Movement over the last 24 hours was driven by concerns about a fresh Greek crisis with the Greek stock market now 40% lower since its highs made earlier this year. Meanwhile Oil fell another $1 for WTI to be $53.67, a fresh six year low. Greek markets took the biggest hit, with the 10 Year Bond yield up 1%, from 8.2% to 9.27%. There was some flight to the USD and US bonds with EUR weaker to 1.2159 and GBP at 1.5521, JPY 120.64. US stocks were mixed with S&P500 2,091 (+0.1%) and Dow 18,038 (-0.1%). US Treasury bonds rallied on lower Oil and the Greek crisis with 10 Year yields now back down to 2.20% (-5bps) while the German Bund again made new lows at an incredible sub-50bps for 10 Year Bonds.
Fresh Greek farce – Yesterday the Greek parliament did not accept the Prime Ministers nominee for President which has now forced an election on January 25. The fear is the Syriza Party will win power and will follow through on their pledge to renegotiate previous bail-out terms and basically default on the Government debt. Various Eurozone officials have warned that there is absolutely no room for renegotiation meaning the Eurozone would again be on the brink of collapse a mere 2½ years after ECB President Draghi saved it with his ‘whatever it takes’ pledge. The FT reports that polls last weekend put Syriza 3-4% ahead of Prime Minister Samaras New Democracy party although neither was likely to win a clear majority.
The Euro is heading for its biggest annual retreat since 2005 amid speculation that Greek elections next month may endanger the country’s bailout agreement and spur the European Central Bank to introduce more currency-depreciating stimulus to revive growth. The Euro is now trading at a 2 year low versus the US Dollar.
This morning on the economic front we have Euro-Zone Money Supply at 9.00 am. This is followed at 3:00 pm by the latest US Consumer Confidence Index.
March S&P 500
The S&P plan worked out well yesterday as after the market had initially sold off it turned around soon after the US markets opened. It went on to make a new high at 2089 which enabled me to go short at 2087. Overnight the S&P has sold off on the weaker European Indices which has enabled me to cover this position at 2081 and I am now flat. Today I will again be a small seller on any rally back to 2087/2092 with a 2095 stop. It was interesting that while the S&P made a new high yesterday, the Dow did not. I will still be a small buyer on any dip to 2068/2073 with a 2065 stop. If the market eventually breaks and closes below 2050 we still have a large ‘Open Gap’ from two weeks ago at 2007/2029 which I would expect to be filled. Any move lower into this ‘Open Gap’ will see me being an aggressive buyer.
Euro/USD
The Euro sold off after I posted yesterday morning on the ongoing Greek crisis. It then traded down to my 1.2140 buy level overnight. I am still long and I will leave my stop the same at 1.2085. The 1.2134 overnight level is significant as this is the 50% retracement of the whole up move from the 0.8228 low on October 26, 2000 to the 1.6040 peak on July 15, 2008 and should offer some support. The Daily Sentiment Index has now printed less than 10% for the fifth consecutive day as sentiment continues to remain at extreme levels.
US Dollar Index
No change as I am still short at 9035 with the same 9075 stop.
March DAX
After the US markets started to reverse and go higher the Dax eventually traded up to my 9930 sell level. I am still short and today I will lower my stop to a break-even as I still believe this market is an accident waiting to happen. It is hard to believe that the Dax is trading near all time highs while the Greek market is 40% lower from its peak made earlier last summer. If I am stopped out of this position I will be a more aggressive seller in front of 9960 with a 10005 stop.
March FTSE
The FTSE plan worked out well yesterday as shortly after I posted it traded lower to my 6550 buy level before having a nice rally in the afternoon which enabled me to cover this position at 6585 and I am now flat. The FTSE is opening lower this morning and today I will again look to buy any dip to 6480/6510 with a 6460 stop.
Dow Rolling Contract
No change as I am still short this market from last Friday at 18070 with the same 18110 stop. If I am stopped out of this position I will be a more aggressive seller in front of 18150 with a 18210 stop.
March BUND
The Bund plan did not work out yesterday as after I posted I went short at 155.50 before being quickly stopped out of this position at 155.80 and I am now flat. With the Bund closed tomorrow I am going to stay flat until the markets re-open again on Friday.
Gold Rolling Contract
No change as I am still long at 1193 from yesterday morning with the same 1179 stop.
Silver Rolling Contract
No change as I am still long from last week at 15.80 with the same 15.45 stop. Remember Gold and Silver both bottomed on December 31, 2013 before both having a 30% rally. Today sentiment still remains at extreme levels for both these metals as conditions are there for a decent rally to develop.
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