The US faces another day of freezing temperatures driving up power prices and limiting output. However it is likely that it was the worryingly low Services ISM data that drove Equities,Treasury Yields and the US Dollar lower yesterday. The cold weather should not effect the US Economic data until we get the January reports. Along with the above, Gold was higher and the Japanese Yen was the G10 outperformer on the currency markets.
The US Non-manufacturing Services PMI was lower than expected at 53.0 versus 54.7 last month with the Orders Component particularly weak which bodes poorly for future reports. On a positive note the Employment Component was positive and should feed through to better expectations for next Friday’s Non Farm Payroll Report. The weak US Services data comes in on the back of the weaker than expected Chinese Services PMI which came out at the lowest level since August 2011. The US indices ended the day down 0.25% whilst the European Equities fared better after their Composite PMI came in as expected at 52.1. The German CPI also released yesterday came in as expected at 1.4% but the Euro-Zone Consistent Measure (HICP) was lower than expected and may increase concern about the commentary from the ECB later this week.
This morning on the economic front we have Euro-Zone CPI which will be closely watched to see if we have any further signs of deflation in the system especially with the ECB Meeting on Thursday. Later at 1.30 pm we have the US Trade Balance. This afternoon the Fed’s Williams speaks on the economy in Phoenix, Arizona.
March S&P 500
It has been a cold few days for the S&P as well as the air temperature in the US which has seen the year start with three consecutive down closes. The March S&P has fallen from a high of 1846 on December 31st to yesterday’s low at 1817 and today being a Tuesday could be seen to have a rally especially if the US Senate confirms Janet Yellen as new Fed chief which is expected to announced later this afternoon. Just as I posted yesterday the S&P was trading at my 1824 buy level and after a small rally I was able to cover this position at 1829 and I am now flat. The market managed to close just above the key 1820 support zone yesterday. If the S&P manages to break and close below 1820 I will be an aggressive buyer on any dip to 1800/1807 as I still look for this market to trade higher in the early part of the year before running into trouble. We have the Non Farm Payrolls due on Friday and I do not want to be short ahead of this very important report. At this present time my only interest in shorting the S&P is still from 1840/1844 with a 1847 stop and today I will be a small buyer on any dip to 1814/1818 with a 1812 stop. If I am taken long and subsequently stopped out I still want to be a buyer in the 1800/18007 (mentioned above) support zone with a 1797 stop.
Euro/USD
The Euro worked really well yesterday as the market had a nice rally off my 1.3590 long position and I was able to cover this position at 1.3640 and I am now flat. Yesterday was another great example of how well the Bollinger Band and Williams Index are as technical signals especially when they occur at the bottom of the Band. Today I will still be a small buyer on any dip to 1.3590/1.3610 with the same 1.3560 stop which is just below yesterday’s low. My only interest in selling the Euro is on a rally to 1.3700/1.3730 with a 1.3750 stop.
March DAX
I was very unlucky with my 9420 buy level for the Dax yesterday as after I posted it made a low of 9423 before having a nice rally to 9478 – I am still flat. As I have mentioned over the last few days as long as the Dax can stay over 9350 the market is okay but a break and close below this level will be bearish. Today I will be a small buyer from 9380/9410 with a 9345 stop. I do not want to be short the Dax at this time especially with the ECB Meeting on Thursday.
March FTSE
No change as I am still long from 6660 with the same 6640 stop. The FTSE has been trading in a very narrow range since the start of the year and I am still looking for it to break higher. However a break and close below 6640 will be bearish.
Dow Rolling Contract
The Dow worked very well today as after I posted it traded down to my 16420 buy level and after a nice rally I was able to cover this position at 16460 and I am now flat. I still like to buy the market on dips and so today I will be a small buyer from 16370/16400 with a 16340 stop. I do not to be short the Dow at this time especially with Non Farm Payrolls due on Friday.
March BUND
Unfortunately i covered my long 139.00 position too early at 139.20 and I am now flat. Today I will raise my buy level to 139.30/139.60 with a 139.05 stop which is just below yesterday’s low.
Gold Rolling Contract
Today I was lucky with my Gold buy order and stop. I had an order to buy Gold at 1225 with a 1215 stop but the low was 1216 and I am still long. I still like Gold and I am going to raise my stop to 1220 on this position as I still look for it to break and close over the key 1245 resistance level. Remember a break and close over 1245 could see Gold challenge the next resistance level at 1300.
Silver Rolling Contract
No change as I am still long at 18.90 with the same 19.50 stop. If Silver breaks 20.40 and trades over this level for 1 hour I will add to my long position. I will then raise my stop to 20.10 on the whole position.
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