Equity markets lost ground yesterday as another day passes with no Budget resolution. With the debt ceiling set to be breached in just 9 days time market nervousness is rising. President Obama and House Speaker John Boehner continue to blame each other for the Government shutdown. Obama reiterated that he will not negotiate with the Republicans and dared Boehner to hold a vote in the House of Representatives to see if there are enough votes to pass a clean continuing resolution that would re-open the Government and raise the debt limit without any concessions. But Boehner is still insisting that there will be no debt limit increase and no end to the shutdown unless Democrats negotiate a broader agreement with the Republicans.
US Equity markets fell 0.9% whilst European stocks were down an average of 0.2%. Currency markets have consolidated with little or no movement over the past 24 hours whilst Bond Yields are also little changed. European markets were not helped by the fall in Euro-Zone Sentix Investor Confidence Index to 6.1 from 6.5 in September.
This morning we have no data of note from Europe whilst later from the US we have the Trade Balance and NFIB Small Business Optimism. Later the afternoon the Feds Plosser is due to speak on Economic Outlook and Monetary Policy.
December S&P 500
The Dow cash market made a new low yesterday at 14920 while the S&P also closed lower but did not confirm the Dow’s intraday low. Instead the S&P’s cash intraday low of 1670.36 remains on October 3. This non confirmation would appear to be a bullish indicator for prices over the near term. The S&P has now closed down for 10 of the past 13 trading sessions resulting in the market been oversold on a Daily Basis. None of my trading guidelines got hit yesterday however overnight the S&P traded down to my 1665 buy level. The 200 Day Moving Average is at approximately 1662 and this 1660/1665 area should offer good support. I will leave a 1659 stop on my 1665 long position and if I am stopped out I will be a more aggressive buyer on any dip to 1642/1650 with a 1638 stop. Given that I expect that we will get a resolution in Congress I do not want to be short the S&P as if and when we get an agreement we will get a very sharp rally.
Euro/USD
The Euro just missed my 1.3600 sell level before spending the rest of the day trading in a very narrow range. The Williams Index has started to turn down and for this reason I have cut my 1.3570 long position for a break-even this morning and I am now flat. I will lower my sell level to 1.3600/1.3630 with a 1.3650 stop. My only interest in buying the Euro is on a drop to 1.3450/1.3480 with a 1.3435 stop.
December DAX
Shortly after the US market opened the DAX had a nice rally off its 8510 low and traded up to my 8595 sell level. The Dax looks bid this morning as we have had no follow through to the downside despite the weaker US market and for this reason I have covered my 8595 short position at 8605 for a small loss and I am now flat. Today I will be a small buyer on any dip to 8520/8545 with a 8495 stop which is just below the low made yesterday morning. I do not want to be short the Dax today.
December FTSE
The FTSE worked out well yesterday as the market traded down to my 6370 buy level before having a nice rally and I was able to cover this position at 6405 and I am now flat. I still like the FTSE and I will use any dip to 6345/6365 to reset my long position with a 6320 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow worked well yesterday as shortly after I posted the market traded down to my 14930 buy level with a 14915 low before having a nice rally and I was able to cover this position at 14990 and I am now flat. The Dow is still very oversold and is at the bottom of its daily Bollinger Band and Williams Index. For these reason I will be a buyer again on any dip to 14890/14920 with the same 14825 stop.
December Bund
No change as I am still a small buyer on any dip to 139.60/139.85 with a 139.40 stop.
Gold Rolling Contract
Gold just missed my 1305 buy level before having a nice rally and I am still flat. Today I will raise my buy level to 1312/1318 with a 1304 stop which is just below yesterdays low.
Silver Rolling Contract
Silver continues to consolidate and is trading stronger than Gold. Remember Silver lost over 60% from its May 2011 high and for this reason I find it very difficult to short the market. Today I will raise my buy level to 21.80/22.20 with a 21.50 stop which is just below yesterdays low.
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