Tuesday saw another consolidation/profit-taking day across global markets with a further reversal of pre and post Fed QE3 announcement rallies in risk assets. The US markets closed flat after a late rally in the last hour of trading. The NAHB September Housing Market Index improved further to 40 from 37, better than the 38 expected. Renowned Fed dove, Dudley suggest there is more the Fed can do if required whilst, the non voting, Bullard said that he would not have voted in favour of last weeks decision. Europe was not helped by the rise in Spanish yields back above 6% as the Government continues to prevaricate on formally requesting EU/ECB assistance. The German ZEW Survey shows current conditions falling further and supporting the view that the Euro-Zone is back in recession in Q3, including a weak Germany.
Today, on the economic front, we have little data of note from Europe whilst later from the US at 1.30pm we have Housing Starts and Building Permits. This data is seen as corroborating the story of the gradually improving housing market and the potential for small wealth effects starting to bolster the consumer side of the economy. Overnight the Bank of Japan boosted asset purchases, joining moves by the Fed last week, in order to stimulate growth and this resulted in the stock market having its highest close since May 4th.
Dec S&P 500
The S&P has now rolled to the December contract which has a discount of 7 handles. My 1469 short in September is now rolled to December at a new price of 1462. Despite the new stimulus from the Japan, European equities are not getting much of a follow through and I will leave a 1466 stop on this position. I will look to take profit in front of 1451 as we have ‘triple witching’ expiration of stock index futures and options as well as stock options tomorrow. These days always lead to added volatility in the market. If the market dips I will look to go long from 1443/1448 with a 1440 stop.
Sept DAX
The DAX has rallied up to my sell level on the BOJ move and I have gone short at 7400 with a 7425 stop. I will look to take profit on any dip to the 7340/7360 level. I will also look to go long in front of yesterdays low at 7305 with a 7280 stop.
Dec BUND
The Bund has worked really well over the last 2 weeks and I dont want to push my luck too much more. It dropped down to my buy zone and I have gone long at 139.00. I am only going to risk 20 pips on this position so I am leaving a 138.80 stop. I will look to take profit on any rally to the 139.50 area and I still want to go short in front of 140.00 with a 140.40 stop.
EURO/USD
The Euro finally had some profit taking late yesterday and entered my buy zone at 1.3030. I will leave a breakeven on this position and I will look to take profit on this position at 1.3090/1.3110. I also want to go short from 1.3140/1.3160 with a 1.3180 stop.
Sept FTSE
I was very unlucky as the FTSE just missed my buy level by 5 pips and and we are now back to the important 5900 level. I have no view at this level but I will still look to go long on any dip to 5850 with a stop below yesterdays low at 5835 and I will also look to go short on any rally to the 5940 level with a 5960 stop.
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