Equity markets made solid gains on both sides of the Atlantic with the Dow and S&P both closing up 0.6%. The S&P had made a new record high earlier in the trading session before giving back some of these gains in the last hour of trading. Helping to support sentiment was speculation that the European Union will offer a financial assistance package to Ukraine. Following the departure of President Yanukovych, Ukraine’s new leaders have said that a debt default is possible unless it gets $35 billion of financial assistance. Ukraine shares jumped 15% yesterday while its 10 Year Bond Yield fell over 100 basis points to 9.08%.
European economic data was also positive with the German IFO Business Confidence rising from last month to reach its highest level since August 2011. Meanwhile the final estimate of January Euro-Zone prices showed a fall of -1.1% in line with the decline shown in the flash estimate of 0.8% year on year. This keeps the pressure on the ECB to ease monetary policy further although ECB President, Dragi, continues to play down fears of deflation.
This morning on the economic front we have UK CBI Reported Sales at 9.30 am along with the BBA Loans for House Purchases. At 10.00 am, we have German GDP followed from the US by the House Price Index at 1.30 pm. At 2.55 pm we have Consumer Confidence and the Richmond Fed Manufacturing Index.
March S&P 500
The S&P started yesterday much stronger than it finished as the market tried to break the upper Bollinger Band at 1856 before sellers returned to the market in the last hour of trading. Nevertheless the S&P again closed higher and has now closed up an incredible 13 of its last 15 trading sessions but is extremely overbought on the Daily Charts. Before this rally occurred the market just missed my 1832 buy level before trading up to my 1853 sell level. As mentioned above, the S&P sold off in the last hour of trading enabling me to cover this position at 1846 and I am now flat. As I keep saying, if this was May instead of February I would be a lot more bearish of the stock market but we are still trading in the seasonally strong time of the year making it very difficult to go short for more than a few hours/days before the market turns around and trades higher. Today I will raise my buy level to 1836/1840 with a 1833 low which is just below yesterday’s low. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1820 with a 1815 stop. I will also be a small seller on any rally back to 1854/1858 with a 1861 stop.
Euro/USD
The Euro worked well yesterday as after I posted it traded down to my 1.3710 buy level before having a nice rally and I was able to cover this position at 1.3740 and I am now flat. The Euro continues to be a ‘buy on dips’ and this trend will continue until we get a sell extreme. Today I will still be a small buyer on any dip to 1.3680/1.3710 with a 1.3660 stop. I will leave my sell level the same at 1.3810/1.3840 with a 1.3860 stop. A break and close over 1.3850 will very bullish in the short term.
US Dollar Index
No change as the Index continues to trade in a very narrow range. I am still long from 80.20 and I will leave my stop the same at 79.70.
March DAX
As expected, the Dax continues to trade higher off the 9060 lows made earlier in the month and is now approaching contract highs at 9800. Before this rally commenced yesterday the market just missed my 9590 buy level with a 9602 low and I am still flat. As I have mentioned over the last few days as long as the Dax can remain over 9550 the market is fine and today I will raise my buy level to 9600/9630 with a 9575 stop. I will also be a small seller on any further rally to 9780/9805 with a 9820 stop.
March FTSE
The FTSE worked well yesterday as shortly after I posted it traded down to my 6780 buy level before having a very nice rally and I was able to cover this position at 6840 and I am now flat. The FTSE just fell short of my 6870 sell level before trading lower. Today I will be a small buyer from 6795/6815 with a 6770 stop which is just below yesterday’s low. I will leave my sell level the same at 6870/6900 with a 6930 stop.
Dow Rolling Contract
As expected, the Dow broke and closed over the key 16200 resistance level. It had traded up to 16300 earlier in the session before falling 100 points in the last hour of trading. Today I will raise my buy level to 16120/16160 with a 16090 stop. I still do not want to be short the Dow at this time.
March BUND
The Bund continues to consolidate in a very narrow range over the key 143.40 support zone. I am still flat and today I will be a small buyer on any dip to 143.25/143.45 with a 143.10 low which is just below last week’s low.
Gold Rolling Contract
Gold just missed my 1342 sell level before trading lower and I am still flat. I will leave my parameters the same as yesterday as I am a small buyer on any dip to 1315/1322 with a 1308 stop while I will still be a small seller on any rally to 1345/1352 with a 1354 stop.
Silver Rolling Contract
Silver having traded up to 22.40 after I posted yesterday morning is now back down testing the 21.40/21.70 small support zone that has contained prices over the last few days. I will be a small buyer in this area with a 21.25 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 20.75/21.10 with a 20.40 stop.
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