European Equity markets staged a nice rally yesterday helped by soothing words from the Peoples Bank of China who announced they would keep interest rates in a reasonable range. PBOC spokesman, Ling Tao, saying that the recent interest rate volatility was temporary, that inter-bank liquidity was abundant and overall risk is largely under control. The other positive news for Equities was the better than expected US Economic data. These came from several sources with signs of higher business investment and signs of recovery in housing and manufacturing. US Treasuries Yields rose in response to these reports but for once this did not knock the stuffing out of Equities with the major indices closing up between 0.7% to 1%.
Overnight Gold has been hit again, down by 2.5%, and is on course for its worst quarterly performance since 1920 with a 22% plunge. Silver is also down hard, overnight, to its lowest level in 4 years as the markets are still spooked by the lack of Inflation.
Today on the economic front we have the Bank of England Financial Stability Report and UK CBI Sales, this morning, followed at 1.30 pm by the revised US Q1 GDP which is expected to be unchanged at 2.4%. This afternoon the ECB’s Dragi is due to speak in Paris whilst Dallas Fed President Fisher and Richmond Fed President Lacker are both due to speak on the US Economy.
September S&P 500
Yet again when we see the McClellan Oscillator oversold as it was yesterday with a reading of -295 the S&P is a buy and the cash market managed to close the 1592 open Gap, that I mentioned yesterday, from last Friday before sellers returned into the close The McClellan Oscillator improved to -157 late yesterday and, given the fact that we have month-end and quarter-end on Friday, I would expect the market to trade higher over the rest of the week.
Unfortunately the market just missed my 1568 buy level with a 1569 low before it rallied to a high of 1586 before having a late sell-off into the close. I have bought the market this morning in small size at 1576 and I will leave a 1568 stop on this position. If I am stopped out I will be a more aggressive buyer in front of 1560 with a 1552 stop. My only interest in shorting the market is if we rally to 1605/1610 with a 1615 stop.
Euro/USD
The Euro traded in a very tight range yesterday and it traded down to my 1.3070 buy level I managed to cover this position at 1.3095 and I am now flat. I am surprised, considering how weak Gold and Silver are this morning, that the Euro is not a lot lower and today I will be a small buyer on any dip to 1.3000/1.3025 with a 1.2985 stop. The bottom of the Bollinger Band is at 1.3000 and I would expect the market to find support here. However a break and close below 1.3000 will be bearish. For today I will lower my sell level to 1.3120/1.3150 with a 1.3170 stop.
September DAX
The Dax continued its nice rally off the 7660 low made on Monday and the market is now up nearly 200 points off this low. The fact that we have month and quarter end on Friday means I do not want to be short the market and today, given the fact that I did not trade the Dax yesterday as the market just missed my 7730 buy level, I am looking for levels to reset my long position. For this reason I will raise my buy level to 7760/7790 with a 7730 stop which is just below yesterdays low.
September FTSE
The FTSE worked well yesterday as we had a nice rally and I was able to cover my 6010 long position from yesterday morning at 6060 and I am now flat. Today I will be a buyer on any dip to 6020/6040 with a 5995 stop and I will also look to sell the market on any rally to 6120/6150 with a 6170 stop.
September BUND
The Bund traded down to my 140.40 buy level and I am still long. I will raise my stop to 140.30 as I look for the market to trade higher and I am expecting that it will get some support when Dallas Fed President Fisher speaks on the economy later this afternoon.
Silver Rolling Contract
Unfortunately I was stopped out of my 19.60 long position at 19.20 overnight. The market then sold off further and Silver dropped down to my 18.85 buy level. I will leave my stop the same at 18.50.
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