Naturally, in the aftermath of the Greece referendum on the bailout producing such a decisive “no” vote to European creditor bailout terms, that was always going to be the main talk across news and wire services yesterday. But the price action in response from the Euro and European equities has been relatively orderly, and in the case of FX, muted. The Euro for example closed last week at 1.11, opened yesterday morning below 1.10, has since recovered to be in the middle of that range. Likewise, the AUD has been mostly hugging 0.75 in the past 24 hours.
For anybody following my new Platinum Service it made 135 points yesterday following last Friday’s 375 point gain. Last Month the new service generated a total return of 3045 points.
The Eurostoxx 600 index lost more ground, down 1.24% with peripheral markets taking more of a hit, Milan down 4.0% on the day. Likewise, peripheral Bond Yields rose in a risk-off market mood, 10y Italian, Spanish and Portuguese yields up between 14-24bps, though that was outflanked by a 346bps rise in Greek Bonds, jumping to news that the ECB had increased the haircuts on Greek sovereign collateral pledged against the ECB’s Emergency Liquidity Assistance to Greece that was held steady at €88.6bn as European Leaders’ meetings kicked off the week in an effort to strike a deal with Greece.
In its statement, the ECB said that it is reviewing the situation closely, it will review the ELA again Wednesday as Greek banks remained shut until Wednesday to stem bank deposit outflows. German Chancellor Merkel and French President Hollande met at the Elysse Palace ahead of Tuesday meetings of EuroGroup Finance Ministers and Heads of State. In a conciliatory gesture, the antagonistic Greek Finance Minister Yanis Varoufakis fell on his sword early Monday to defuse some negotiating tensions. He’s being replaced with the less aggressive Euclid Tsakalotos. Wire services report such comments out of the Merkel-Hollande meeting as “doors remain open”, but that “time is running out”.
The bigger price action came in the commodity space overnight with Oil, Metals and Iron Ore all down sharply. Oil markets have been eyeing potential new Iran supply with on-going nuclear talks with Iran in Vienna, but these commodity moves have global growth concerns written all over them, with Crude closing down a hefty 8%. Brent was down a cool $3.52 (-5.84%), LME copper by 2.93% and spot Qingdao iron ore by $2.98/t to $52.28, off 5.39%. Chinese steel rebar futures fell 2.7% yesterday.
This morning on the economic front we already had German Industrial Production which came in flat versus 0.1% expected. At 9.30 am we have UK Industrial Production. At 1.30 pm we have US Trade Balance and this is followed at 3.00 pm by the very important JOLTS Jobs Openings which of course Fed Chair Yellen plays a lot of attention to. Finally at 8.00 pm we have US Consumer Credit.
September S&P 500
I have to say how resilient the S&P is to any negative news with the market trading over 40 Handles higher since the open on Sunday night when yet again the 2035/2040 major support and 200 day Moving Average have held the market. We now know where the real support lies and until we break and close below this level which by the way has been tried four times already this year it is very difficult to be short the market. The last hour of trading last night saw a huge rally in the S&P and that theme has continued this morning. Today I will move my buy level higher to 2062/2067 with a 2058 stop. If I am taken long and subsequently stopped out of any long position I will use my ‘5 Handle Rule’ to go long again with a stop below whatever new low is printed. Given the price action I still do not want to be short the market at this time.
EUR/USD
The Euro plan worked very well yesterday as shortly before lunch the Euro traded lower to my 1.1020 buy level before having a nice rally shortly after the US Markets opened which enabled me to cover this position at 1.1070 as outlined earlier to my Platinum Members and I am now flat. This morning the Euro is opening lower as the latest EU Summit takes place. I would expect a lot of two-way volatility in the Euro today especially as we get comments from the various Leaders through- out the day. Today my only interest in buying the Euro is on a further drop to 1.0950/1.0980 with a 1.0925 stop. I will also lower my sell level slightly to 1.1120/1.1150 with a 1.1180 stop.
September Dollar Index
My Dollar plan also worked well yesterday as shortly after I posted the Dollar traded higher to my 96.80 sell level before having a nice sell-off which enabled me to cover this position at 96.30 as again outline to my Platinum Members and I am now flat. Today I will again be a small seller on any rally higher to 97.10/97.40 with a 97.70 stop.
September DAX
The volatility in this market is just incredible which is understandable when you consider that the German Banks are owed over EUR90bn by the Greek Banks. I still firmly believe that Greece will not leave the Euro at this time but will do over the next two years and I expect another ‘kick the can down the road’ deal to emerge over the next few days. Today I will move my buy level slightly higher to 10750/10820 with a wider 10690 stop. Again I am trading the DAX in much smaller size to allow for the volatility. Given how oversold the DAX is, I do not want to be short the market at this time.
September FTSE
Finally my FTSE plan worked out yesterday as very late in the New York trading session the FTSE traded lower to my 6460 buy level before having a nice rally overnight which enabled me to cover this position at 6495 as again outlined to my Platinum Members and I am now flat. The FTSE is trading lower this morning and with the market trading back inside its Bollinger Band having been outside yesterday I have bought the market again this morning at 6470. I will leave a 6470 stop on this position which is just below last night’s trading low.
Dow Rolling Contract
Very frustrating as the Dow just missed my 17540 buy level by 10 points shortly after I posted yesterday morning and is now trading 250 points higher and I am still flat. Just like the S&P above you have to admire how resilient this market is especially when you consider that we had five confirmed Hindenburg Omen’s on the clock in June. Today I will move my buy level higher to 17670/17720 with a 17630 stop. Given the price action I do not want to be short the Dow at this time.
September BUND
No change as my only interest in selling this market is still on a rally higher to 152.85/153.15 with a 153.35 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1152/1160 with the same 1139 stop.
Silver Rolling Contract
No change as I am still long from last week at 15.60 with the same 15.20 stop.
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