Crimea is now officially part of the Russian Federation after Russian President, Putin, the Prime Minister of Crimea and the Mayor of Sevastopol jointly signed a treaty late yesterday. However in his lengthy speech to the Russian Parliament, Putin indicated that he is not seeking ‘a partition of Ukraine’ thus soothing market fears that the crisis will escalate further. This gave investors the chance to start focusing on the US FOMC Meeting this evening.
Janet Yellen will take charge of her first FOMC Meeting as the new Fed Chair with markets widely expecting the Fed to taper QE by a further $10 billion to $55 billion per month. However more important will be the signals that Ms Yellen gives at her press conference immediately following the FOMC announcement. In particular, the markets will be interested in any changes to the Fed’s forward guidance as the Unemployment Rate of 6.7% continues to close in on the 6.5% threshold. Of course no one is expecting a rate rise soon but Ms Yellen may want to refine that threshold guidance and or include other employment growth targets.
Yesterday, equity markets had gains in both Europe and the US despite some soft economic data. US Housing Starts failed to recover from the weather affected losses in January and fell 0.2% in February versus +3.4% expected, whilst the core CPI at 0.1% came in as expected. In Germany the ZEW Survey showed that investors are increasingly nervous about the adverse impact of events in Crimea on the German economy. The expectations component of the Survey fell from 55.7 in February to 46.6 in March yet the Current Situation Index rose from 50 to 51.3, the forth consecutive monthly increase, thus suggesting that the German economy is gaining momentum.
This morning on the economic front we have UK Unemployment and Average Earnings, followed by the Bank of England Minutes from its latest meeting three weeks ago. This afternoon the UK Chancellor will present his 2014 Budget to Parliament. We have no data of note due from the Euro-Zone today whilst all eyes will be on the US at 6 pm for the FOMC announcement and the press conference with Ms Yellen afterwards.
June S&P 500
I have now rolled to the June Contract which trades 7 handles (points) cheaper than the March Contract. We still have a Gap left open from last Monday in the March Contract from 1839/1852 which corresponds to 1832/1845 in the June Contract but all Gaps eventually get filled in the S&P. As I have continuously mentioned over the last two years I will never be short in the week of an important event, especially an FOMC Meeting and in particular, one that occurs when we have’ triple expiration’ Friday when all the March Contracts for the Futures and Options markets expire.
Just after I posted yesterday morning the S&P was trading on its lows but unfortunately just missed my 1850 buy level before trading up to my 1865 sell level. After a small sell-off I was able to cover this position at 1861 and I am now flat.
The two key levels for the June contract going forward are 1829 on the downside and 1865 on the upside and a closing break of either level will determine the next move. As today we have the FOMC announcement at 6 pm I will go into this event without a position. If the market rallies after the announcement I will be a small seller from 1875/1880 with a 1884 stop. I will also be a buyer on any dip to 1848/1853 with a 1843 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any further dip to 1831/1835 with a 1827 stop.
Euro/USD
The Euro continues to be a buy on dips. Today I will leave my buy level the same at 1.3850/1.3880 with a 1.3830 stop on any long position. I will still be a small seller on any further rally to 1.3980/1.4010 with a 1.4030 stop. Note that the Daily Sentiment Index for the Euro is currently at a very scary high of 90% bulls.
US Dollar Index
The US Dollar Index continues to trade in a very narrow range. I am still long from last week at 79.45 and I will leave my stop the same at 7880. A break and close below 78.90 will be very bearish but as long as we can stay over this key support the US Dollar is still bullish.
March DAX
The Dax continues to trade in a very wild fashion as it has now rebounded 400 points from its low made last Friday having fallen an incredible 300 points on Thursday afternoon. Just after I posted yesterday morning the market had already been trading at my 9110 buy level but rallied after the ZEW Survey was released and this rally continued after Putin addressed the Russian Parliament especially when he said he would not partition Ukraine -the Dax just took off to the upside! It then traded up to my 9240 sell level before quickly stopping me out of this position at 9275 and I am now flat. As I mentioned yesterday the key level for the Dax is a 9275 as a break and close over this level signals a move higher to 9535/9570. Today if it breaks 9300 and trades over this price for 1 hour I will be a buyer with a 9250 stop. Otherwise I am going to stay flat as I want to see how it behaves here after the huge move up since last Friday.
March FTSE
The FTSE just missed my 6530 buy level yesterday with a 6533 low and I am still flat. This was a frustrating day as it rallied over 100 points from its morning low. The market is still trading in oversold territory and today I will raise my buy level to 6560/6580 with a 6545 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow also just missed my 16180 buy level by 20 points yesterday before the market rallied 150 points and is now trading comfortably above the key 16250 support. Just like the S&P, I will go into the FOMC announcement flat and if the market sells off afterwards I will be a buyer form 16230/16270 with a 16190 stop which is just below yesterday’s low. I still do not want to be short the Dow at this time as the market has underperformed the other major US Indices.
June BUND
After I posted yesterday the Bund traded down to my 143.15 buy level. I am still long and I will raise my stop to 142.85 on this position.
Gold Rolling Contract
Gold worked very well yesterday as, shortly after I posted, it traded down to my 1851 buy level before having a nice rally which enabled me to cover this position at 1361 and I am now flat. Gold is continuing to trade heavily after the $200 move upwards that we have seen since the lows on December 31st. Today I will be a small buyer on any dip to 1338/1345 with a 1333 stop. Even though it is trading heavily I do not want to be short the market at this time.
Silver Rolling Contract
Silver traded down to my 20.75 buy level after I posted yesterday morning. I am still long and I will leave my stop the same at 20.40.
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