The S&P500 closed above 2000 for the first time aided by a generally better than expected set of US economic releases and more M&A news. The latest is Switzerland’s Roche is slated to acquire San Francisco based biotech company InterMune for $8.3 billion. European stocks also continued to feed off Monday’s Dragi inspired rally, Euro Stoxx 50 adding 1% to Monday’s 2% gain. News that Ukraine President Poroshenko was to meet with Russian President Putin may also have helped, as did news of yet another ceasefire agreement between Israel and Hamas.
US Bond Yields were mixed yesterday with a partial reversal of the recent trend of curve flattening, perhaps helped by a strong result for the latest 2-Year Treasury Auction. The standout US releases were for Consumer Confidence and Durable Goods Orders. In contrast to the fall in the UoM reading last week the Conference Board Confidence measure rose to 92.4 from 90.9 and versus 89.0 expected. In addition, the ‘jobs plentiful/jobs hard to get’ reading and which is one of the 19 ingredients in the Fed’s’ Labour Market Conditions Index’, and referenced by Fed Chair Yellen in her Jackson Hole speech last Friday, rose to -12.4 from -15.3 and in contrast to a year ago when the reading was -22.0. Durable Goods blew the roof off, in headline terms, rising 22% month on month but this was on a surge in Boeing Orders. We also had two sets of House price data both of which slightly disappointed expectations.
Today is very light in terms of economic releases with the only data due on either side of the Atlantic being German GIK Consumer Confidence this morning.
September S&P 500
Yesterday was one of the quietest trading sessions of the month so far with most traders in London and New York on holiday until next Tuesday. The S&P was trading lower by the time I posted yesterday but as soon as the Durable Goods Orders were released the market spiked to a high of 2002.75 before selling off into the close. I am still short from last Monday at 1996 with the same 2003 stop.
The S&P has made an incredible 29 new record highs this year and we have now gone nearly 31/2 years without at least a 10% correction which is un-precedented. Yes the market is way over valued in my opinion but until we get a sustainable sell extreme it is very difficult to fight this trend and thus the reason why I have been selling spikes over the last two weeks and quickly taking profit before the next move higher. Today if I am stopped out I will be a more aggressive seller in front of 2008 with the same 2013 stop. I am still reluctant to chase this market higher and I will leave my buy level the same at 1878/1883 with a 1874 stop.
Euro/USD
No change as I am still long at 1.3190 with the same 1.3160 stop which came close to being hit yesterday after I posted. The Euro is still trading at the bottom of its Bollinger Band and Williams Index and it may stay soft until we get the ECB Meeting out of the way next week. Given how oversold the Euro is trading I still do not want to be short at this time.
US Dollar Index
Still no change as I am a small seller on any further rally to 82.80/83.10 with the same 83.30 stop as the Dollar is trading at the top of its Bollinger Band and Williams Index making me reluctant to be long at this time.
September DAX
The Dax briefly sold off after I posted yesterday morning before it re-grouped and forged ahead to eventually hit my 9570 sell level. The market is now up over 500 points in the last week mainly on the back of the political stability in Russia/Ukraine and the hope that somehow Dragi can rescue Europe which is on the verge of re-entering another recession. I am still short at 9570 and I want to give this trade some room hence the wider stop at 9630. I will also move my buy level higher to 9430/9470 with a 9415 stop which is just below yesterday’s low.
September FTSE
The FTSE just missed my 6770 buy level yesterday before trading higher but the market is noticeable in that it is totally underperforming the other major stock markets. I will leave my buy level the same at 6740/6770 with the same 6725 stop.
Dow Rolling Contract
I read last night that apparently in 1929 the stock market in the US topped on the day after Labour Day and of course we all know what happened then. I am not saying that the same event will happen again but with a market so stretched it is worth keeping an eye on. I am still short at 17105 with the same 17165 stop as the Dow so far has failed to confirm the new highs in the S&P. If I am stopped out of this small position I will be a more aggressive seller in front of 17210 with a 17240 stop.
September BUND
Finally the Bund failed to make a new high despite the Italian and Spanish Bond Markets forging ahead. Today I will be a small seller from 151.10/151.40 with a 151.70 stop. Given how over extended the Bund is trading I do not want to be long at this time.
Gold Rolling Contract
My Gold trade finally worked well yesterday as the market had a nice rally which enabled me to cover my long 1274 position at 1287 and I am now flat. Today I will look to reset my long position on any dip to 1273/1279 with a 1265 stop.
Silver Rolling Contract
I like the price action of Silver at this time. For this reason I am going to raise my buy level to 19.25/19.50 with a 18.95 stop.
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