Yesterday was another slow trading session as Ukrainian tensions remain with doubts about the veracity of last Thursday’s Geneva agreement. However US stock markets and risk sentiment have been supported by a wave of M&A activity in the Pharmaceutical sector (Novartis/GSK, Pfzer/AstraZeneca and Novartis/Eli). As a result the NASDAQ continued to lead US stock markets higher just as it led the decline two weeks ago. The NASDAQ closed up 1% whilst the Dow and S&P both closed 0.4% higher.
US Bond Yields are little changed with 10 Year Treasuries just holding the break above 2.7% from last Thursday. The currency markets continue to trade in a very narrow range with the Euro having been below 1.8000 yesterday morning now back above 1.3830 today. US data has not had much of an influence although Existing Home Sales at -0.2% were a little less soft than expected whilst the Richmond Fed Manufacturing Index came in a lot higher at +0.7 versus -0.7 last month and +0.2 expected.
Former Fed Chairman, Ben Bernanke, speaking at the Economic Club yesterday afternoon said that he is amongst those expecting faster economic growth with the US economy heading towards complete recovery. He also said the risk of inflation falling below zero is quite low.
Overnight the Chinese Purchasing Managers Index was released and again came in very weak, at 483, for April thus signalling further economic weakness ahead for the Chinese economy.
This morning on the economic front we have UK CBI Trends and the Bank of England Minutes from its last meeting. The Euro-Zone and Germany will release their latest Manufacturing and Services PMI at 10.00 am whilst this afternoon the US will release New Home Sales and Manufacturing PMI.
June S&P 500
The S&P rose again for the sixth consecutive day and amazingly it has now closed higher on 16 of the last 18 Tuesdays. I still feel the market will test the key 1920/1940 resistance level before running into trouble in May/June. This morning the market is overbought on a short term basis and any sell-off that emerges will be brief before the market rallies again. The S&P is now up nearly 70 handles since the low made last Tuesday evening with this rally enhanced by the latest M&A activity in the Pharmaceutical Sector.
After I posted yesterday the market traded up to my 1871 sell level before quickly stopping me out of this position for a small loss at 1876 and I am now flat. Today I will again be a small seller on any further rally to 1879/1884 with a 1888 stop. I will also raise my buy level to 1862/1866 with a 1859 stop.
Euro/USD
I cannot believe how quiet the currency markets are trading with little or no movement over the last six months. As I mentioned yesterday I do not want to be short the Euro until we see the ECB take some action to fight deflation and weaken the Euro rather than just talk about it, as shown by ECB’s Couere who said yesterday that the ECB has room to cut rates. This morning I have cut my long 1.3805 position from last week at 1.3830 and I am now flat. Today I will again be a small buyer on any dip to 1.3780/1.3805 with a 1.3755 stop. I still do not want to be short the Euro at this time.
US Dollar Index
The Dollar is trading a little weaker this morning I will leave my buy level the same at 79.30/79.60 with the same 78.80 stop.
June DAX
The Dax continues to outperform the other European Indices following the Ukrainian/Russian agreement last Thursday, as shown by the Dax/FTSE spread which is again approaching the key 3000 level. The Dax is now over 500 points higher since last Tuesday evening. By the time I posted yesterday morning the Dax was already trading through my sell level and as a result I am still flat the market. The key level for the Dax is from 9660/9700 where the original sell-off took place in Mid January and from which so far the market has never really recovered. Today if the market can break 9580 I will be a small seller with a tight 9625 stop as I will then look for a move back to the key 9400 support level where I will be a reasonably aggressive buyer with a 9320 stop. If the Dax can break and close over 9630/9660 for 3-4 days I will then look to set up a long position for 10000/10200.
June FTSE
The FTSE plan worked well yesterday as it traded up to my 6650 sell level before having a small sell-off into the close which enabled me to cover this position at 6630 and I am now flat. The FTSE continues to lag the other major indices which is a worry going forward. Today I will raise my sell level to 6660/6680 with a 6705 stop. I still do not want to be long the market at this time.
Dow Rolling Contract
The Dow continues to trade higher as it pushes to break the key 16580/16620 recent highs. I still believe that it will eventually take out this resistance level and then run into trouble somewhere between 17200/17400 in the May/ June time frame. After I posted yesterday the Dow traded up to my 16500 sell level before unfortunately stopping me out of this position at 16550 and I am now flat. The market is over bought on a short term basis and today I will again be a small seller on any further rally to 16570/16620 with a 16640 stop. I am not going to chase this market higher and I will only raise my buy level to 16360/16400 with a 16320 stop.
June BUND
No change as I am still long from last Thursday at 143.85. The Bund came close to stopping me out of this position at 143.60 with a 143.63 low. Today I will leave my stop the same and If I am stopped out of this position I will be a more aggressive buyer in front of 143.40 with a 143.15 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still long from last Monday at 1285 with the same 1276 stop.
Silver Rolling Contract
Silver traded in a very narrow range yesterday and surprisingly although Gold started to sell-off Silver did not reach my 1930 buy level and I am still flat. Today I will leave my buy level the same at 19.00/19.30 with a 18.70 stop.
Recent Comments