Yesterday was a somewhat quieter day on the major financial news front with risk markets back in vogue again. European and US Equity markets closed higher with the S&P 500 closing up another 0.75% for a new all time high record close after a very choppy last month. It was a mixed day for the US Dollar which gained against a very weak Japanese Yen but continues to fall against the very strong Euro, much to ECB President Dragi’s disdain.
The US Markets were helped by a strong US ISM Manufacturing which came in at 53.7 for March versus 53.2 in February with the latter having been up 2 points from January, showing that the US Economy is getting back on track after the weather affected data in January and February.
Greece managed to get the sign off from the European Finance Ministers for its next €8.3 billion aid tranche after passing more than 100 economic reforms in a late night Parliamentary Session ahead of a Bond payment due in May. Despite this financial assistance we seem no clearer to knowing what the end game for Greece might be with its Government finances as more time is been bought for now.
This morning on the economic front we have the UK PMI Construction at 9.30 am. We have no data due from the Euro-Zone today ahead of tomorrow’s crucial ECB Meeting. At 1.15 pm we have the latest US ADP Employment Change which will be closely watched by the markets for clues ahead of Friday’s Non Farm Payrolls. The US will also release its latest Factory Orders at 3 pm.
June S&P 500
The S&P continued its recent gains with the the June Contract breaking and closing over the key resistance at 1872 for a new all time closing high after what has been an incredibly choppy market over the previous four weeks. It still has the ‘Open Gap’ from last Friday/Monday from 1850.50/1859.50 and in contrast to the previous 10 days the market rallied into the close.
After the US markets opened yesterday the S&P traded as high as 1877.25 just missing my 1878 sell level before having a nice sell-off down to 1869 before heading higher. I am still flat, with the market now trading at the top of the Bollinger Band and Williams Index. I do not really want to be short today especially given the fact that we have now broken and closed over the key 1872 resistance level . The 1868/1872 area should now act as good support and today, despite the market been overbought, I will be a small buyer from 1869/1873 with a 1864 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer from 1853/1857 with a 1848 stop.
April is traditionally one of the strongest months of the year and I am still looking for the S&P to trade as high as 1930/1950 before we eventually put in a more meaningful top. My only interest in going short today is on a rally to 1893/1898 with a 1902 stop.
Euro/USD
Despite the ECB trying to talk down the Euro, following the very weak Inflation data that we received on Monday, it continues to rally off the key 1.3700/1.3730 support zone as we head in tomorrow’s crucial ECB Meeting. Dragi’s press conference that will follow this meeting promises to be very interesting.
The Euro just missed my 1.3750 buy level yesterday before trading higher and is now back above 1.3800. Today I will raise my buy level to 1.3750/1.3780 with a 1.3730 stop. I still do not want to be short the market at this time as I still feel we will have at least a test of the key 1.4000 resistance level before trading lower.
US Dollar Index
No change as I am still long from last week at 80.20. The Dollar Index is trading in a very narrow range as the Dollar is a lot stronger against the Japanese Yen but weaker against the Euro thus leaving the Dollar Index neutral. As I mentioned yesterday a break and close over 80.60 will be bullish.
June DAX
The DAX continues to struggle at the top of its Bollinger Band and Williams Index as yet again the market sold off having hit the key 9650 resistance level after I posted yesterday morning. I sold the Dax at 9645 and after we had this sell-off I was able to cover my position at 9605 and I am now flat. As I mentioned yesterday a break and close over 9650/9670 for 2/3 days will be very bullish and opens up the possibility of a test of 10200 over the next few weeks. Today I will be a small buyer on any dip to 9550/9580 with a 9525 stop. I do not want to be short the DAX at this time despite the market been overbought.
June FTSE
The FTSE again closed over the key 6560 resistance level for the second consecutive day and this level should now act as good support. Today I will raise my buy level to 6555/6575 with a 6535 stop as I look for the market to retest the 6660/6680 resistance level and possibly 6765 over the next few weeks. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Having suggested over the last few weeks that the Dow would eventually test its December 31 high of 16589, it did so yesterday before selling off and then trading higher again into the close. A break and close over this key 16589 resistance level will be very bullish and will cancel the negative divergence that has existed between the S&P and the Dow all year.
When we do break and close over this level I am then looking for the market to trade as high as 17200/17400 before I expect to see strong selling return. Today I will be a small buyer on any break of 16610 with a 16560 stop. I will also be a small buyer on any dip to 16380/16410 with a 16350 stop. I still do not want to be short the Dow at this time.
June BUND
No change as I am still a small buyer from 142.90/143.10 with a tight 142.75 stop. A break and close below 142.80 will be bearish as I will then look to set up shorts in the market.
Gold Rolling Contract
For the second consecutive day Gold has closed below its 100 Day Moving Average. I am going to leave my buy level the same as yesterday at 1265/1272 with a 1258 stop.
Silver Rolling Contract
No change as I am still long Silver from early last week at 19.90. It continues to be the stronger of the two metals and I will leave my stop the same at 19.40 on this position. If I am stopped out of this position I will be a more aggressive buyer on any further dip to 18.80/19.20 with a 18.50 stop.
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