Profit taking on the US Dollar has been the big theme over the last 24 hours which has seen the Dollar Index stronger by over 1.0% with all G10 major currencies seing gains against the Greenback. The Euro led the charge as it moved from 1.2520 yesterday morning to over 1.2670 at one stage last night before falling back to 1.2610 this morning. The stronger Dollar helped Gold which rallied 1.2% since yesterday morning. Not even additional soft Euro-Zone data could help support return to the Dollar against the Euro with the single currency continuing its rally with only the briefest of hesitation. German Factory Orders fell a hefty 5.7% in August, more than double the expected 2.5% and more than countering July’s 4.9% rise, which is testimony to the struggling level of German Industrial activity in the months ahead. German Industrial Orders have now been flat overall for almost three years.
The Euro-Zone Sentix Investor Confidence Index for October was also weaker than expected at -13.8 versus -9.8 last month. US equity markets closed flat yesterday having opened a lot stronger whilst Treasury Bond Yields were also softer.
This morning on the economic front we have already had the German Industrial Production release which came in a lot weaker than expected at -4.0% and this is hitting the Dax. At 9.30 am we have UK Industrial Production whilst the only of data of note due from the US is at 3 pm when the JOLTS Jobs Openings are released. The Fed’s Kocherlakota and Dudley will both speak on Monetary Policy at 7.30 pm and 8:00 pm, respectively. Finally former Fed Chairman Bernanke is due to speak at the World Business Forum after the markets close at 9.30 pm.
December S&P 500
The S&P plan worked well yesterday as shortly after I posted the market was trading at my 1969 sell level. The market could not hang on to its gains after it opened in Chicago and soon reversed its rally which enabled me to cover this short position at 1958. Soon after it continued to trade lower before finally trading down to my 1953 buy level. The S&P made a 1950 low before having a nice rally into the close which enabled me to cover this long position at 1960 and I am now flat. Despite the late day rally the advance/decline ratio still closed lower. As I mentioned yesterday we still have an ‘Open Gap from last week which was partially filled today but its is still big at 1938.50/1950. I expect this gap to be filled over the coming days and today my only interest in buying the market is on a dip to 1941/1946 with a 1936 stop. Yesterday’s high at 1971 will be key resistance going forward ahead of the main resistance at 1992. On the downside, a break and close below 1935 is short term bearish. Today I will again be a seller on any rally back to 1965/1970 with a 1973 stop which is just above yesterday’s high.
Euro/USD
Finally the rally that I have been looking for in the Euro happened yesterday with the market moving nearly 170 points higher form yesterday’s low. I covered half of my 1.2530 long position at 1.2620 and I will raise my stop to 1.2560 on the other half as I look for the Euro to trade back to at least 1.2790. The Daily Sentiment Index closed at just 3.0% bulls strengthening my belief that we will have a decent counter trend rally.
US Dollar Index
The Index just missed my sell level before trading lower and I am still flat. Today I will lower my sell level to 86.40/86.70 with a lower 87.10 stop.
December DAX
I was lucky with my Dax plan yesterday as after I posted the market traded down to my 9270 buy level before the market spiked higher which enabled me to cover this position at 9310. The Dax subsequently fell apart and is now trading at the 9160 level as I write. The next key support comes in at 9080 and a break and close below here is very bearish, opening up the possibility of a move lower to 8600 and even 8320. The Dax is trading very weak when you consider that the ECB have already started their own form of QE and this is reflected in the price action. The Dax needs to break and close back over 9500 for me to turn bullish. Today given how significant the 9080 support level is I will be a small buyer from 9080/9110 with a 9055 stop. I will also be a small seller on any rally back to 9270/9310 with a 9330 stop.
December FTSE
No change as I am still a small buyer on any dip to 6460/6490 with a 6435 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow just missed my sell level by 5 points yesterday before falling 150 points and I am still flat. Today I will lower my sell level to 17070/17100 with a 17130 stop. I still do not want to be long the Dow at this time as I am still expecting a significant correction over the next few weeks.
December BUND
The Bund has continued to trade in a very narrow range around the key 150 level. Given my apathy to the equity markets I expect the Bund to rally from here and today I will be a small buyer from 149.60/149.90 with a 149.35 stop.
Gold Rolling Contract
Gold reversed sharply higher yesterday having been at a price of 1183 early yesterday morning. The evidence for an upward push continues to mount. Last Friday saw the Daily Sentiment Index with another low reading of 7% bulls which is keeping a measure of investor optimism at negligible levels. This 1183 low is significant because on two occasions in 2013 we tested this level before mounting huge rallies. After the spike higher yesterday I have covered half of my aggressive 1187 long position at 1205 and I will raise my stop on the other half to 1180 as I look for Gold to trade higher to at least 1250.
Silver Rolling Contract
No change as finally we saw a decent rally in Silver yesterday. I am still long at 16.95 and I will leave my stop the same at 16.45 on this position. If Silver breaks 17.80 I will add to my position and if this happens I will leave a 17.30 stop on both trades.
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