The last 24 hours has produced an escalation in volatility with the big surprise being that the European Equity markets closed higher despite the ongoing negative developments in Russia. The mood was still downbeat early yesterday morning when the Russian Central Bank raised rates from 10.5% to 17% after the Ruble had fallen 11% on Monday. No sooner was the ink dry on this latest move when the Ruble weakened again and eventually closed down another 9%.
European markets were helped by the stronger than expected German Manufacturing PMI which is now back in positive territory at 51.2 versus 49.5 last month. The German ZEW Survey also printed higher following the October shocker with the Forward-Looking Expectations Measure hitting 34.9, from 11.5, more than doubling and better than the 20.0 expected. The Euro rallied to 1.2600 on this news but is now back at 1.2470. The positive close for European equities did not filter through to the US which had a very bad last hour of trading which saw the S&P weaken another 0.8% for its seventh consecutive lower close.
This morning on the economic front we have the UK Bank of England Minutes and the UK Unemployment Rate. This is followed at 10.00 am by the Euro-Zone CPI. All eyes will then turn to the FOMC Rate decision at 7.00 pm and the Yellen press conference that follows. It promises to be another wild trading session.
March S&P 500
I have now rolled to the March Contract which is trading at a discount of 7 handles versus the Cash Market.
Yesterday the S&P plan worked out well as initially after the market dropped to my 1985 buy level I was stopped out of this trade at 1975 but using my 5 handle rule I was able to go long again at 1974. The market then rallied to 2018 before getting slammed in the last hour of trading. I covered this long 1974 position at 2004 and I am now flat. Yesterday was another great example of how important the McClellan Oscillator is especially when it has negative reading of at least -250. Interestingly despite the S&P closing down anther 0.8% the MO improved slightly to -252 from -260 on Monday. I bought the March Contract after the close last night at 1967 and I will leave a 1959 stop on this position. If I am stopped out I will again use my 5 handle rule to go long again. I am hoping we will get a rally ahead of the FOMC Rate announcement at 7.00 pm as I want to be flat into the Yellen press conference. If the market subsequently rallies after she speaks I will look to go short from 1998/2008 with a 2015 stop. I will also be a buyer on any dip to 1940/1948 with a 1932 stop.
Euro/USD
No change as I am still a small buyer on any dip to 1.2410/1.2440 with a 1.2385 stop.
US Dollar Index
My short 88.65 position finally worked out well yesterday as after I posted the Dollar had a nice sell-off which enabled me to cover this position at 88.00 and I am now flat. Today I will again be a small seller on any rally back to 88.60/88.90 with a 89.20 stop.
December DAX
The Dax plan worked out well yesterday as the market, which had been strong all morning, eventually got slammed with the market trading lower to my 9260 buy level before incredibly rallying 300 points from this low. I covered my long position too early at 9430 and I could not believe the market then rallied to 9570. I am still flat and today I will be a buyer on any dip to 9390/9420 with a 9330 stop. Despite the ongoing carnage in the Russian markets the price action in the Dax ìs telling you not to be short.
December FTSE
I was very unlucky with my FTSE plan yesterday as the market just missed my 6140 buy level by three points before also having a huge 200 point rally and I am still flat. Today I will be a small buyer on any dip to 6240/6270 with a 6190 stop. Given the volatility in all markets I am trading in smaller size with a larger stop.
Dow Rolling Contract
What can I say about yesterday’s price action in the Dow? The market was up big in the morning before getting slammed to near 17000 before having a 400 point rally in the afternoon before again giving up 300 points of this rally into the close. Long may this volatility continue!
After the market sold off at lunch time, the Dow eventually hit my 17120 buy level before having this huge rally which enabled me to cover this position at 17300 and I am now flat. Today I will again be a buyer on any dip to 17040/17090 with a 16950 stop. Given how weak the MO is and the fact that the Dow is so oversold I do not want to be short the market at this time.
March BUND
After I posted yesterday morning I was stopped out of my 154.70 position for a small loss at 155.05. Afer the market went higher I went short again at 155.10 as I really believe that the Bund is within spitting distance of a major breakdown especially given how low Bond Yields are. I will leave a 155.50 stop on this position.
Gold Rolling Contract
My long Gold position at 1193 worked out very well yesterday as the market had a nice rally following the huge Russian Central Bank rate hike which enabled me to be able to cover this position at 1212 and I am now flat. Today I will again be a small buyer on any dip to 1175/1185 with a 1169 stop.
Silver Rolling Contract
Silver had anther wild trading session yesterday with the market eventually trading lower to my 15.80 buy level. I am still long and today I will raise my stop on this position to 15.30.
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