US stocks have given back a little of last Friday’s late-session gains that came on news of an in-principle deal to grant Greece a four month extension to its current bailout. Here, a delay until today to the submission of the list of reforms to which Greece would commit breeds the suspicion that what might have been circulated privately yesterday was unacceptable to Germany or some other EU officials.
We also learn courtesy of the Financial Times, that even if agreed today, a more detailed reform programme needs to be agreed by April, and that the remaining EUR7.2bn of aid under the current rescue programme will only be released once promised reforms have actually been implemented. So whatever happens later today, the Greece issue cannot be put to bed for another 3-4 months. This, plus a disappointing German IFO Survey which printed 106.8 versus 107.7 expected has weighed a little on the Euro, though Euro-Zone peripheral Bond Yields all fell sharply on Monday in their first response to Friday’s news and which came after the European markets had all closed.
Elsewhere the NOK and the Canadian Dollar have both been crunched again on fresh weakness in Oil prices. Lower Oil was blamed on news of a Libyan pipeline restart and the smaller fall in the US rig-count reported late on Friday. The fall in Oil was only briefly interrupted on reports from Nigeria which holds the OPEC Presidency that OPEC may hold an emergency meeting on the slide in crude prices. OPEC has just issued a denial which is leading to lower Oil prices again.
US data has again disappointed expectations, this time for Existing Home Sales which came in at -4.9% versus -1.8% expected. Weakness in Home Sales cannot just be blamed on the weather as the largest falls were on the West Coast. The Dallas Fed Manufacturing Index came in very weak at -11.2 versus -4.0 expected.
This morning on the economic front we have already had German GDP which came in stronger than expected at +0.7% for the last Quarter. At 10.00 am the Euro-Zone will release its latest CPI which will be closely watched by the markets. Later this afternoon the US will release its Services PMI and the Richmond Fed Manufacturing Index at 2.45 pm and 3.00 pm respectively. All eyes will then turn to Fed Chair Janet Yellen’s Annual Testimony to the Senate which begins at 3.00 pm. Following her Testimony there will be a Q&A session which should lead to more volatility.
March S&P 500
Following a very quiet trading session yesterday in which none of my parameters got hit, volatility should return later this afternoon with Fed Chair’s Annual Testimony to the Senate at 3.00 pm. I am going to stay flat until Ms Yellen’s statement is released just before she starts to speak. If the S&P rallies following the release of her Statement my only interest in going short is still on a rally to 2116/2121 with a 2126 stop. If I am taken short and subsequently stopped out of any short position, I will use my 5 handle rule to go short again with a stop above whatever new high is printed. I will still be small buyer on any dip lower to 2093/2098 with a tight 2087 stop.
EUR/USD
The Euro plan worked very well yesterday as shortly after I posted the Euro traded lower to my 1.1310 buy level before having a nice rally which enabled me to cover this position at 1.1350 and I am now flat. I am going to continue with the strategy of buying dips as I am not convinced that the Euro is going down to 1.05 or even parity as most analysts seem convinced is going to happen. Today I will again be a small buyer on any further dip to 1.1250/1.1290 with a 1.1225 stop.
US Dollar Index
Shortly after I posted yesterday morning the Dollar was trading near the highs of the day which enabled me to go short at 94.90. I am still short and today I will lower my stop slightly to 95.30 as I do not want to risk too many points ahead of this afternoon’s Yellen Testimony.
March DAX
No change as my only interest in selling the DAX is still on a spike higher to 11220/11320 with the same 11350 stop. After yesterday’s very quiet trading session for the DAX, volatility could return to day as the market will be very sensitive to any news reports on how the Greek submission is going. Given how over extended the DAX is currently trading, I do not want to be long the market at this time.
March FTSE
My short 6900 position worked out very well yesterday as shortly after I posted the FTSE start to trade lower to my 6855 buy level which enabled me to cover this short position while at the same time go long the market. I am still long and today I will raise my stop on this position to a tight 6840. I will again be a small seller on any rally higher to 6900/6930 with a 6950 stop.
Dow Rolling Contract
Given the fact that we have Fed Chair Yellen’s Annual Testimony to the Senate this afternoon, I have decided to cover my short 18090 position for a small loss at 18115 this morning and I am now flat. If the market rallies after the release of her statement, I will again look to go short on any spike higher to 18170/18220 with an 18250 stop. Also the fact that we already had seven Hindenburg Omen’s so far in 2015 and despite the fact that the price action has been very positive for the Dow over the last three weeks I still do not want to be long the market at this time and I will continue with my strategy of selling rallies with a tight stop.
March BUND
After I posted yesterday morning the Bund started to rally as it followed the peripheral Bond markets higher. Eventually the Bund traded at my 159.00 sell level. I am still short and I will leave my stop the same at 159.30 which is just above yesterday’s 159.20 high print.
Gold Rolling Contract
My long 1193 Gold position which was taken just before I posted yesterday morning worked out very well as just after I posted Gold started to rally which enabled me to cover this position at 1205 and I am now flat. Gold is opening lower this morning but as long Gold holds over the key 1180 support then the market should be fine. Today I will again look to buy Gold on any further dip to 1182/1188 with an 1173 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.20 with the same 15.70 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 15.40 with a 14.90 stop.
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