After a long weekend in the US and the UK the markets opened higher with the Dow and S&P closing up, another 0.4% and 0.8% respectively, to post another record close on yet another day of low volume. The US Dollar did make some gains against the majors as it rose from just under 80.20 to 80.40. Despite the record close for the major stock indices the Volatility Index rose 1.3% from last Friday’s record close for the year.
There were some good and not so good points of the US data releases yesterday. The Durable Goods Orders report had some useful upward revisions to recent history, and whilst the headline outcome was better than expected underlying orders and shipments did not carry through further from a positive March in what is a volatile monthly report. The Conference Board’s measure of US Consumer Confidence was right in line with expectations at 83.0, up from 81.7, and contained an encouraging rise in the Expectations Component. Also telling was the ‘Jobs Plentiful Index’ which was back on its improving trend again, this after some decline in April, a sign that consumers see improving job market conditions.
This morning on the economic front we have UK CBI Reported Sales at 9.30 am. This is followed at 10.00 am by German GIK Consumer Confidence and Unemployment . The Euro-Zone will also release its Consumer Confidence and Business Climate Indicator this morning. We have no economic data of note from the US today as the markets wait for the very important US GDP data tomorrow.
June S&P 500
The S&P continues to trade at record levels as it continues to power ahead ever since it broke the key 1878/1880 resistance level last week. This area will now act as good support going forward. The S&P is now very overbought on both a Daily and Weekly basis and I would expect any sell-off to be initially contained at the 1880 support level. Yesterday after I posted, the market traded in a very narrow range and as I did not want to have a position overnight I covered my short 1904 position near the close at 1908 and I am now flat. As I have been mentioning over the last few months, I still expect the S&P to put in some sort of a major top between 1930/1950 and we are not to far away from this area now. Today I will again be a seller on any rally to 1910/1915 with a 1918 stop. My only interest in buying the market is on a dip to 1887/1892 with a 1884 stop.
Euro USD
After I posted yesterday the Euro traded down to my 1.3615 buy level. I am still long and I will not risk too much on this trade by leaving my stop at 1.3580. I will still be a seller on any rally back to 1.3690/1.3720 with a 1.3740 stop.
US Dollar Index
The Dollar Index finally traded down to my 80.20 buy level. I am still long and I will raise my stop on this position to 79.90.
June DAX
After I posted, the Dax traded up to my 9930 sell level. I am still short in small size and I will leave my stop the same at 9970. Just like the S&P the Dax is overbought on both a Daily and Weekly basis however I still expect it to put in a major top somewhere between 10100/10300. The Dax could easily extend its rally until we get neat week’s key ECB Meeting and projected rate cut out of the way. Today I will also be a buyer on any dip to 9800/9830 with a 9770 stop
June FTSE
The FTSE continues to struggle versus the other major indices with the Dax/FTSE spread at an incredible 3100 points differential. I am still flat having taken profit on my long position early yesterday morning at 6830. Today I will again be a buyer on any dip to 6790/6815 with a 6775 stop on any long position.
Dow Rolling Contract
The Dow finally closed over the key 16600/16640 yesterday at 16676. I still believe the Dow will trade as high as 17000/17200 at least before putting in a major top. Today I will raise my buy level to 16570/16620 with a 16545 stop. I still do not want to short the Dow at this time even though the market is very overbought on a Daily Basis.
June BUND
The Bund just missed my 145.90 buy level before spending the rest of the day trading higher. Today I will raise my buy level to 146.00/146.20 with a 145.85 stop which is just below yesterday’s low.
Gold Rolling Contract
By the time I posted yesterday morning Gold was trading at my 1282 buy level. After trading at this level for a couple of hours it started to fall hard just as the US markets were opening and I was quickly stopped out of this position for a small loss at 1273 and I am now flat. The buying the dip strategy has worked in Gold for the last six weeks until we got the sell extreme yesterday with the market unable to break the key 1310 resistance level. Yesterday was the first day that it closed substantially below the 100 Day Moving Average and even though the market is oversold it will take a lot for it to break the now key resistance from 1275/1285. The next good support comes in at 1250 and today I will be a small buyer from 1249/1256 with a 1243 stop. I will also be a small seller on any rally back to 1276/1282 with a 1287 stop.
Silver Rolling Contract
No change as I am still long Silver from last week at 19.40 with the same 18.90 stop. If I am stopped out of this position I will be an aggressive buyer on any further dip to 18.30/18.70 with a 1795 stop.
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