We expected this week to be one of fast moving events, and that’s how it’s playing out. Greek PM Alex Tsipras has been speaking saying that he will do whatever he can to protect the Greek people; the Greek Finance Ministry has been denying rumours that ATM withdrawals will be reduced from €60/ day to €20/day as Greek queued up get their €60. The trading day night seemed to start off with the inevitable claims and counter claims after the breaking off of negotiations late on Friday. But as the day unfolded at the start of the week, the Troika/Institutions (Greece’s creditors) appeared to be holding the olive branch out to Greece in an effort to get a last minute deal and forestall Greece’s exit from the Euro and a “no” vote at Sunday’s referendum.
But even then, in the event of a “no” vote, is that to be interpreted as “no, we want out of the Euro”, or “no, we want a better deal than the one on offer but want to stay in the Euro”. Who’s to know? Uncertainty prevails. EC President Juncker was offering more conciliatory gestures, wanting to spell out in fact what seems essentially to still be on offer to Greece even after tomorrow that the creditors had said previously was the expiry date for last week’s offer. He also wanted to ensure Greek voters make an informed decision at the referendum.
There was even talk during the day of a group of Syriza MPs preparing to get a side deal done with the creditors by Wednesday and to propose forming a new unity Government in an effort to ensure Greece remains in the EC and the Euro-zone. Even the IMF was holding out its own olive branch, saying that should Greece miss the payment Tuesday (highly likely), then it would be in arrears rather than default. Playing with words to some extent, but clearly a statement to diffuse tensions, calm investor sentiment and keep hopes alive that a deal might still be forthcoming with Greece before or after Sunday.
After yesterday’s equity market declines in Asia yesterday, it was replayed overnight, plus more in European and US markets with investors shying away from risk and plunging into bonds, the safe haven ones anyway. The German DAX fell 3.6% and periphery Euro markets were down as much as 5.2% in Milan. It was a similar picture in Euro bonds, German bunds rallying strongly, but the periphery selling off, Italian 10y +24bps. Currency markets have been an all-together different story. The AUD has held its composure, and the Euro has rebounded, closing at 1.125 last night, after opening yesterday morning below 1.10. It remains to be seen whether that reflects more hope for Greece and the Euro. It’s a very partial and incoherent reaction across all asset classes with the US stock markets getting hit late in the day. The Dow closed down 350 points while the VIX rallied an incredible 34.5% to close at 18.85.
This morning on the economic front we have the German Unemployment Rate at 8.55 am. This is followed at 9.30 am by UK GDP and Current Account Balance. At 10.00 am we have Euro-Zone Unemployment and CPI. This afternoon we have the US ISM Index for Milwaukee at 2.00 pm. Finally we have the Chicago Purchasing Manager’s Survey and Consumer Confidence Index at 2.45 pm and 3.00 pm respectively.
September S&P 500
Internally yesterday was one of the worst days for the US stock market in several years with the S&P closing down over 44 Handles since last Friday. In the process the S&P has left a large ‘Open Gap’ from last Friday’s close at 2095.75 to yesterday afternoon’s high at 2084, before the market literally fell off a cliff to make a low at 2047 before rebounding slightly into the close. Essentially the market has gone nowhere in the past six months with today the half-yearly close for all stock markets. As I mentioned yesterday that I expected some of yesterday morning’s down gap to be filled and that is exactly what happened with the market trading at 2064 when I started to write my commentary but unfortunately by the time I posted we were already 8 handles higher which unfortunately meant we missed the large part of this up-move. Subsequently the S&P got hit hard from 6.00 pm on with the market eventually hitting my 2064 buy level before stopping me out of this position at 2055. Using my ‘5 Handle Rule’ I went long again at 2052 and with the market trading at 2057 this morning I have decided to cover this position. Although the S&P is very oversold with the McClellan Oscillator closing at a negative 178 and despite the fact that we are trading at the bottom of the Bollinger Band and Williams Index I am expecting the S&P to sell-off later when the US Markets open especially after such a huge down move yesterday there will be a lot of margin calls from the Clearing Houses. Today I will again look to buy the S&P in small size on any further dip to 2039/2047 with a 2034 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip to 2016/2025 with a 2009 stop. Given how oversold the S&P is I do not want to be short the market at this time.
EUR/USD
Yesterday was not one of my luckier days as every time I wanted to do a trade the market moved against me and certainly the Euro was one of these casualties. I correctly called for the Euro to rally and I believe that if Greece were to leave the Euro we could see a large rally in the single currency as the Euro-Zone overall will be a stronger group without Greece. Yesterday after I posted the Euro just missed my 1.1050 buy level by 20 points before having nearly a 200 point rally and I am still flat. Given the volatility I am only trading in smaller size and today I will move my buy level higher to 1.1090/1.1140 with a 1.1055 stop.
September Dollar Index
I am still flat the Dollar and today I will lower my sell level to 95.70/96.10 with a 96.35 stop.
September DAX
Just before the New York close last night the DAX traded lower to my 10970 buy level before having a nice rally on the open this morning which has enabled me to cover this position at 11035 and I am now flat. Today I will again be a small buyer of the DAX on any dip lower to 10910/10960 with a 10850 stop.
September FTSE
Just like the DAX above the FTSE also sold off late in the day which enabled me to go long at 6520. I am still long and today I will move my stop higher to 6495. If I am stopped out of this position I will be a more aggressive buyer in front of 6475 with a 6440 stop.
Dow Rolling Contract
Due to time constraints and computer problems that I had yesterday when writing my commentary I did not get time to write on the Dow. It is amazing that since we first got the latest Hindenburg Omen signal the market is down over 450 points. For New Members please read an explanation of this great technical indicator under my ‘Education Tab’ on the tradernoble website. With the Dow trading outside the bottom of its Bollinger Band and with the risk/reward moving in favour of been long the market in case that we do get a Greek deal there is no point in been short the Dow at these levels. Today I will be a small buyer from 17550/17610 with a 17490 stop.
September BUND
The BUND plan worked well yesterday as shortly after I posted the BUND was trading at my 152.10 sell level before having a nice 100 point sell-off which enabled me to cover this position at 151.60 as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small seller on any rally higher to 152.65/153.05 with a 153.30 stop.
Gold Rolling Contract
No change as I am still a small buyer from 1162/1168 with the same 1155 stop.
Silver Rolling Contract
No change as I am still long at 15.90 with the same 15.50 stop.
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