Equity markets made further gains yesterday with US markets up 0.5% and European markets up 1.4%. Europe had a bit of catching up to do after the gains in the US on Friday but were supported by better news for Greece and Portugal. The European meeting of Finance Ministers got underway yesterday and the Ministers released a statement saying that the Fiscal and Structural Reform Process in Greece was broadly on track and conditionally approved the next EFSF installment of €3 billion in two tranches. An additional €3.8 billion will come from the ECB and the IMF. Markets were also comforted by the weekend agreement in Portugal to keep the Governing Coalition together.
The gains in Equity markets came despite some weak German Industrial Production data which was well below expectations at -1% versus -0.5% expected. After the close of the US markets last night Alcoa kicked off the US Q2 Earnings season with adjusted earnings per share of 7c slightly better than the 6c expected.
This morning on the economic front we have UK RICS House Price Balance (Just Released: Demand came in at a 4 year high which is helping the FTSE and Sterling this morning), Industrial Production and the Trade Balance, followed in the US by the NFIB Small Business Optimism Index.
September S&P 500
The S&P continues to amaze me by its resilience! Three weeks after the Fed announced that it was tapering its Asset Bond Purchasing Programme, leading to a 100 handle drop in the S&P, the market is now back to where we were ahead of the FOMC meeting despite the back up in Bond Yields.
Yesterday it traded up to my 1637 sell level with a 1639.75 high before having a small sell off and I was able to cover this position at 1632 and I am now flat. The 1650/1660 area is the next key resistance and a break and close over 1660 will be very bullish and could possibly lead to a test of 1740 in the weeks ahead. Today I will be a small seller on any rally to 1649/1654 with a 1662 stop and I will also be a buyer on any dip to 1635/1639 with a 1630 stop which is just below the low made in the New York session.
Euro/USD
I had the correct idea in not being short the Euro yesterday but unfortunately the market never hit my 1.2810 buy level first before having a nice rally and I am still flat. I like the fact that the Euro closed over 1.2830 and today I will be a buyer on any dip to 1.2830/1.2850 with a 1.2810 stop. I do not want to be short the Euro at this time.
September DAX
The Dax also just missed my 7870 buy level before having a nice rally to my 7995 sell level. I went short here and I was able to cover this position at 7955 and I am now flat. The Dax is now approaching the key 8060 level as I write this commentary and I have gone short here in small at 8060 with a 8105 stop. I will also be a buyer on any dip to 7970/8000 with a 7950 stop.
September FTSE
The FTSE has now gone from the bottom to the top of the Bollinger Band in two weeks and today, as the FTSE is overbought, and also at the top of the Williams Index and I will be a small seller between 64750/6510 with a 6530 stop. I do not want to be long at this time given how overextended the FTSE is trading.
Gold Roilling Contract
Gold worked well as I was able to buy the market at 1222. I have covered this position this morning at 1255 and I am now flat. I still like Gold as long as we stay over the 1179 low made two weeks ago and today I will look to reset my long position on any dip to 1230/1242 with a 1218 stop. I will also be a seller on any rally to 1290/1300 with a 1310 stop.
Silver Rolling Contract
Silver also worked well yesterday as I was able to buy the market at 18.90 and after a nice rally overnight I have been able to cover this position this morning at 19.40 and I am now flat. I still like Silver as I believe it is putting in a long term bottom down here and today I will look to reset my long position on any dip to 19.00/19.30 with a 18.80 stop.
September BUND
No change from yesterday’s update.
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