Yesterday, Equity markets across Asia, Europe and into the US session were lower with the decline again dominated by the tech sector due to concerns over high valuations. The NASDAQ closed down another 1.16% to post its largest 3 day losing streak since November 2011. European Equities were catching up on last Friday’s moves in the US with the DAX, for example, closing down nearly 2%. This climate of risk aversion gave Bonds a boost but interestingly the US Dollar is not being seen as a safe haven and is lower against all currencies in the G10.
The Swiss Franc is the star performer due mainly to its ‘safe haven’ status but also after the higher than expected Swiss Inflation numbers released yesterday morning. The safe-haven bid may be a result of renewed concerns surrounding Russia and the Ukraine although surrounding countries are also expressing their concerns.
In Europe there was some relatively positive news from Germany’s Industrial Production which was as robust as expected, coming in at +0.4%. There was much talk yesterday that the ECB may pursue QE through its Asset Backed Security Bond but at this stage the markets may want to see some action before selling the Euro.
This morning on the economic front we have UK Industrial/Manufacturing Production and the NIESR GDP estimates. We have no data of note from the Euro-Zone but at 1.30 pm we have the latest US NFIB Small Business Optimism Index.
June S&P 500
The incredible volatility continues with the S&P down almost 60 handles from the high, which was made after the Non-Farm Payroll numbers on Friday afternoon, to yesterday’s low. The S&P plan worked well, as after I posted, the market traded to my 1851 buy level and after a nice rally, after the US opened, I was able to cover this position at 1856 and I am now flat. As I mentioned yesterday as long as the S&P can hold the 1830/1840 support zone the market is bullish but a closing break of this key support will see me look to set up a short position. This market has finished higher on 13 of the last 14 Tuesdays and generally when we have had a bad Monday the market turns around and trades higher on the Tuesday. The S&P also left a very small gap yesterday from 1857.50/1859.50 and today I will be a small buyer from 1834/1840 with a 1829 stop. I will also lower my sell level to 1857/1862 with a 1865 stop.
Euro/USD
The Euro just missed my 1.3690 buy level before trading higher yesterday but at least we were not short. I find it very difficult to get to bearish of the stock market especially when the Euro is holding on and today I will raise my buy level to 1.3680/1.3710 with a 1.3660 stop. I will also be a small seller on any rally to 1.3790/1.3820 with a 1.3840 stop.
US Dollar Index
No change as I am still long from two weeks ago at 80.20 with the same 80.00 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 79.70 with a 79.40 stop. The 100 Day Moving Average comes in at 80.60 and we really need to see this market break this level to give me more confidence that the US Dollar is going to break higher.
June Dax
Despite the very good economic news out of Germany yesterday the Dax was still hammered as the market closed down nearly 2%. After I posted yesterday morning it traded down to my 9540 buy level. The market held this level for quite a while before selling off into the close and unfortunately stopped me out of this position for a small loss at 9495 and I am now flat. The Dax has key support from 9450/9485 and today I will be a small buyer in this region with a 9435 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 9320/9360 with a 9295 stop. I will also be a seller on any rally to 9570/9600 with a 9620 stop.
June FTSE
The FTSE continues to trade the strongest of the other major indices. After I posted yesterday morning it started to rally which enabled me to cover my long 6585 position at 6615 and I am now flat. I still like the FTSE and today I will again be a buyer on any dip to 6525/6545 with a tight 6510 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow plan also worked well yesterday as after I posted it traded down to my 16380 buy level before having a nice rally after the US opened and I was able to cover this position at 16420 and I am now flat. it subsequently sold off but interestingly again held the key 16210/16250 support level. Today I will be a small buyer on any dip to 16210/16240 with a tight 16180 stop. I still do not want to short the Dow at this time as I want to see how the market trades at this key support.
June BUND
No change as I am still a buyer on any dip to 143.10/143.25 with the same 142.88 stop.
Gold Rolling Contract
Gold made a low of 1295 yesterday just missing my 1293 buy level and is now trading higher this morning at it tests key resistance at 1310. I still like Gold and today I will raise my buy level to 1295/1302 with a 1289 stop.
Silver Rolling Contract
Just like Gold, Silver just missed my 19.70 buy level before trading higher and I am still flat. Today I will raise my buy level slightly to 19.60/19.90 with a 19.30 stop.
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