Equities soared in Europe as Germany’s ZEW Report came in much better than expected, raising hopes that the Euro-Zones strongest economy will move out of recession in Q1 of 2013. Whilst the ‘Current Conditions’ component of this survey of investor and analysts sentiment was a little softer than forecast, the ‘Expectations’ component was much stronger at 48.2 versus forecasts of 35.0. The good news out of Europe spurred US Equities, taking the S&P to a fresh 5 year high. On the currency markets the Euro was also stronger after the good ZEW survey result. Looking ahead to increasing influence on the Euro over the balance of the week is likely to the growing concern about the weekend Italian Elections which carry some significant downside risk for the Euro. Sterling was the laggard against most currencies ahead of the BOE Minutes this morning.
This morning at 9.30 am we have the UK Unemployment data ahead of the BOE Minutes. In the Euro-Zone we have Consumer Confidence whilst CPI is released in Germany. It is also a busy day for economic releases in the US where at 1.30 pm we have PPI, Building Permits and Housing Starts. This is followed at 7.00 pm by the Fed releasing its minutes from last months FOMC Meeting. With all this economic data been released today the markets have the potential to be very volatile.
March S&P 500
After the much stronger than expected ZEW Survey from Germany I raised my sell level on the S&P to the top of my sell range at 1531 which has not been hit so far. The S&P is now at the top of its Bollinger Band and Williams Index but we still need the market to leave a sell extreme for me to get excited about the downside. The Bears are getting squeezed more and more as the S&P moves relentlessly higher and we are up almost 150 handles off the December 28th 2012 low of 1383. Today I will leave me sell level the same at 1531 and I will leave a 1537 stop on this position.
Given how overbought the market is on both a daily and weekly basis I do not want to be long up here. If I am taken short and subsequently stopped out of this position I will leave a trailing 5 point sell to go short again with a stop at whatever high is put in. In other words if we trade up to 1540 and reverse by 5 handles I will go short at 1535 with a 1540.5 stop.
Euro/USD
The Euro worked really well yesterday as my call not to go short proved correct. After I posted yesterday morning the Euro traded down to my 1.3330 buy level with a 1.3328 low. I went long here and I took a nice gain at 1.3390 and I am now flat. Given the risk associated with the Euro ahead of this weekend’s Italian Elections its is hard to call the market from here. If the Euro drops down to the 1.3350/1.3370 I will be a small buyer with a 1.3325 stop. I am only interested in going short if we rally to 1.3470/1.3500 with a 1.3520 stop.
March FTSE
The FTSE worked well but unfortunately I took my profit (on my 6290 long position) too early at 6320. It then traded a lot higher into my sell zone and I have gone short at 6360. I will leave my stop the same at 6380. The FTSE is very overbought and at the top of the Williams Index. I will look to take profit on any move back to the 6330 level.
Gold Rolling Contract
No change as I am still long at 1607. I will give this market one more day to rally or else I will cut the trade. I will leave my stop the same at 1595.
March Nasdaq 100 Rolling Contract
The Nasdaq still continues to lag behind the Dow and the S&P as Apple shares are still trading heavy. I am still convinced we will have one look at my 2800/2820 sell zone before the market goes lower. If I am taken short I will leave a 2840 stop on this position.
March DAX
Well we certainly got the upside surprise in the Dax, that I have been looking for, yesterday. It is now 200 points higher than its low on Monday and is not overbought. Today I am a small buyer on any dip to 7730/7750 with a 7710 stop.
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