Equity markets had a better day yesterday as tensions eased in the Emerging Markets after the rout of the last few days coupled with some better US Earning Reports (apart from Apple). The Dow and S&P both closed up 0.58% ending a 5 and 3 day losing streak respectively whilst the NASDAQ closed up 0.25% despite Apple falling over 5% after their earnings were reported after the close last night.
Markets were also supported by better US Economic data with Consumer Confidence rising to 80.7 in January from 77.8 the previous month whilst the Case Shiller 20 City House Prices rose a further 0.9% in November to be up 13.7% year on year. Positive US earnings reports from Pfizer, Comcast and Ford also supported sentiment. For Equity markets, the good news seemed to overwhelm the very disappointing Durable Goods Report for December which fell 4.3% in December versus an expected rise of 1.8%. On the currency markets Sterling was the best performer after UK GDP was released showing a rise of 0.7% in the fourth quarter and 2.8% year on year thus enabling Sterling to regain what it lost over the last few days.
This morning on the economic front we have UK Nationwide House Prices at 9.30 am and this is followed by German Consumer Confidence at 10.00 am. All eyes will then turn to the Fed announcement at 7 pm where another $10 billon of tapering is expected. During the week I said that this week’s Fed Meeting will be the first one led by new Fed Chair Janet Yellan, whereas actually this will be the final one presided over by outgoing Chairman Ben Bernanke. Ms Yellan is due to take Chair on Saturday Feb 1st and as there is no meeting in February the next meeting on March 19th will be the first meeting where Ms Yellan will be the Chair.
March S&P 500
The expected rally in the S&P finally occurred late last night as traders are nervous about being short into Ben Bernanke’s last FOMC Meeting as Chairman before Janet Yellan takes over on Feb 1. After the massive sell off in the S&P last Thursday and Friday the market has now rallied from a low of 1767 on Monday afternoon to over 1800. There are two days that I am flat going into major announcements each month and they are the Non Farm Payrolls and the FOMC Meeting and tonight will be no exception. I am expecting a lot of volatility surrounding the tapering decision. The key levels to watch this evening are 1760/1767 on the downside and 1810/1820 on the topside which contains the open Gap left from last Thursday’s close to Friday’s opening.
Yesterday the S&P worked very well as after the Durable Goods were released the market traded down to my 1779 buy level with a 1776 low before having a nice rally and I was able to cover this position at 1787. After the close last night the S&P then traded up to my 1801 sell level on better earnings reports and after a brief sell off I have covered this position this morning at 1796 as I want to be flat ahead of the FOMC tonight. This evening after we get the tapering decision I will be a buyer on any dip to 1778/1783 with a 1774 stop which is just below yesterday’s low. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1760/1767 with a 1757 stop. I will also be a seller on any rally to 1810/1816 with a 1822 stop.
Euro/USD
The Euro also worked well yesterday as after I posted it traded down to my 1.3645 buy level and after and after a nice rally I was able to cover this position at 1.3675 and I am now flat. Today I will be a small buyer on any dip to 1.3600/1.3630 with a 1.3575 stop. I still do not want to be short the Euro at this time.
US Dollar Index
I am still long the Index at 80.50 and I would expect some volatility after tonight’s FOMC announcement. I will still leave my stop the same at 79.80 as I want to give this trade some room. If the Index can break and close over 81.50 it will very bullish.
March DAX
The Dax had a nice bounce yesterday and is finally beginning to move off the bottom of its Bollinger Band and was helped by the Williams Index turning higher. This afternoon the Dax traded up to my 9460 sell level and after a small sell off into the close I covered this position at 9445 and I am now flat. The reason I covered my position is that I did not want to have a position overnight. Today I will be a small seller from 9490/9530 with a 9550 stop. I will also raise my buy level to 9300/9330 with a 9275 stop which is just below the low made last Monday.
March FTSE
After the hammering that the FTSE took over the last few days the market finally began to stabilise yesterday. It unfortunately missed my buy level before trading higher and today I will raise my buy level to 6490/6520 with a 6470 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I was very unlucky with my 15850 buy level in the Dow yesterday as the market traded down to a low of 15858 before trading higher and I am still flat. Today is the one day that I will go into tonight’s announcement flat and if the market sells off after the announcement I will still be a buyer from 15830/15860 in small size with a wider 15785 stop. I will allso be a seller on any rally to 16100/16130 with a 16160 stop. I have to leave my parameters wider given the expected volatility later.
March BUND
No change as I do not to chase this market ahead of tonight’s announcement as I am still a small seller on any rally to 142.80/143.10 with a 143.25 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold continues to sell off from the key 1275 resistance at the 100 Day Moving Average. Today I will leave my buy level the same at 1235/1242 with a 1229 stop. I will still be a small seller on any rally to 1270/1280 with a 1285 stop.
Silver Rolling Contract
Silver, just like Gold, is trading heavy and I was finally stopped out of my 19.80 small long position at 19.50 and I am now flat. Today I will again be a small buyer on any dip to 19.00/19.30 with a 18.80 stop. I still do not want to be short Silver at this time as I am still looking for Silver to put in a major bottom between here and 17.00.
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