One step forward, two (larger) steps back. This is how the Foreign Exchange markets have interpreted the eleventh hour deal to save the Cypriot banking system from collapse and ensures Cyprus remains within the Euro-Zone. The responsibility for the set back remains firmly with the recently appointed head of Euro group Finance Ministers, Dutch Finance Minister Jeroen Dijsselbloem. He told Reuters and the Financial Times if there is a risk to a bank our first question should be ‘Okay, what are you and the bank going to do about that? What can you do to recapitalise yourself? If the bank cannot do this then we
will talk to the shareholders and bond holders, we will ask then to contribute to recapitalise the bank and if necessary the uninsured deposit holders’. So whereas the agreement to protect all deposit of under €100K from been bailed-in to the banking sector resolution was greeted with some relief, the subsequent admission from a top ranking EU official that the agreement to bail-in uninsured depositors could act as a template for future resolutions of vulnerable banks elsewhere, has greatly exacerbated the risk of deposit flight. The impact of Dijsselbloems remarks was to drive the Euro from over 1.30 to 1.2850. A later attempt at a retraction of his comments have had no effect and the Euro is still weak this morning. The Dow ended down 0.5% having been down 1% earlier.
On the economic front we have UK CBI Retail Sales report this morning at 9.30 am for March which will be of interest after the surge in Retail Sales reported last week which helped lift Sterling. This is followed at 12.30 pm by the very volatile Durable Goods Orders and the Schiller House Index.
June S&P 500
The S&P had a nice rally after the open but this rally did not last long after comments from the Dutch Finance Minister sent the Euro into free fall hurting Stocks along the way. The S&P having come within 1 Handle of making an all time high then fell 20 handles before buyers emerged again in the last hour of trading. The S&P dropped down to my 1547 buy level. I did not get stopped out as the low was 1539.25 and I still have this position. I am still convinced we are going to make a new high before this market rolls over for more than one day and I am going to stay long. I will raise my stop to 1543 and I will look to take profit in front of 1558. If the market continues to rally I will be a seller from 1570/1575 in small with a 1586 stop. The S&P needs to break and close below 1530 for me to turn bearish.
June DOW
Extremely unlucky here as the Dow just missed my 14520 sell level by 2 points before falling 200 points. I bought the Dow at 14380 but I had to close a stop and I got stopped out at 14350 and I am now flat. Today I am still a seller on any rally to 14520/14550 in small with a 14580 stop.
June BUND
The Bund worked very well and I was able to take a nice gain at 144654 on my 14415 long position from yesterday morning and I am now flat. As I said yesterday as long as the Bund is holding up it means there is more bad news coming out of Europe and today I will use any dip to 144.00/144.30 to go long with a 143.90 stop which is just below yesterdays low. I still do not want to be short at this time.
Euro/USD
In my opinion the Euro/USD is the most difficult market to trade and this proved itself again yesterday. After the comments from the Dutch Minister sent the Euro crashing I was quickly stopped out of my 1.2950 long position at 1.2920 and I am now flat. I do not like the fact that the Euro closed below 1.2875 and this eventually opens up the Euro for an attack on the 1.2050 low made last July. Today I will use any rally to 1.2900/1.2930 to go short in small size with a 1.2950 stop. Given the technical breakdown in the market I do not want to be long at this time.
June DAX
Just like the Eur,o the Dax is very vulnerable here as the market continues to trade heavy and just like the Dow I was very unlucky with the Dax as the market just missed my 8050 sell level by 7 points before getting hit hard in the afternoon. The Dax then dropped down to my 7900 buy level before quickly stopping me out at 7875 and I am now flat. Today if the Dax breaks 7875 I will go short in small with a 7910 stop, otherwise I am going to stand aside and stay flat.
Silver Rolling Contract
Silver finally stopped me out of my 29.08 long position at 28.60 and I am now flat. I have no strong view here and I am going to stay flat.
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