Global equity markets remained on the defensive yesterday, held back by some market jitters with the focus on on protests in Hong Kong as China warned other countries not to meddle in its internal affairs. Protests continued overnight with China apparently giving Hong Kong police 48 hours to stop demonstrations before intervening. There was notable weakness yesterday in the Brazilian stock market which fell 4.5% ahead of their Presidential election. The re-emergence of a risk-off mood overshadowed what was a solid US Personal Income and Spending Report for August, coming also with still benign PCE Deflator Inflation. However in Europe there were no ugly downside surprises from Spanish and German inflation ahead of today’s Euro-wide CPI. US Treasuries rallied, equities eased whilst the VIX rose to 16.0 which is 23.4% above its average for the past quarter.
This morning on the economic front we have German Unemployment at 9.00 am and this is followed at 9.30 am by UK GDP. At 10.00 am we have Euro-Zone CPI and Unemployment. From the US we have Chicago Purchasing Managers Report at 2.45 pm whilst finally at 3 pm we have the Consumer Confidence Index.
December S&P 500
The nervousness for the Stock market continues as we approach the dreaded month of October. The VIX surged to a 3 month high, thus adding to the volatility, and yesterday continued the theme. As I have mentioned recently, I am extremely worried about where this market is heading and a break and close below 1940 will be very bearish and opens up the possibility of a move to at least 1870. The S&P really needs to rise and close over 1992 for me to be more bullish. First resistance is from 1980/1985 and today I will be a seller form 1978/1984 with a 1988 stop. Again for the second consecutive day I do not want to be long this market even though today is month end.
Euro/USD
The Euro traded in a very tight range yesterday. I am still looking for the market to spike higher given how weak sentiment is towards the Euro, especially with the 10-day average at just 8.4% Euro bulls. Today I will be a small buyer from 1.2640/1.2670 with a 1.2625 stop. I will also be a buyer on a break higher over 1.2750 with the same 1.2715 stop.
US Dollar Index
No change as I am still a seller from 85.80/86.20 with a 86.40 stop. Presently the Dollar is testing a 5 Year Trend-line that extends off the highs made in March 2009 and June 2010 whilst the Daily Sentiment Index has jumped to 91% bulls which is the highest level of optimism in over four years.
December DAX
The Dax had a very bad trading session yesterday with the market closing below the key 9465 support level. If the market does not break back and close over 9500 today I will look for the DAX to possibly retest the 8905 low from last March. Today I will be a small seller on any rally back to 9460/9490 with a 9520 stop. Despite QE starting in Europe and as we have broken this key 9465 support I do not want to be long the Dax at this time.
December FTSE
The FTSE plan worked well yesterday as after the US markets opened the market traded down to my 6585 buy level before having a nice rally which enabled me to cover this position at 6630 and I am now flat. Today I will again be a buyer on any dip to 6560/6585 with a 6535 stop. Given how oversold the FTSE is currently trading I do not want to be short the market at this time.
Dow Rolling Contract
Thankfully we have not been long the Dow over the last four weeks. Technically the market is setting itself up for a major move lower especially if the market cannot climb back above the key 17240 resistance level. Today I will lower my sell level to 17090/17130 with a 17170 stop.
December BUND
No change as I am still short from last week at 149.60 with the same 150.05 stop. I am happy that the Bund has not traded higher especially given how weak the equity markets are.
Gold Rolling Contract
No change as I am still long from last week at 1215 with the same 1199 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 1185 with a 1175 stop.
Silver Rolling Contract
Also no change as I am still long from last week at 17.65 with the same 16.95 stop. Optimism continues to be near all time lows for Silver at just 3% bulls but we need to see the market break and close over 18.05 for me to turn more bullish.
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