There remains a tinge of concern about global economic growth, particularly in China. Worries about Chinese corporates and some poor US data contributed to weaker markets yesterday with this theme continuing in Europe this morning. US Equities closed lower but importantly, Copper closed sharply lower. Oil to was down and, the safe haven, Gold is sharply higher from where we were 24 hours ago.
Whilst there was no economic news out of China, a story that another company, Baoding Tianwei, has been suspended over concerns about its ability to meet debt payments continues to raise concerns about the broader credit market in China and thus the true state of economic growth. This tension is reported to have had a negative effect on Copper prices, in particular, which fell nearly 3%.
In the US, Wholesale Sales were unexpectedly lower as was the NFIB small business survey which came in at 91.4 from 94.1 last month with the weather again to blame apparently.
Meanwhile the ECB has honed its forward guidance on interest rates by giving investors a new economic gauge to watch. ECB President Dragi has cited the so called ‘Output Gap’, which is a measure of spare economic capacity, as the reason why the 18 Nation Euro area will need low interest rates even after inflation and growth pick up. This is likely to to be the talking point at an economic conference in Frankfurt today.
This morning on the economic front we have UK Trade Balance at 9.30 am followed by Euro-Zone Industrial Production. For the second day this week we have no data of note from the US.
March S&P 500
The S&P, having been up for the last 11 Tuesday’s in a row, finally broke this winning sequence yesterday as concerns about China and the weak data in the US Economy finally began to kick in. I believe that the Gap from 1844/1862 from last week is too big for at least some if not all of it to be filled before the market attempts to move higher. After I posted yesterday the S&P traded down to my 1868 buy level before having a small rally and I was able to cover this position at 1872 and I am now flat. Today I will be a small seller from 1865/1870 with a 1873 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 1880 with a 1885 stop. My only interest in buying the S&P today is on a dip to 1846/1852 with a 1841 stop. I am trading in smaller size with wider stops given the volatility. Note: A break and close below 1836 will be very bearish.
Euro/USD
The Euro has not moved since I marked prices yesterday morning. Given the fact that the Daily Sentiment Index is nearly at 90% bulls I have decided to cover my long 1.3850 position for a breakeven this morning and I am now flat. Today I will be a small seller on any rally to 1.3880/1.3920 with a 1.3940 stop. I do not want to be long the Euro at this time.
US Dollar Index
No change as I am still long the Dollar Index from last week at 79.80. This market has hardly moved over the last month but I am still convinced that the Dollar will start to advance versus all its major trading partners as the year moves on. I will leave my stop the same at 79.30 on this position.
March DAX
The DAX had another wild trading session yesterday and having turned around nicely after I posted yesterday morning the market is back on the defensive this morning. None of my parameters were hit yesterday and I am still flat. As I mentioned yesterday the key level for the DAX runs from 9150/9200 and a break and close below 9150 signals a move to 8950 and possibly 8610. Today I will be a buyer on any further dip to 9155/9185 with a 9135 stop. Given how oversold the DAX is trading I do not want to be short the market at this time.
March FTSE
This morning the FTSE is trading at the bottom of its Bollinger Band and Williams Index. I am still flat and today I will be a small buyer on any dip to 6595/6610 with a 6575 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 6540 with a 6510 stop. Given how oversold the FTSE is trading I do not want to be short at this time.
Dow Rolling Contract
Shortly after the US opened the Dow traded down to my 16350 buy level. I was still long this morning but given how weak the European markets are trading I have decided to cover this position for a small loss at 16335 and I am now flat. As I mentioned yesterday the key support for the Dow comes in at the 14 Year Trendline at 16220/16250 and my only interest in buying the market is on a dip to this area with a 16195 stop. I do not want to be short the Dow at this time but a break and close below 16200 will change my mind as this break would be very bearish.
June BUND
The Bund traded down to my 142.30 buy level after I posted yesterday morning. Having looked weak yesterday, it has turned around this morning and I will raise my stop on this position to 142.15. The Bund continues to be a ‘buy on dips’ market and if the equity markets start to weaken further we should see a large move higher. This is the reason that I have kept my long position.
Gold Rolling Contract
Gold just missed my 1335 buy level before trading a lot higher this morning as it again becomes a safe haven for risk assets. At least I am not short the market and today I will raise my buy level to 1345/1350 with a tight 1338 stop on any long position.
Silver Rolling Contract
Silver tried to break its important resistance at 21.20 before running into trouble. I am still long from 20.80 and today I will raise my stop on this position to 20.55 which is just below yesterday’s low.
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