Caution is the watchword of global markets ahead of this weeks key events. Equities were on the back foot yesterday, following on from gains for the main US Indices of almost 5% so far in July, with the S&P closing down 0.4% and the Dow 0.25% lower. This followed a fairly mixed performance on European markets and the earlier 3% plunge in the Nikkei for the second day in a row. US Treasuries are not showing any evidence of being seen as a safe-haven ahead of the two day FOMC Meeting, which starts later today, with 10 Year Yields up 3 basis points to 2.6%.
Just as last Friday’s stronger than expected Consumer Sentiment Reading failed to stir the markets neither did yesterday’s Pending Home Sales data which came in at -0.4% versus -1% expected. Their is evidently some concerns that the back up in Mortgage Rates in the past two months is already having a material impact in subduing Home Sales Activity although it is too early, based on the evidence to date, to conclude this with any confidence. It is nevertheless going to be a key consideration for the Fed in determining when it is safe to commence QE tapering. This is perhaps moreso than the labour market data where the trend so far this year is such that the FOMC could allow one soft-ish number in either July or August without ruling out tapering commencing as early as September.
This morning on the economic data front we have Euro-Zone Economic Confidence, Business Climate Indicator and Services Confidence. These are followed later in the US by it’s own Consumer Confidence Index and this data will be closely watch by the Fed who start their two day meeting later this afternoon.
September S&P 500
As expected, the market has gone on hold ahead of tomorrows very important ADP Employment Change and the outcome of the FOMC Meeting tomorrow evening. After I posted yesterday the market dropped down to my 1681 buy level and I am still long as I expect it to rally ahead of tomorrows events plus we have month-end which is generally positive for equity markets. I will leave my stop the same at 1675 and if I am stopped out I will be a more aggressive buyer on any subsequent dip to 1666/1670 with a 1662 stop. I do not want to be short the market at this time.
Euro/USD
The Euro also traded in a very marrow range but at least the market traded down to my 1.3240 buy level before having a small rally and I was able to cover this position at 1.3265 before the close and I am now flat. Today I will be a small buyer again on any dip to 1.3200/1.3230 with a 1.3185 stop. As I mentioned yesterday my only interest in selling the Euro is on a rally to 1.3370/1.3400 with a 1.3420 stop.
September FTSE
No change as I am still long from 6525 as I expect the market to rally into the month-end. I will raise my stop to 6490 which is just above the lows made yesterday. I do not want to be short at this time.
September DAX
No change as the market never hit any of my levels yesterday. I am still a buyer on any dip to 8200/8230 with a 8180 stop. I will also be a buyer on a break of 8330 with a 8290 stop. I do not want to be short at this time.
September BUND
Shortly after I posted yesterday morning the Bund traded down to my 142.30 buy level before having a small rally and I was able to cover this position at 142.60 and I am now flat. Today I will look to reset my long position on any dip to 141.90/142.20 with a 141.75 stop. I do not want to be short at this time with the Fed meeting today and tomorrow.
Gold Rolling Contract
Gold traded down to my 1325 buy level and after a small rally I was able to cover my position at 1335 and I am now flat. Today I will lower my buy level to 1310/1316 with a 1305 stop. A break and close below 1300 will be bearish.
Silver Rolling Contract
Silver traded down to my 19.80 buy level and I am still long with the same 19.45 stop. It is trading heavy and I will give this market one more day to rally or else I will cut my position. Silver really needs to break 20.70 for the market to turn bullish.
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