The US Dollar continues to consolidate against the major G10 Currencies with the Euro so far holding the key 1.2450 support level. However the Dollar Index continues to make new highs led by the USD/JPY as the Bank of Japan’s latest QE continues to propel USD/JPY upward. The Euro tried to trade back above 1.25 but struggled after the Euro-Zone PMI Surveys failed to inspire confidence. Germany’s Manufacturing PMI for October was revised downwards from the flash reading of 51.8 to 51.4. This weighed on the block wide number which dipped from 50.7 to 50.6. The only bright spot in Europe was the UK where the PMI printed at a punchy 53.2 versus 51.4 expected.
An ever-growing camp of Dollar bulls were encouraged by a healthy ISM Manufacturing Index where the 590 print far surpassed the 56.1 expected, and matched the 2014 high hit last August. Luckily for these bulls the Fed seems fairly sanguine on the impact that a higher Dollar will have on the US economy. Dallas Fed President Fisher answered a question on that subject last night and argued that the Fed should not pre-occupy itself with the Dollar’s value.
This morning on the economic front we have UK Construction PMI at 9.30 am. We have no data of note due from the Euro-Zone whilst at 1.30 pm we have the latest US Trade Balance. This is followed at 2.45 pm by the New York ISM. Finally at 3pm we have US Factory Orders which are expected to be flat after last month’s 10% fall.
December S&P 500
The S&P traded in a very narrow range yesterday ahead of today’s key Mid-Term Elections. The market closed modestly lower after rallying earlier in the trading session on the back of the stronger than expected ISM. It traded up to my 2017 sell level and I am still short – I will leave my stop the same at 2027. If I am stopped out of this position I will use my five handle rule to reset my short position with a stop just above whatever new high is put in. The reason I am staying short is as I mentioned yesterday about how high the McClellan Oscillator reading is as traditionally when this reading is above +250 we tend to get a decent correction. Given how overbought this market is currently trading I do not want to be long at this time as the S&P has now rallied over 200 handles without a decent pull-back and in my opinion this is not sustainable.
Euro/USD
After I posted yesterday morning the Euro was trading at my 1.2470 buy level. I am still long and I will leave my stop the same at 1.2430 which is just below key support at 1.2450. If I am stopped out of this trade, and given how oversold the Euro is, I will look to go long again on any further dip to 1.2370/1.2400 with a 1.2345 stop. I will still be a seller on any rally to 1.2600/1.2630 with a 1.2660 stop.
US Dollar Index
The Dollar index is extremely overbought at current prices. Today I will be a small seller on any further rally to 87.60/87.90 with a 88.20 stop. I will leave my buy level the same at 86.20/86.50 with the same 85.95 stop.
December DAX
The Dax just missed my 9370 sell level after I posted as it started to fall on the weaker PMI data. The economic data out of Germany seems to be getting worse by the week but with the ECB printing money it is very hard to short the market. As I mentioned yesterday in relation to what is happening in Japan, deflation is not good for equities. As an aside the Nikkei was trading at 16000 18 months ago and despite the massive weakness in the Yen the Nikkei is now only back above these levels despite the unprecedented action taken on by the Bank of Japan. Today I will move my sell level slightly lower to 9330/9370 with a 9410 stop. I still do not want to be long the Dax at this time.
December FTSE
The FTSE plan worked well yesterday as the market traded at my 6530 sell level before having a nice sell-off into the New York close which enabled me to cover this position at 6480 and I am now flat. The market is still overbought and today I will again be a small seller on any rally back to 6510/6540 with a 6560 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow just missed my 17430 sell level by a few points yesterday before trading lower. As I mentioned over the last few days I do not like the Dow at these levels and today I will lower my sell level to 16390/16440 with a 16470 stop.
December BUND
No change as I am still a seller on any rally to 151.10/151.40 with a lower 151.70 stop. A break and close below 149.80 will be short term bearish and if this happens I will then start to look to go short.
Gold Rolling Contract
Gold continues to trade lower with the market now over $90 lower since the 1255 high made 10 days ago. The Daily Sentiment Index is now just 4% bulls and for this reason I will raise my buy level to 1155/1163 with a 1148 stop.
Silver Rolling Contract
The Daily Sentiment Index reading for Silver also posted 4% bulls last night thus increasing my appetite to be long after the 72% sell-off it has had since May 2011. I am still long from early yesterday morning at 15.90 with the same 15.25 stop. If Silver breaks 16.50 I will look to add to my position.
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