Opinion – Wednesday 10 December 2014

The last 24 hours has brought more twists and turns with the US Dollar losing ground against its major counterparts including the Japanese Yen which itself had a wild trading session. Even the Euro made up some ground against the Dollar despite Greece being all over the wires for the wrong reasons. The Dollar fell despite the Labour Market JOLTs Job Openings data coming in stronger than expected, and the NFIB Small Business Optimism rising to a post Global Financial Crisis high with a big jump in business expectations for the economy.

It was a big 24 hours for equities triggered by Greek PM Samaras bringing forward a Parliamentary vote on a new President, a vote he could lose. Such a prospect could see Parliamentary Elections early next year and a change of Government to the anti-bailout party Syriza. Greek Bond Yields jumped, the curve inverted, and the Athens Stock market slumped a cool 12.8%. This  also led to a rise in  Euro periphery yields. European Equities fell 23%, currency volatility ensued and with the US Dollar losing ground, Gold and Silver ended the day up 3% and 5% respectively.

Today is very light on the economic front with no data of note due from the Euro-Zone. At 9.30 am we have the UK Trade Balance while at 7 pm the US will release its Monthly Budget Statement.

December S&P 500

The S&P had another wild trading session yesterday. At one stage it looked like the market was going to fall off a cliff only for it to do another ‘Tuesday Turn Around’ and rally hard into the close. As I mentioned yesterday if the S&P was below 2048 at 3.30 pm I would add to my short 2079 position which I did at 2046. The market subsequently traded lower to a 2033.50 print before literally turning on a dime and eventually cutting me out of both positions at 2057 and I am now flat. I am still looking at the 2045/2050 as an inflection point as a close below this support will be bearish. The problem with looking for lower prices going forward is the fact we have the FOMC Meeting and Yellen press conference next Wednesday and the December Expiration for all the Futures and Options Contracts the following Friday. This means that the market may well hold up until the end of next week which is exactly what happened in the lead up to the September 19 top which which was also a week when we had an FOMC Meeting and September Expiration. The market subsequently fell 10% from this September 19 high.

Today I am going to stay flat unless we break the 2045/2050 now major support. If we break this support zone I will go short with a 2054 stop. If on the other hand the S&P continues to rally I will look to go short from 2073/2078 with a 2083 stop.

Euro/USD

After I posted yesterday morning the Euro rallied hard just missing my 1.2340 buy level in the process. I am still flat and today I will raise my buy level slightly to 1.2320/1.2350 with a tight 1.2295 stop.

US Dollar Index

The Dollar Index plan worked out well yesterday as after I posted the Dollar fell as expected and tested the key 88.20 support level. I covered my 89.25 short position at 89.30 and I am now flat. Today I will again be a seller on any further rally to 88.85/89.05 with a 89.30 stop. As I mentioned yesterday a break and close below 88.20 will be short term bearish and could lead to an acceleration lower.

December DAX

The Dax plan thankfully worked out well yesterday after a difficult few days trading. After I posted the Dax was trading at my 9950 level before having a nasty sell-off on the Greek news which enabled me to cover this position at 9840 and I am now flat. The Dax is following the S&P higher this morning and today I will again be a small seller on any further rally to 9930/9960 with a tight 10005 stop. Given how over extended the Dax is trading I do not want to be long the market at this time.

December FTSE

The FTSE was hit hard all day yesterday with the market eventually hitting my 6535 buy level. I am still long and I will leave my stop the same at 6495. However I am disappointed that the FTSE is not following the other major Indices higher this morning,meaning I will not be looking for too much out of this trade on the upside.

Dow Rolling Contract

No change as I am still short from last Friday at 17970. Today I will lower my stop to 17870. If I am stopped out of this trade I will be a more aggressive seller in front of 17940 with a 18010 stop.

March BUND

This morning the Bund has traded higher to my 154.00 sell level. I am still short but as I do not want to risk too much on this trade I will lower my stop to 154.30.

Gold Rolling Contract

Finally Gold has built on its significant Key Day Reversal from Dec 1 with a 3% rally yesterday as the market finally broke and closed over the key 1204/1210 resistance level. I went long at 1215 and I have covered half of this position this morning at 1232 and I will raise my stop to 1205 on the other half. I will also add to my position on any dip to 1215/1221 with the same 1205 stop.

Silver Rolling Contract

Silver has now rallied an incredible 19% since its 14.49 low on the morning of Dec 1. I am still long at 15.10 and today I will raise  my stop on this position to 16.50 which is just below the 16.70 support level. Silver has the potential to rally further as remember in May 2011 Silver made a high at $51 before getting crushed.

January NYMEX Crude