All the focus yesterday was on the US Dollar with the release of the first of this weeks big reports from the US, the ISM Manufacturing Report. The market was priced for virtually no change in May but the outcome was on the soft side at 49, the lowest reading in four years, immediately spurring selling of the US Dollar with the US Dollar Index loosing 1%. Interestingly US Treasury Yields also fell after the ISM release but recovered more than half their intra-day losses to be little changed on the day. The Euro recovered from a low of 1.2960 to touch 1.31 before consolidating, helped by by some upward revisions in the flash Manufacturing PMIs yesterday morning. Indeed at 48.3 in May the Euro PMI is within touching distance of the US reading. However with both readings below 50, it still shows contraction in a low growth environment.
Overnight the Nikkei, having touched a low of 12,950 in the futures market, recovered to close up 2.5% and regain all of Monday’s losses. The Royal Bank of Australia met earlier this morning and left rates unchanged at 2.75% whilst the US stock market recovered from earlier losses with the Dow adding 1% in what was a spectacular final hour rally. Today, being Tuesday, all eyes will be on the US market to see if we can close higher for the 21st Tuesday in a row.
Today is another busy one for economic data. This morning we have UK PMI Construction followed by Euro-Zone PPI. Later at 1.30 pm we have the US Trade Balance and the New York ISM. George and Fisher from the Fed are due to speak on Monetary Policy in New Mexico and Toronto respectively.
June S&P 500
What a day yesterday! It was one of the most volatile trading days of the year so far. After I posted yesterday morning the S&P rallied up to my 1636 sell level with a 1638 high. I covered this position at 1629 before the market dropped down to my 1623 buy level with a 1620.5 low. The market then rallied strongly and I took profit at 1631 on this position and I am now flat. Today, being Tuesday, makes it very difficult to be short and I think that is why we got such a rally in the last hour as nobody wants to be short today. I believe the sell off last Friday was real and yesterday was helped by institutional buying at the beginning of the month. As long as the S&P can stay below 1645 the market is still bearish and today I will be a small seller on any further rally to 1639/1643 with a 1646 stop. I will also be a small buyer on any dip to 1627/1631 with a 1619 stop which is just below yesterday’s low and, given the volatility, we have to use wider stops and smaller positions. If I am taken long and subsequently stopped out I will be an aggressive buyer on any dip to 1600/1607 with a 1593 stop.
Euro/USD
Very frustrating as I have been bullish on the Euro but for the second day in a row I got stopped out of my 1.2990 long position at 1.2965 before the market rallied 140 points. At least the Euro rallied to my 1.3095 sell level and I have taken profit this morning at 1.3060 and I am now flat. This morning as the Euro is overbought I will be a small seller on any rally to 1.3110/1.3140 with a 1.3160 stop. A break and close over 1.3150 will be short term bullish. I will also look to buy the Euro on any dip to 1.2970/1.3000 with a 1.2950 stop.
June FTSE
The FTSE worked out well as it traded up to my 6550 sell level before following the US market lower and then higher. I went short at 6550 and I covered this position at 6510 and I am now flat. The FTSE looks tired to me and I will use any rally back to 6555/6580 to go short again in small with the same 6610 stop.
June DAX
I am finding the Dax very difficult to trade in comparison to the other Equity markets and I was stopped out of my 8275 short position yesterday at 8310 and I am now flat. The Dax is stuck between 8280 on the downside and 8400 on the upside and we need a break of one of these levels to set the next trend. I am going to stay flat today unless we break 8270 and I will be a small seller at this level with the same 8310 stop.
June BUND
The Bund continues to trade heavy but I still do not want to be short this market. The Bund is oversold and today I will be a small buyer on any dip to 142.90/143.10 with a 142.75 stop.
June Nasdaq 100
The Nasdaq also worked well yesterday as shortly after I posted the market traded up to my 2990 sell level. I covered this position at 2960 and I am now flat. Today I will be a small seller again on any rally to 2995/3010 with a 3025 stop.
Silver Rolling Contract
Silver rallied nicely yesterday and I was able to cover my 22.40 long position at 22.80 and I am now flat. Silver is still trading heavy in comparison to Gold and today I will look to reset my long position on any dip to 21.90/22.20 with a 21.75 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 21.00 with a 19.90 stop.
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