With little news for markets to focus on yesterday, equities lost further ground in the aftermath of the San Francisco Fed’s research paper which suggested that investors had been underestimating the odds of an earlier Fed interest rate hike. US Stock markets fell 0.6% whilst European markets closed down 04% and are opening lower this morning. There was a short-lived rally in Apple shares after the company launched its Apple Watch and iPhone 6 but by the end of the trading session it was down 0.4%. On the data front the only US economic release was the NFIB Small Business Optimism Index which rose to 96.1 in August versus 95.7 in July which is still close to the recent high of 96.6 in May, the strongest reading since 2007.
There was some excitement in the UK after Bank of England Governor Carney said that a Spring rate rise would be consistent with the BoE’s mandate. He said that the UK recovery has exceeded expectations and has momentum and that the decision on rates has become more balanced. Sterling spiked on this news and was also supported by better than expected UK Industrial Production data which rose 0.5% in July.
Today on the economic front we have no data of note from the Euro-Zone or the UK whilst the only release from the US is Wholesale Inventories at 3 pm At the same time former Fed Chairman, Ben Bernanke speaks at the Credit Union Conference in Orlando.
September S&P 500
The S&P plan worked well yesterday especially with my caution around not wanting to be long and expecting the market to finally break and close below 1990. After I posted yesterday the S&P was trading at my 2001 sell level. Given that this is September and the fact that I am expecting a decent correction I only covered half my short position at 1991 and I will leave a break-even stop on the other half which is the first time that I have put on a core short macro position in 2014. I will also be a small seller on any rally back to 1991/1995 with a 1998 stop. Given how over extended this market is trading and the fact that nearly every Wall Street Analyst is bullish I do not want to be long the market at this time.
Euro/USD
Finally the Euro had a decent rally which had been indicated by the low Daily Sentiment Index Reading. Unfortunately the market did not trade down to my 1.2840 buy level before having this rally and I am still flat. The 1.2990/1.3020 level will be strong resistance to any rally from here and today I will be a small seller in this region with a 1.3040 stop. My only interest in buying the Euro today is on a drop to 1.2840/1.2870 with a 1.2820 stop. The key support for the Euro going forward surrounds the 2013 lows at 1.2750/1.2770. as a break and close below here will probably lead to an acceleration lower.
US Dollar Index
The US Dollar finally took a much needed breather yesterday having traded as high as 84.40. One scary indicator for the Dollar is the Relative Strength Index (RSI) which closed at 83 on Monday, the highest level in six years and confirms how overbought the Dollar is trading. The Index has good resistance from 84.50/84.80 and I will be a seller here with a 85.10 stop. Given how strong this RSI reading is I do not want to be long the Dollar at this time.
September DAX
Yesterday was not a misprint as given that the Dax has rallied over 700 points over the past two weeks my only interest in buying this market is on a dip to 9565/9595 with a 9535 stop. Despite how much the Dax has risen and given the fact that the ECB is starting QE I still do not want to be short this market at this time.
September FTSE
The FTSE had a relatively quiet trading session yesterday and I am still flat. Today I will again be a buyer on any dip to 6765/6785 with a 6740 stop. Just like the Dax, I do not want to be short the FTSE at this time.
Dow Rolling Contract
Despite having numerous opportunities to take out the July closing high at 17150 the Dow has failed to do so and unless we break this level soon the Dow could be setting itself up for something nasty on the downside. I am still flat and today I will be a small seller from 17040/17080 with a 17110 stop. A break and close below 16980 will be at least short term bearish.
December BUND
Yesterday was very frustrating as I was looking for the Bund to sell-off but unfortunately the market did do so but without me being able to get a short position on board and I am still flat. The market is back trading at the 1.0% level and I would expect some resistance at this yield level before trading higher. For this reason I will leave my sell level the same at 148.90/149.20 with a 149.55 stop. Today I will also be a small buyer on any further drop to 147.60/147.90 with a 147.35 stop.
Gold Rolling Contract
The Gold plan worked well yesterday as the market, which had been heavy for most of the trading session, finally hit my 1248 buy level before turning around after the equity markets started to sell-off. This saw a nice bounce in Gold and enabled me to cover this long position at 1258 and I am now flat. As I mentioned yesterday the key level to watch for is 1241 which was made earlier in the year as a break and close below here opens up the December 31 low of 1181. Today I will again be a small buyer from 1248/1253 with a 1237 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip to 18.50/18.85 with a 18.25 stop/
GBP/USD
This is a market that I have not traded in a very long time but this morning I have gone long at 1.6125 with a 1.6050 stop which is just below yesterday’s low. Cable was hit hard on the Scottish Referendum Poll over the last couple of days having already being hit hard since it made its recent high at 1.7200. It is oversold and trading at the bottom of the Bollinger Band but the Williams Index has started to turn up and I am looking for a bounce back to 1.6270 which was the low on Friday before the market gapped lower on Sunday night following the Poll in the Sunday Times Newspaper.
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