A short Euro market has been squeezed higher over the past 24 hours amid wire stories covering the continuing speculation over Greece’s future amid talk of looming deadlines. Greece which apparently had been told it has until Friday to apply for a programme extension, but the terms still appear unacceptable to Greece. Greek PM Tsipras continues to use strong rhetoric in a speech to the Greek Parliament, saying he is in no hurry and will not compromise. Greek Central Bank Governor Stournaras is apparently heading to Frankfurt tomorrow to talk to the ECB with Greek banks reliant on the ECB’s Emergency Liquidity Assistance (ELA) facility for liquidity support. It is not clear whether the ELA facility will be open to Greece beyond the end of the week if no political agreement is reached.
The Athens stock market closed down 2.45% with bank shares down by up to 9% on the day. However markets overall are relatively calm, with European stocks finishing higher overall yesterday, though not the DAX, despite the fact that the German ZEW Survey came in stronger than expected. There is no doubt that despite a very fluid situation the markets believe that a deal will be done with Greece.
Charles Plosser, Philly Fed President, well known hawk, and non-voter on the FOMC this year, has been offering his latest take on Fed guidance and rates saying that the Fed should drop the word ‘patient’ from its guidance at the upcoming March 19 FOMC Meeting. He also said that the FOMC is really close to raising rates and that rates at 1 ½% by end of this year is not unreasonable. Plosser’s views are well known and not surprising but it serves to reinforce the still active debate on rate lift-off and policy guidance.
Treasury Yields rose across the curve on his comments with the 10 year closing at 2.15%. To give an idea of how much these rates have moved, it was only 10 days ago that the 10 year yield was trading at 1.65%. Despite the rising rates the S&P 500 closed at yet another record high at 2100 while Gold and Silver both plunged by 2.5% and 5% respectively.
This morning on the economic front we have UK Average Earnings and the latest Bank of England Minutes from its last Meeting at 9.30 am. At 1.30 pm we have US Housing Starts and PPI. This is followed at 2.15 pm by US Industrial Production. Finally at 7.00 pm the Fed will release its Minutes from the January 27-28 FOMC Meeting.
March S&P 500
My long 1981 S&P position worked well yesterday as the S&P spent the rest of the trading session trading higher which enabled me to cover this position at 1991. Very late in the day the S&P traded higher to my 2098 sell level. I am still short with the same 2105 stop. The S&P is back trading at the top of its Bollinger Band and Williams Index, while at the same time is overbought on a Daily basis after its 125 handle rally in the past two weeks. However the price action is telling you that all dips are been bought by the market and this trend will continue until we close back below the now key support at 2065/2072. My strategy is still to buy dips and sell rallies with tight stops. Today if I am stopped out of my short 2098 position I will use my 5 handle rule to go short again with a stop just above whatever new high is printed. I will still be a small buyer on any dip lower to 2081/2086 with a 2078 stop which is just below yesterday’s low.
EUR/USD
The price action in the Euro is telling you not to be short. Unfortunately having been stopped out of my latest long position on Monday evening near the lows of the session at 1.1330 the market spent the rest of yesterday trading higher and I am still flat. Today I will again look to go long on any dip to 1.1330/1.1370 with a 1.1295 stop. Remember a break and close over 1.1534 will be short term positive.
US Dollar Index
After I posted yesterday morning the Dollar was trading at my 94.50 sell level. I am still short and today I will lower my top on this position to 94.90.
March DAX
The DAX has had a nice 200 point rally since I marked prices 24 hours ago with the market now believing that a deal with Greece will somehow get done. The situation with Greece is very fluid as one headline can stop you out of a decent position. This happened to me as I was stopped out of my long 10850 position near the lows of the day yesterday at 10795 and I am still flat. Today I will again be a small buyer on any dip lower to 10795/10835 with a 10750 stop which is just below the lows made earlier yesterday morning. My only interest in selling the DAX is still on a rally to 11060/11110 with an 11140 stop.
March FTSE
The FTSE plan worked out well yesterday as by the time that I posted the FTSE was trading at my 6845 sell level. The FTSE sold off just after lunch which enabled me to cover this position at 6815 and I am now flat. Thankfully I was able to cover this position as the FTSE had a decent rally in the last hour of trading which saw the market close over the 6850 previous resistance level. I have to respect this close and today I will be a small buyer on any dip lower to 6825/6850 with a 6795 stop. My only interest in selling the FTSE today is on a rally higher to 6920/6940 with a 6955 stop.
Dow Rolling Contract
The Dow plan also worked well yesterday as shortly after I posted the Dow rallied to my 18020 sell level before having a nice sell-off which enabled me to cover this position at 17970 and I am now flat. While the S&P made new highs yesterday the Dow so far has not with the market still failing to break the December 26th high at 18103. Today I will again be a small seller on any further rally to 18100/18140 with an 18170 stop. Given the fact that we still have seven Hindenburg Omen signals on the clock so far in 2015 I do not want to be long the Dow at this time despite the positive price action in the market.
March BUND
My short 159.25 Bund position taken early yesterday worked out very well as the Bund followed the US Treasury Markets lower which enabled me to cover this position at 158.50 and I am now flat. In my opinion these Bond Yields in Europe are just insane as last week Germany had a 5 year auction at a negative interest rate and was 3 times over- subscribed. The traders who bought this auction are today sitting on a decent loss on their position. Today I will again look to go short on any rally higher to 158.80/159.10 with a 159.38 stop which is just above yesterday’s high.
Gold Rolling Contract
The gold plan did not work out so well yesterday as just after I posted I was stopped out of my long 1233 position at 1217. Yesterday was another great example of how important it is to have stops in the market with Gold trading as low as 1202. The accelerated move lower in Gold saw me go long again at 1206. I am still long and I will leave my stop the same at 1199 on this position.
Silver Rolling Contract
Just like Gold above, I was stopped out of my latest long 16.90 Silver position for a small loss at 16.40 and I am now flat. Today I will again be a small buyer on any further dip to 15.80/16.20 with a 15.40 stop.
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