The downtrend in world equity markets continues since the release of the better than expected Non Farm Payrolls data, last Friday. Asian stock markets are down overnight on concerns that the Chinese slowdown is weighing on corporate earnings. China yesterday pumped $42.5billion into its banking system in another sign that the PBOC is relying more on reverse repos to ease monetary policy. German and US Bonds saw some safe haven buying. The equity markets were not helped buy the worse than expected NFIB small business survey which slipped to 92.8 versus 93.5 expected. There was nothing new from Merkel’s visit to Greece or the EC Finance Ministers meeting which concluded yesterday. As a result, markets will continue to focus on Spain and Greece.
Meanwhile in the US the Feds Beige Book is due today. Also later, a couple of non voting Fed officials on the FOMC, Fisher and Kocherlakota are scheduled to speak.
Dec S&P 500
Yesterday, just after I posted the S&P dropped into my buy zone with a 1445 low before rallying to 1453.5 after lunch. This was before sentiment took over and the market ended up getting slammed into the close and even broke and closed below the very important 1440 support level. I broke my own rule of never trading the same commodity the same way on the same trading day and, having made a nice gain on my 1446 long which I sold at 1453, I subsequently went long again at 1445 and I was stopped out at 1439 – I am now flat.
The fact that we closed below the now very important 1440 resistance level means the game has changed. Today I will look to go short from 1438/1442 with a 1444 stop. I am only interested in going long in front of 1420 with a 1417 stop as this 1420/1425 support is the last defense line for the bulls. A break and close below 1420/1425 support will be very bearish and if this happens the market will then focus its attention on the open gaps going back to 1362 from early August.
Euro/USD
The Euro also dropped into my 1.2900/1.2920 buy zone with a 1.2907 low and I went long at 1.2912 and took a nice gain at 1.2955 before, following the lead from the stock markets, it got hit hard, late on, and is now back to the 1.2870 area. Thankfully, unlike the S&P, I did not trade the Euro again and I am still flat. The next key support fro the Euro is 1.2790/1.2820 and I will be a buyer here against a 1.2775 stop.
Dec BUND
I am still long the Bund from 141.20 and I am surprised it is not higher given what is going on in the equity markets. Today I will raise my stop to break-even and I will also look to take profit in front of 141.80.
Dec DAX
The Dax worked out very well as I have been saying for the last week that it is trading heavy. I took a nice gain on my 7325 short at 7240 and I went long at 7225 and I am still long. The 7200/7230 is very strong support and as I made a nice gain on the short side I will leave a 7195 stop on this position.
Dec FTSE
I was stopped out of my 5795 long for break-even just after I posted and I am still flat. I am going to stay this way for the next 24 hours to see how we trade.
Euro/YEN
The Euro/Yen dropped into my 100.70/101.00 buy zone late on yesterday and I went long at 100.80. I will leave my stop the same at 100.50 and I will look to take profit on any rally back to 101.20.
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