Yesterday was another interesting trading session in Europe with equities closing mixed. Bank stocks were higher following the Portuguese Government’s rescue of the Banco Espirito Santo Group, without ‘bailing in’ unsecured depositors and other senior creditors, thus lifting sentiment in Lisbon where stocks closed 0.9% higher. Portuguese Bonds also rallied with the 10-Year Bond rising 10 basis points as the government used funds from its previous bail-out to rescue the Group without increasing its public debt.
US Equities had a better session, helped by Berkshire Hathaway Shares which rose 3.1% after posting record quarterly profits. Sentiment was also helped by the latest Fed’s Quarterly Survey of Senior Loan Officers which reported ‘a continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand’. The VIX Volatility Index eased back after last week’s surge and Commodities were generally stronger while Currency markets were quiet.
This morning on the economic front we have German, Euro-Zone and UK Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Retail Sales while at 2.45 pm we have US Services PMI. Then at 3 pm we have ISM Non-Manufacturing Composite and Factory Orders.
September S&P 500
The S&P plan worked well helped by the the very oversold reading on both the Bollinger Band and Williams Index, coupled with the extreme oversold reading on the McClellan Oscillator. This Oscillator Reading may only come into play a few times in the year but when it does it can be very powerful. Yesterday after I posted and shortly after the US markets opened the market traded down to my 1919 buy level before having a huge rally up to 1937 which enabled me to cover my long position at 1930. I then went short at 1935 and I covered this position just before the close at 1930 and I am now flat.
As I mentioned yesterday, it is going to take a lot to break the 1900/1910 support level whilst after last week’s drubbing it will take a lot for the market to break back above the 1940/1950 resistance point. Today I will be a small buyer from 1924/1928 with a 1918 stop. I will still be a seller on any rally back to 1936/1941 with a 1946 stop.
Euro/USD
In contrast to the Equity markets the Euro has traded in a very narrow range over the last few days and I am still flat. I will still be a small buyer on any dip to 1.3365/1.3395 with the same 1.3345 stop.
US Dollar Index
Still no change as I am a buyer on any dip to 80.00/80.20 with the same 79.75 stop.
September DAX
The Dax plan also worked well as shortly after I posted it was trading at my 9170 buy level and following a quick rally I was able to cover this position at 9220 and I am now flat. It then proceeded to have another nasty sell-off shortly after the US markets opened before re-grouping later in the session. It is trading higher this morning helped by better than expected earnings from BMW. It is still extremely oversold and trading at the bottom of its Bollinger Band. So far we have not had a sustainable rally but interestingly the Williams Index has given a buy signal this morning while the RSI is trying to turn up from a very oversold reading. For these reasons I have bought the market this morning at 9210 and I will leave a 9160 stop on this position. If I am stopped out I will be a more aggressive buyer in front of 9130 with a 9085 stop. My only interest in selling the Dax is on a rally back to 9340/9400 with a 9440 stop. After last week’s sell-off the 9380/9400 should be formidable resistance.
September FTSE
The FTSE again traded in a very narrow range and I am still flat as none of my parameters were hit. Today I will still be a seller on any rally to 6675/6710 with the same 6720 stop. I will also be a small buyer on any dip to 6580/6600 with a 6565 stop.
Dow Rolling Contract
The Dow plan also worked well helped by the extreme oversold McClellan Oscillator reading. Despite yesterday’s rally the Oscillator is still showing a -201 reading and is still oversold. After the US markets opened the market traded down to my 16460 buy level before having a nice rally which enabled me to cover this position at 16530 and I am now flat. Today I will again be a small buyer on any dip to 16470/16510 with a 16445 stop. Given how oversold the Dow is trading I still do not want to be short at this time.
September BUND
Still no change as I am short from last week at 148.50 with the same 148.80 stop.
Gold Rolling Contract
After I posted yesterday morning Gold traded down to my 1287 buy level. As I am still long Silver and following a small rally in Gold overnight I have covered my position this morning at 1293 and I am now flat. Today I will again be a small buyer on any dip to 1278/1285 with a 1273 stop.
Silver Rolling Contract
Silver is still trading heavy in relation to Gold. I am still long from last week at 20.35 and I will leave my stop the same at 19.85.
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