Yesterday was a whip-saw day for US equities with the market falling initially on weaker than expected German IFO, US Consumer Confidence and Richmond Fed Manufacturing numbers but then recovered as President Obama made conciliatory noises about Syria. But by the end of the New York session, concerns about a shut down of the US Government and potential default weighed on markets. There were also unsubstantiated rumours about a possible downgrade of Italian debt.
On the US Debt-Ceiling issue, D-day is looming and it is spooking investors. Congress has until September 30th to pass a Federal Budget otherwise the Government will start to shut down with most Federal employees not being paid and not working. The Government has been pushing up against its $16.7 trillion debt limit since May but has avoided defaulting on any bills by employing emergency measures to manage its cash. The US Treasury is expected to run out of borrowing options by the middle of October and this time around Obama has vowed not to negotiate but Republicans are demanding that he give ground on some of their priorities in order to pass the Budget. These include the delaying of health laws, changes in taxation and lowering of medicare rates. The ratings agency Moody’s said that if the debt ceiling is not raised and the US Government defaults on debt servicing this could ‘rile financial markets and damage business and consumer confidence’.
This morning on the economic front we have UK CBI Reported Sales and German Consumer Confidence. Later from the US we have Durable Goods, New Home Sales and MBA Mortgage Applications.
December S&P 500
As I mentioned in the opening commentary above the S&P had a whip-saw day yesterday with market closing down for the forth day in a row. Initially it had a very nice rally after the New York open and I was able to cover my long 1692 position at 1698 and I am now flat. The S&P is very concerned about the debt ceiling deadline next week and the ramifications of not reaching an agreement is so vast that I believe we will come to some arrangement as last happened at the end of December 2012. This led to a huge rally in the S&P. Today I will be a buyer on any dip to 1683/1687 with a 1679 stop. This level is key for the market and for this reason I do not want to be short the S&P today.
Euro/USD
The Euro also traded down to my 1.3470 buy level and after a small rally I was able to cover this position at 1.3490 and I am now flat. Today is the third day in a row that we are testing 1.3450 and for this reason I will not be a buyer today. I will be a small seller on any rally to 1.3500/1.3530 with a 1.3550 stop.
December DAX
The Dax had a very quiet trading session as the market held in well despite the weaker than expected IFO Survey. Today I will raise my buy level to 8600/8625 with a 8580 stop. I do not want to be short the Dax at this time.
December FTSE
The FTSE worked well yesterday as the market had a nice rally and I was able to cover my 6520 long position at 6552 and I am now flat. Today I will be a small buyer from 6500/6520 with a 6490 stop. Just like the Dax above I do not want to be short the FTSE at this time.
I am still short the FTSE/DAX cross position at 2120. We are trading at 2110 as I write this commentary and I will lower my stop to 2140.
December 10 Year Treasury Bond
Unfortunately this market keeps rallying without me being able to get on a long position. I still like this market and today I will raise my buy level to 125.20/125.60 with a 124.95 stop.
December BUND
The Bund just missed my buy level before having a nice rally – at least I wasn’t short! Today I will be a small seller from 140.10/140.40 with a 140.55 stop.
Gold Rolling Contract
Gold just missed my 1302 buy level with a 1306 low before having a nice rally. Today I will raise my buy level to 1310/1318 with a 1304 stop which is just below yesterday’s low. If I am taken long and subsequently stopped out I will be a more aggressive buyer from 1290/1296 with a 1287 stop.
Silver Rolling Contract
Silver traded down to my 21.50 buy level. I am still long and I will raise my stop to 21.30.
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