Markets ended the day on a positive note after a rise in German investor confidence and some improved optimism that progress is being made to advert the US Fiscal Cliff. The German ZEW Survey rose to +6.9 from -15.7 in November, well above expectations of -11.5. The Index is now at its highest level since May and has further calmed fears that the German Economy will fall into recession early next year particularly when viewed alongside the recent solid German IFO and Factory Orders Data. In the US some senior Republicans appear open to ceding some ground on Democrat aims to raise taxes on the wealthiest from 29.6% to 35%, raising hopes that a deal can be done to avert the Fiscal Cliff. However House Speaker Boehner said he is still waiting for President Obama to propose further spending cuts.
This morning on the Economic front we have UK Employment and weekly Average Earnings at 9.30 followed by Euro-Zone Industrial Production. The OPEC meeting begins in Vienna and then all eyes turn to the FOMC announcement at the earlier time of 5.30 PM. I would expect Operation Twist to be replaced with $25-45bn of outright Treasury purchases per month along with continued buying of Mortgage Back Securities.
Dec S&P 500
The S&P just missed my 1416 buy level after I posted yesterday and as expected has continued to rally into the FOMC meeting with the announcement at the earlier time of 5.30pm. The market broke and closed above the important 1425/1430 area and also closed over the 1431 high made after Obama was elected. I am now short term bullish and I will look to reset my long position from 1425/1429 with a 1422 stop. I expect the market to trade up to the next resistance area at 1445/1450. Given that it is FOMC Day I do not want to be short and I will see what the market reaction is to Bernanke’s press conference.
Dec FTSE
The FTSE continues to under perform the rest of the Equity markets and I am amazed that I have not been stopped out of my 5925 short position from Monday. The FTSE is extremely overbought and I am going to give it some room to fall by raising my stop level to 5950. I will look to take profit on any dip to 5860/5880.
Euro/USD
After the much stronger than expected German Zew survey the Euro traded up to my 1.3000 sell level. I am still short and just like the FTSE I am going to raise my stop to 1.3030 as I want to give this trade some more room.
Dec DAX
I was very unlucky as after I posted yesterday the Dax just missed my buy level by 10 pips and I am still flat. The market is very overbought and at the top of the Williams Index and this morning I will look to go short on any further rally to 7630/7650 in small size with a 7670 stop. I will also look to buy the market on any dip to 7540/7560 with a 7520 stop which is just below yesterdays low.
March BUND
The Bund looks tired and this morning I will lower my sell level to 145.60/145.80 with a 146.05 stop as I do not want to chase the market lower from here as anything can happen from the FOMC meeting.
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