Yesterday was a buoyant start to the second half of the year with the tone in the markets particularly positive. This was not necessarily due to big macro outcomes, perhaps it was just the absence of bad news, but it was a generalised theme. Equity markets were stronger across the board, yields higher in Bond markets, Oil was flat and Gold slightly lower. The US Dollar was also a little stronger.
The July set of Manufacturing PMI’S ranged from very good, in the UK, to ‘as expected’ in China, to ‘steady’, in the US, and a little disappointing in Europe. The US ISM got most attention, and whilst it was a little lower at 55.3, versus 55.9 expected, it remains at solid levels with the details mostly positive. The news from the car manufacturers was also better than expected so there is increased hope for the US Manufacturing Sector’s revival.
The UK outcome was at a ‘stellar’ 57.5, versus 56.6 expected, and takes the Cable (GBP/USD) to levels not seen since 2008. In contrast, Europe continues to struggle in line with an already established pattern and puts further pressure on the ECB when they meet tomorrow.
This morning on the economic front we have the UK Nationwide House Prices. We have no economic data of note due from the Euro-Zone whilst at noon we have the US MBA Mortgage Applications. At 1.15 pm we have the latest US ADP Employment Change which will be closely watched ahead of next week’s Non Farm Payroll data. At 3 pm we have Factory Orders whilst at 4 pm Fed Chair Janet Yellen is due to deliver a lecture in Washington.
September S&P 500
Yesterday the S&P had a very strong start to July with a 0.75% gain in line with what is traditionally a seasonally very strong time of the year with the July 4th Holiday on Friday. After I posted yesterday the S&P just missed my 1953 buy level before trading higher for the rest of the day before eventually hitting my 1967 sell level only to stop me out of this position near the highs of the day at 1971 – I am now flat. There is no point in being short until we get two decent consecutive down-days in a row. This has not happened for nearly two months as every dip is just being bought by the market in this low yield environment where there is literally no where else to put monies to work. This just means that when they do eventually sell-off, the markets will fall further than most analysts expect.
Therefore, if I am selling in this market it will only be on spikes with tight stops, a strategy which has worked well so far. Today I will raise my buy level to 1959/1963 with a 1956 stop as 1958 should now act as good support. Also, as the S&P is back trading again near the top of the Bollinger Band and I will be a small seller from 1972/1976 with a 1981 stop.
Euro/USD
Early yesterday morning the Euro started to sell-off and eventually traded down to my 1.3675 buy level. I am still long and today I will raise my stop on this position to 1.3645. Tomorrow is ECB rate decision day and I want to be flat ahead of this announcement and the very important press conference with ECB President Dragi that follows.
US Dollar Index
No change as I am still a buyer on any dip to 79.20/79.50 with the same 78.80 stop which is just below last November’s low.
September DAX
The Dax, having traded heavy all day eventually turned around, in line with the US market, and closed higher on the day. It just missed my 9830 buy level with a 9836 low before eventually trading up to my 9920 sell level just before the close. I am still short but only in small size and I will leave my stop the same at 9950. A break and close over this 9950 level will be very positive. I will also be a small buyer on any dip to 9850/9885 with a 9830 stop which is just below yesterday’s low.
September FTSE
The FTSE had had a nice rally over the past week since we were trading at the bottom of the Bollinger Band and Williams Index. Once again showing the importance of these trading indicators especially on the downside. After I posted yesterday morning the FTSE made a low of 6718 just missing my 6710 buy level before spending the rest of the day trading higher – I am still flat. Today I will raise my buy level to 6625/6650 with a 6605 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow finally hit the key 17000 resistance level yesterday but did not break and close over this level as yet. Thankfully I have not been short the Dow at any stage over the last three months as every dip is just being bought. Today I will raise my buy level to 16895/16935 with a 16870 stop. My only interest in selling the Dow is on a further rally to 17050/17080 with a 17110 stop.
September BUND
The Bund has failed to sell-off from this key 147.00 resistance level and as a result I covered my short 146.85 position for a small loss at 146.98 before the close yesterday and I am now flat. I am going to stay flat ahead of tomorrow’s ECB Rate decision as it is still 50/50 as to which way this market will break from here.
Gold Rolling Contract
No change as I am still a small buyer on any dip to 1312/1318 with a 1306 stop which is just below last Monday’s low.
Silver Rolling Contract
Silver tried to push higher after I posted yesterday morning but failed. I am still long at 20.80 and today I will raise my stop on this position to 20.70. If I am stopped out I will be a more aggressive buyer in front of 20.50 with a 19.90 stop.
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