US Stock markets rose yesterday with the S&P 500 closing just two points from a record high as economic data showed that inflation has failed to gain a toehold whilst earnings from Comcast Corp topped estimates. The Dow, S&P and NASDAQ closed up 0.36%, 0.50% and 0.70% respectively, again emphasising that no matter what bad news is thrown at this market we have buyers waiting on the sidelines to jump in.
The data showed that Consumer Prices rose 0.3% in June paced by a jump in gasoline that is now undermining Fed Chair, Janet Yellen’s view that recent increases were temporary. Yesterday’s inflation numbers are supportive of higher stock prices by reflecting an economy that is growing at an even pace. The US Dollar gained on this news with the US Dollar Index rising 0.35% to 80.85 while the Euro closed below key support at 1.3480.
This morning on the economic front the Bank of England will release its minutes from their last meeting at 9.30 am. At 12 pm we have US MBA Mortgage Applications and this is followed at 3 pm by Euro-Zone Consumer Confidence.
September S&P 500
As I mentioned above, the S&P closed near a new record high as no matter what bad news is thrown at this market and despite the increasing number of analysts coming out saying that it is overvalued the price action is telling a different tale. Until we see three decent consecutive down-days it is very difficult to be short the market apart from the hit and run method that I am pursuing when we hit the top of the Bollinger Band – this strategy has worked well over the last two months.
Yesterday after the US markets opened the market traded up to my 1980 sell level and after a nice sell-off near the close I was able to cover this position at 1975 and I am now flat. I still expect it to hit the 2000 level over the coming days as the momentum is still with the buyers. Today I will raise my buy level to 1967/1971 with a 1963 stop. I will also be a small seller on any rally to 1985/1989 with a 1992 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 1997 with a 2003 stop.
Euro/USD
Despite the Euro trading at the bottom of its Bollinger Band it broke through and closed below some key technical levels yesterday and this price action has to be respected. After I posted yesterday it was already trading at my 1.3495 buy level. The market traded at this level until the US markets opened and after the CPI data was released I was stopped out of this position for a small loss at 1.3475 and I am now flat. Today I will be a seller on any rally back to 1.3495/1.3520 with a 1.3540 stop. Despite the Euro been oversold I do not want to be a buyer at this time.
US Dollar Index
The Dollar Index also broke and closed over key support at 80.60. The next major resistance is at 81.50 and a break and close over this level may well signal that we have finally put in a bottom for the US Dollar. Today I will raise my buy level to 80.45/80.65 with a 80.20 stop.
September DAX
The Dax rose, as expected, yesterday as the market finally played ‘catch-up’ with the other major indices. Unfortunately it just missed my buy level before trading higher. It needs to break and close over 9820 for me to turn more bullish and today I will be a seller on any further rally to 9775/9805 with a 9830 stop I will still be a buyer on any dip to 9650/9680 with a 9615 stop.
September FTSE
My fears around not wanting to be short the FTSE were certainly proved valid as it burst through resistance at 6750. It just missed my buy level before trading higher and I am still flat. I am not going to chase the market higher and I will leave my buy level the same at 6700/6720 with a 6665 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow plan worked well yesterday as it traded up to my 17130 sell level before a late sell-off near the close enable me to cover this position at 17100 and I am now flat. The Dow continues to lag the other major US Indices and today I will again be a seller on any rally to 17145/17185 with a 17210 stop. I still do not want to be long at this time.
September BUND
Finally my short 148.40 position for the Bund worked out as after I posted it had a nice sell-off which enabled me to cover this position at 148.00 and I am now flat. I still believe it is close to a top given how low its Yield at 1.15% . Today I will again be a seller on any rally to 14835/148.65 with a 148.80 stop.
Gold Rolling Contract
Gold continues to trade heavily compared to Silver but any signs of geopolitical changes and it will again spike to the upside. I will leave my buy level the same at 1292/1298 with a 1287 stop.
Silver Rolling Contract
No change as I am still long at 20.85 with the same 20.45 stop. Silver needs to break and close over key resistance at 21.50 to finally signify that we may have put in more than a temporary bottom.
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