The US Equity markets have managed to eek out another gain with the S&P gaining 0.2% despite a pre-open earnings and revenue miss from McDonalds, who also warned of challenging global market conditions ahead. Economic data also came in shy of expectations, notably Existing Home Sales which fell by 1.2% against an expected gain of 1.5%. This though may have been another example of Alice in Wonderland Economics where bad news is good news in so far as it plays into the debate about the timing of Fed tapering of QE. US Bond yields are little changed with the ’10 Year’ flat at 2.48%. On the ForEx Currency front the Euro is better on positive political news out of Portugal where the President decided against a potentially de-stabilising snap election and this was followed by a call for unity from the Portuguese PM, Coelho on Monday and a stated determination to keep the €78 billion bailout programme on track. The result was a 42 basis point drop in 10 Year Yields with some positive contagion impact on Spain and Italy.
This morning on the economic front we have the Euro-Zone Consumer Confidence and this is followed later in the US by the House Price Index and the Richmond Fed Manufacturing Index.
September S&P 500
A small divergence has developed between the S&P, the DOW and the NASDAQ. The S&P has registered two new closing highs over the last two trading days that were unmatched by both the DOW and the NASDAQ. This implies to me that the rally is tiring and is due at least a breather. The S&P dropped down to my 1687 buy level after the weaker Existing Home Sales before having a small rally and I was able to cover this position at 1693 and I am now flat.
Today, given this over extended market, I am a small seller from 1692/1697 with a 1702 stop. I will also be a small buyer on any dip to 1678/1682 with a 1675 stop. Remember we still have the outstanding Gap from two weeks ago at 1648.50 which I would expect to be filled over the coming weeks and which I will be an aggressive buyer against this price the first time we test this level.
Euro/USD
The Euro just missed my buy level before having a nice rally. The next resistance level is from 1.3250/1.3280 and I will be a seller on any rally to this area with a 1.3310 stop. I will move my buy level up to 1.3130/1.3160 with a 1.3115 stop which is just below yesterday’s low.
September FTSE
The FTSE continues to trade very heavily as the market is unable to sustain any reasonable rally after the big move up at the end of June/beginning of July. Today I will lower my sell level to 6600/6630 with a 6645 stop. I will leave my buy order the same at 6480/6510 with a 6460 stop.
September DAX
No change as I still plan to be a buyer on any dip to 8270/8300 with a 8250 stop whilst my only interest in selling the DAX is on a rally to 8400/8430 which the market came close to doing this morning before sellers returned.
September BUND
No change as the Bund traded in another very quiet range. I am still a buyer on any dip to 143.60/143.80 with a 143.45 stop. I still do not want to be short at this time.
Gold Rolling Contract
I am glad I stood aside in Gold yesterday given the violent up move that occurred on Sunday night and continued all day yesterday. The fact that Gold closed over the 1300/1320 resistance area is very impressive and this zone will now act as support. Today I will be a small buyer on any dip to 1315/1325 with a 1308 stop. I do not want to be short Gold at this time.
Silver Rolling Contract
Finally Silver has had its move to the upside that I have been looking for over the last month. Today I will raise my buy level to 20.00/20.30 with a 19.80 stop
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