Yesterday was another very quiet trading session for the equity markets with the S&P closing flat on thin volumes for the US Veterans Day Holiday. The Dollar, having sold off on Monday, reversed course yesterday with the Euro back trading at 1.2480 this morning having briefly broken the 1.2400 level early yesterday morning. Gold and Silver also closed higher with Gold having tested the key 1140/1150 support level which so far has held as it is trading at 1166 this morning.
The Japanese Yen again under-performed throughout yesterday’s session hobbled by growing speculation that the Prime Minister Abe would dissolve Parliament and call a snap election. The move would be designed to shore up support for a delay to the next Sales Tax hike. News reports noted that preparations for a snap election were underway, citing law makers from Abe’s political party the LDP. If this were to happen then it would be justifiably Yen negative to the extent that it would further deteriorate an ugly fiscal picture.
The only data of note released yesterday was the US Small Buisness Optimism which came in slightly higher at 96.1 versus 960 expected.
This morning on the economic front we have UK Unemployment and Average Earnings at 9.30 am. At the same time the Fed’s Plosser will speak in London on Monetary Policy. At 10.00 am, we have the latest Euro-Zone Industrial Production. Finally at 10.30 am the Bank of England will release its latest Inflation Report. We have no data of note due from the US today.
December S&P 500
The S&P plan worked well yesterday as shortly after I posted the market was back trading at my 2038 sell level and after an nice sell-off after the US markets opened I was able to cover this position at 2032 and I am now flat. I am going top keep the same strategy of selling spikes with a tight stop until this market eventually rolls-over. Interestingly the internals of the stock market continue to weaken, as shown by the McClellan Oscillator which closed at +137 from +162 on Monday. The Daily Sentiment Reading is still at an all time extreme for the bulls and I pay a lot of respect towards these readings as they are working very well in Gold and the US Dollar at this time. I have no doubt that eventually this S&P is going to be hit hard but we have to way until we get a sell extreme first in the market.
Today I will again be a small seller from 2034/2040 with a 2044 stop. Again if I am stopped out of this position I will look to go short in front of 2050 with a 2055 stop. I will also be a small buyer on any dip to 2018/2023 with a 2012 stop. A break and close below 2013 will be the first signs that the S&P is trying to break lower.
Euro/USD
The plan of buying dips in the Euro against major support at the 1.2350/1.2400 area is working very well at this time. The Euro, which opened lower yesterday morning, eventually reversed course in the afternoon and had a strong close into the end of the New York session which enabled me to cover my long 1.2430 position from Monday at 1.2480 and I am now flat. Today I will again be a buyer from 1.2430/1.2460 with a 1.2390 stop which is just below yesterday’s low.
US Dollar Index
Unfortunately the Dollar just missed my 88.20 sell level with a 88.10 before trading lower yesterday and I am still flat. The sentiment readings towards the Dollar are still at an extreme 95% Bulls and in my opinion this is unsustainable with the Dollar eventually due a decent sell-off to correct its overbought condition. Today I will lower my sell level to 87.80/88.20 with a 88.45 stop.
December DAX
The Dax plan worked well yesterday as just as I posted the market was trading at my 9390 sell level and after a nice sell-off I was able to cover this position at 9340 and I am now flat. The Dax is getting hit hard this morning on the back of weaker Banking sector stocks. Enel SpA lost 1.9 percent after third-quarter profit fell more than analysts had predicted. Banks slipped after U.S., Swiss and British regulators fined lenders including HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG to settle a probe into foreign-exchange manipulation.
It is interesting that the DAX is now down nearly 8% from its June highs while at the same time the US markets keep making new highs. As I have said time and time again deflation is the curse for any Central Banker and equity markets do not perform well in deflationary times. Today I will lower my sell level for the Dax to 9310/9350 with a 9375 stop which is just above this morning’s high. I still do not want to be long the market at this time.
December FTSE
Shortly after I posted yesterday morning the FTSE was trading at my 6610 sell level. I am still short and today I will lower my stop to 6630 especially with the FTSE due a decent correction after its 9% rally since October 15.
Dow Rolling Contract
Shortly after I posted yesterday morning the Dow rallied to my 17630 sell level. I am convinced that the Dow is on the verge of a decent correction especially with sentiment readings so extreme for the Bulls. My strategy is still the same, to sell spikes with a tight stop and I will continue this theme until the market finally breaks lower. I am still short and today I will lower my stop to 17650 on this position. If I am stopped out I will look to reset on any rally to 17680/17720 with a 17760 stop.
December BUND
With the equity markets opening weaker this morning I am going to raise my sell level slightly to 151.70/152.00 with a 152.25 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Unfortunately after I posted yesterday morning Gold just missed my 1148 buy level before trading back to the 1170 area. I still like Gold at these levels as I believe the market is trying to put in at least a short term bottom. For this reason I will raise my buy level to 1155/1160 with a 1143 stop which is just below yesterday’s low. A break and close over 1180 will be short term bullish.
Silver Rolling Contract
No change as I am still long at 15.30 and 15.80 with the same 15.25 stop. Again if Silver breaks 16.25 I will raise my stop to 15.75.
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