European equity markets all finished lower yesterday hit by a variety of factors but the US Indices were more positive and rallied into the close to end the day with some nice gains. A poor ZEW-Survey in Germany (which fell to 9.2 from 13.6 the previous month) weighed on stocks in Europe as did a downgrade of global growth from the IMF to 3.25% from 3.50% with their chief economist saying that the growth outlook for Europe was particularly problematic.Also negative for European stocks was a decision by the European Parliament to make changes in their emissions trading system which would effectively reduce the supply of pollution permits and cause the price of those permits to rise. Utilities fell the hardest in the Eurostock Index, down 2.6% on concern about the value of the permits they hold. Meanwhile in America stocks rebounded from the recent sell off on better than expected Housing Starts (which rose a much higher than expected by 7% to 1036 well above the 935 forecast) and Industrial Production and some good earnings from Goldman Sachs, Johnson & Johnson, and Coca Cola. Commodity markets were generally up on US Dollar weakness with Gold rebounding 2%. Yesterday the Fed members Duke, Kokerlakota, and Yellan all spoke in support of continuing existing policy.

Today is another busy day for economic data. This morning we have the UK Unemployment report and MBA Mortgage Applications, ahead of the Bank Of England releasing its Monetary Policy Committee Minutes. The Bank Of Canada released it’s interest rate decision whilst later in the US we have the Beige Book from the Fed. Later this afternoon the Fed.s Bullard and Rosengren are both due to speak in New York.

June S&P 500

The question I asked yesterday ‘would buyers return?’ was certainly answered emphatically as the S&P rallied by 1.4% on really strong Housing Starts and good earnings from Goldman Sachs. So the theme continues until we get two decent down days in a row it makes it very difficult to short this market but I still believe the market will get a decent shakeout over the next few weeks. Clearly the 1537/1540 support from late Monday night is now key and it will take a closing break of this level to get bearish. Yesterday after the US Housing Starts were released I went short the S&P, in small, only to be stopped out at 1565 and I am now flat. If the market can break and close over 1570 it will be short term bullish and I will then look for it to test the 1600 level. As I said yesterday, after Mondays 90% down day you tend to get a 1-3 day rally before heading lower. We have now left a nice Gap from the 1545 close on Monday to yesterday’s 1556 low and if this Gap remains unfilled for another day then we will have a break away Gap to the upside. I also like the fact we closed back above the 1558 level. Today, given the volatility, I am only trading in small size and I will be a buyer on any dip to 1553/1558 with a 1549 stop. If I am taken long and subsequently stopped out I will be an aggressive buyer from 1536/1540 with a 1532 stop. If the S&P can break 1570 I will also look to buy the market with a 1565 stop.

Euro/USD

The Euro worked perfectly yesterday as after I posted it dropped down to my 1.3040 buy level. One of the key signals for trading is to watch the price action and if a market can not go down on bad news you have to respect this and you do not want to be short. Yes I do not like the Euro long term but at the moment the price action is telling me not to be short. Unfortunately I took profit way too early at 1.3110 on my 1.3040 long position and I am now flat. Today given the Euro is now trading at the top of the Bollinger Band and testing the important 1.3200/1.3230 resistance area I will be a small seller here with a 1.3240 stop. I will also look to buy the Euro on any dip to 1.3120/1.3150 with a 1.3095 stop.

June DAX

The Dax worked well yesterday as we traded up to my 7740 sell level. As I had so many positions yesterday I cut my Dax position too early at 7720 before the market had a further 40 point sell off and I am now flat. The Dax continues to underperform the US market and  As I have just posted the Dax has dropped through the 7600 level which is very bearish and I will only buy again if it hits the 7500/7530 level with a 7480 stop.

June FTSE

The FTSE also worked well as we traded up to my 6280 sell level. I took profit at 6255. The FTSE has just broken the key 6215 support level and as a result I have gone short the market here with a 6240 stop.

June BUND

The Bund worked out well, took a gain at 1.4570 on my 1.4618 short and I am now flat. Today I will look to reset my short on any rally to 1.4600/1.4620 with a 1.4630 stop.

Gold Rolling Contract

After the massive sell off in Gold since last Friday it is trying to put in some sort of a bottom. I have bought Gold this morning in small at 1375 and I will leave a 1340 stop on this position. If I am stopped out I will look to reset my long position on any dip to 1300/1320 with a 1270 stop.