and I am now flat. Today I am not going to buy the Euro against 1.3000 as we have now tested this level a few times over the last week and I feel this 1.30 support is getting weaker. Today I will look to sell the Euro if we break 1.2990. If I am taken short I will have a stop at 1.3020, otherwise I will stay flat.
June DAX
Very unlucky with the Dax as I had my stop too tight as after I was stopped out of my 7480 long position at 7450 the market rallied strongly. I am still flat and I am conscious of how weak the Dax is trading vis a vis the other major equity markets. Today I will only look to buy the market on any dip to 7410/7430 with a 7395 stop.
June FTSE
The FTSE worked perfectly yesterday as, after I posted, the market was trading in my 6275/6290 sell zone. I went short at 6280 and I took a gain at 6245 and I am now flat. This morning I will look to go short again on any rally to 6250/6270 with a 6280 stop. I will also look to buy the FTSE on any dip to 6150/6175 with a 6140 stop.
June BUND
The Bund is struggling to go down and given how nervous I am about equity markets I am treading very carefully. I went short at 146.35 yesterday and I have covered this position this morning at 146.30. If it rallies from here I will look to sell the market from 146.80/147.00 with a 147.20 stop. The Bund needs to break 145.80 for the market to turn bearish.
Gold Rolling Contract
Gold never hot my buy level yesterday. I am very surprised how weak Silver is and for this reason I have cancelled my buy order in Gold and I am going to stand aside and take another look at the market tomorrow.
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