Yesterday after a bright start saw US Equity markets close in the red, US 10 Year Treasury Yields below the lows that we saw in the immediate aftermath of last week’s FOMC Meeting, and the US Dollar broadly steady but masking some significant divergence between currencies after another quite volatile 24 hours trading.
The bellwether EUR/USD exchange rate, for example has traded on three different handles (1.08,1.09 and 1.10), the Swiss Franc has jumped for no apparent reason, while Sterling took a hit from weaker than expected UK CPI inflation data. The latter showed annual headline inflation hitting zero for the first time in the post-1989 history of this particular series, with Cable (GBP/USD) closing down 0.7% to sit firmly at the bottom of the G10 FX scoreboard.
We had some good economic news out of the Euro-Zone, courtesy of ‘flash’ PMI data that shows the composite Euro-Zone reading rising to 54.1 from 53.3 and better than the 53.6 expected, with rises for both Services and Manufacturing and led by similar sized gains for Germany. The highs for the day on EUR/USD came in at 1.1029 and this came sometime after the PMI printed so were not the proximate cause.
Much of the intra-day gyrations came around the US data releases, of which the highlights were CPI and New Home Sales. CPI showed the core (ex food and energy) tick up to 1.7% from 1.6% and the headline reading of 0.0% from -0.1% which marks this as the shortest, shallowest deflation in any country in history.
The much bigger surprise of yesterday was in New Home Sales which bounced by 7.8% against an expected weather-struck 3.5% fall. We also had the Markit version of US Manufacturing PMI unexpectedly rising, to 55.3 from 55.1, while the Richmond Fed Index fell to -8 from 0. All up, one might have expected US Bond Yields and the Dollar to be a bit higher on the day, but in Bonds at least, good price action into and out of a well-received US two Year Note Auction looks to have carried the day.
This morning on the economic front we have the very important German IFO Survey for Business Climate and Current Assessment/Expectations at 9.00 am. This is followed at 11.00 am by US MBA Mortgage Applications. Finally at 12.30 pm we have the equally important US Durable Goods Orders at 12.30 pm where the consensus is for a 0.5% rise after the previous month’s 2.8% increase.
June S&P 500
Despite some decent US economic releases yesterday the S&P sold off in the last thirty minutes of trading for the third consecutive trading session. The sell-off last night has seen me go long the market at 2083 which is just above the key 2075/2080 support that I have mentioned over the last week. I am only long in small size and I will leave my stop the same at 2074. If the S&P breaks and closes below 2075 this evening I will then look to put on a more macro short position especially with the three confirmed Hindenburg Omen’s on the clock. Given the negative price action over the past few days I will lower my sell level to 2093/2098 with a 2103 stop.
EUR/USD
Sometimes you get lucky with your calls in the market but yesterday was not one of those days which was very frustrating for me as I had a sell order in the Euro at 1.1030 and the high was 1.1029 before the market fell over 130 points and I am still flat. Today I will still be a small buyer on any dip back to 1.0860/1.0890 with a tight 1.0835 stop. I will also lower my sell level slightly to 1.1025/1.1055 with a 1.1085 stop.
June US Dollar Index
The Dollar plan worked well yesterday as shortly after I posted the Dollar Index traded higher to my 97.60 sell level and after a nice sell-off overnight I have been able to cover this position at 97.20 this morning and I am now flat. Today I will again look to go short on any rally higher to 97.55/97.85 with a tight 98.10 stop. I will still look to buy the Dollar on any further dip lower to 96.10/96.50 with a 95.55 stop.
June DAX
The DAX plan also worked out very well yesterday as late in the afternoon the DAX traded higher to my 12040 sell level and after a nice sell-off I was able to cover this position at 11990 and I am now flat. This morning the DAX is rebounding after a shaky start and I will again look to go short on any further rally to 12070/12110 with a tight 12140 stop. I will still be a buyer on any dip lower to 11870/11920 with an 11830 stop.
June FTSE
After last week’s 5% rally in the FTSE the market has gone sideways since but at the same time is holding on to these gains. I am still flat the FTSE and today I will raise my buy level to 6920/6950 with a 6885 stop. Given the positive price action I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately after the Dow rallied to my 18160 sell level shortly after I posted yesterday morning I covered this position way too early at 18100 and I am now flat. I will continue with my strategy of selling rallies with a tight stop as this plan has worked very well so far in 2015. Today I will again look to go short on any rally higher to 18090/18130 with an 18170 stop which is just above yesterday’s high. As I mentioned at my analysis session last night I am really worried for the Dow going forward especially as the stronger Dollar will have an impact on some of the major Dow stock earnings plus the fact that we have three confirmed Hindenburg Omen’s on the clock.
June BUND
Shortly after I posted yesterday the Bund again rallied to my sell level at 158.65 and after a nice sell-off in the afternoon I was able to cover this position at 158.20 and I am now flat. Just like the Dow above I will continue with my strategy of selling rallies in the Bund especially with Bond Yields at such depressed levels. Today I will again be a small seller on any rally higher to 158.70/159.00 with the same 159.25 stop.
Gold Rolling Contract
Gold has traded in a very narrow range over the past few trading sessions and I am still flat. Today I will leave my buy level unchanged at 1167/1176 with the same 1158 stop.
Silver Rolling Contract
No change as I am still long from yesterday morning at 16.90 with the same 16.40 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 16.20 with a 15.70 stop.
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