US Equity markets ended mixed after a volatile trading session yesterday with the S&P closing up 0.2% whilst the Dow closed down 0.3%. This having been down over 1% earlier in the session after weak earnings reports from Verizon, Johnson&Johnson and Travelers. The US Dollar, having been strong yesterday morning, lost ground during the US session with the US Dollar Index back at 81.20 having been 81.50 earlier. It was initially strong after yesterday’s article in the Wall Street Journal by Fed watcher Jon Hilsenrath who wrote that the Fed remains on track to trim QE by a further $10 billion at next weeks FOMC Meeting, despite the weak December Non Farm Payrolls Report. The Fed still expects activity growth this year, a view backed by the IMF in its latest World Economic Update.
The IMF revised up its growth forecasts, as expected. Global Growth was revised up to 3.7% in 2014 from its October forecast of 3.6% whilst 2015 remains unchanged at 3.9%. It expects Euro-Zone GDP growth to grow 1% this year.
The German ZEW Survey released yesterday morning showed some resilience in January but expectations have cooled. The Current Situation Index rose to 41.2 versus 32.4 last month which is the highest level since May 2012 signalling that Germany has recovered from the slump seen in 2013 but the Expectations Index eased to 62 from 61.7 last month.
Equity markets are again opening stronger in Europe this morning after Chinese Money Rates eased further overnight.
This morning on the economic front we have UK Unemployment, Public Finance and Average Earnings . This is followed by the latest Bank of England Minutes. We have no key data releases from the Euro-Zone or the US today.
March S&P 500
Yesterday gave us an example of one of the ‘left field’ situations that you can never plan for in the markets whereby, allegedly, a massive 7000 E Mini S&P contracts were sold ‘at market’ thus driving the March S&P contract down to a low of 1826. It then spent the rest of the day trading higher having triggered a whole load of stops in the process. After I posted yesterday morning the S&P continued to trade higher before having this dramatic 20 minute sell off. I bought the market at 1835 and I was stopped out of the rest of my original 1832.50 long position for a breakeven and then frustratingly at 1829 on the balance and I am now flat.
The key level for the bulls going forward will be the 1826 low made yesterday afternoon and as long as we can stay over this level the market is fine but a break and close below here will open up the possibility of move down to 1800. Today I will be a small buyer from 1834/1838 with a 1831 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1826 with a 1823 stop. My only interest in selling the S&P is on a rally to 1848/1851 with a tight 1853 stop. A break and close over 1850 will be very bullish.
Euro/USD
The Euro worked very well yesterday morning as after I posted it traded down to my 1.3530 buy level and after a nice rally I was able to cover this position at 1.3565 and I am now flat. Today I will still be a buyer of the Euro on a dip to 1.3510/1.3540 with a 1.3490 stop. The price action is telling me not to be short the Euro at this time.
US Dollar Index
No change as I am still long at 80.95 from last week with the same 80.85 stop. I am disappointed that the Index did not have any follow through having tested the key 81.50 resistance level before trading back down. I will give this position one more day to trade higher or I will cover and stand aside.
March DAX
In contrast to the S&P above where I was caught by the dramatic selloff the Dax worked really well for me yesterday. Shortly after I postedit traded higher to my sell level at 9780 and after a nice move lower I was able to cover this position at 9735 and I am now flat. This morning it is back trading higher and is again testing the key 9800 resistance level. The Dax is overbought and at the top of the Bollinger Band and Williams Index. Today I will raise my sell level to 9800/9820 with a 9835 stop. I will also raise my buy level to 9695/9715 with a 9680 stop.
March FTSE
The FTSE managed to hold in yesterday despite the sell off initially in the US markets. I am still long at 6760 and today I will raise my stop to 6775. If I am stopped out I will look to reset my long position on any dip to 6715/6745 with a 6695 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately I raised my buy level in the Dow yesterday and after the market traded down and I entered at 16420 I was quickly stopped out of this position for a small loss at 16380 and I am now flat. The Dow is still trading the heaviest of the US markets. Today I will be a small buyer on any dip to 16350/16380 in small size with a 16310 stop which is just below the reaction low made yesterday afternoon at 16320. Again my only interest in selling the Dow is from 16570/16600 with a 16620 stop.
March BUND
After I posted yesterday morning the Bund started to sell off but rose quickly after the US stock markets started to get hit.The Bund traded up to my 141.50 sell level before quickly stopping me of this position for a small loss at 141.75 and I am now flat. I am only trading in small size in most markets as I am trying to get my ‘eye’ in. Every market that I trade is now at a critical juncture and I feel that which ever way these markets break, after next week’s FOMC Meeting, we are going to get a dramatic move. Today I will raise my sell level to 141.90/142.10 with a 142.25 stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
My fears that we had no follow through to the break of the 1250 resistance level came through as I was stopped out of my long 1255 position at 1242 and I am now flat. Today I am going to stay flat unless Gold gets hit hard later and my only interest in buying Gold is from 1215/1222 with a 1208 stop which is just below the recent low made two weeks ago.
Silver Rolling Contract
Silver also followed Gold lower yesterday and after I posted I was quickly stopped out of my 20.20 long position for a small loss at 19.90 and I am now flat. Today I will lower my buy level to 19.30/19.60 with a 19.10 stop.
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