The Markets continue to trade quietly higher as we wait for the FOMC this evening which will be announced at 7.15 pm, our time. The Euro has stalled at the psychological 1.3500 level and now having retraced 50% of the fall from 1.4940 in May 2011 to 1.2040 July 2012. The Euro rallied into the release of the Consumer Confidence report and held its gain after the Nos. It seems that the increase in payroll tax this month in the US and the lack of a permanent fiscal solution is weighing on US Consumers minds. Not even a rise in US House Prices was enough to turn USD sentiment sufficiently. It is of course the US Jobs Market that holds the key to the Fed’s QE plans and the USD. We have had better Jobless Claims of late but the Conference Board Jobs Plentiful Index took a backward step, dimming USD sentiment into Fridays Non Farm Payrolls.
This morning on the economic front we have UK Net Consumer Credit and Euro-Zone Business Climate Indicator ahead of Monti speaking in Brussels. In the US, the ADP Employment Change will be closely monitored ahead of Friday, as well as MBA Mortgage Applications and GDP. All eyes will then turn to the FOMC announcement later.
March S&P 500
The S&P continues to grind higher. The market dropped nicely to my 1492 buy level with a 1490.5 low before trading as high as 1504 into the close. I took a nice gain at 1500 on my 1492 long position and I am still flat. Today I do not want to be short ahead of the FOMC this evening unless we trade up to 1510/1515 where I will look to go short with 1522 stop. Even though we are very overbought on both a daily and weekly basis we are at the end of January/beginning of February which is seasonally a very strong time of the year. I still believe we are putting in a short term top over the next 10 days and I will wait for the first sell extreme in order to get bearish. This morning I will also be a buyer on any dip to 1497/1501 with a 1495 stop.
March DAX
The Dax also worked very well yesterday as we dropped down to my 7820 buy level with a 7814 low. I have covered this position this morning at 7860 and I am now flat. Today I will still look to buy the market on any dip to 7810/7830 with a 7795 stop. I will also look to go short if we hit my 7890/7910 target level with a 7925 stop on any short position.
Euro/USD
The Euro worked really well as dropped down to my 1.3420 buy level. I went long here and I took a very nice gain at 1.3490 and I am now flat. The Euro has traded up to my 1.3510 sell level this morning and I have gone short in small with a 1.3540 stop. I will look to take profit at 1.3490 on this position as I want to be flat going into the FOMC. If the Euro continues to rally I will be a seller from 1.3570/1.3600 with a 1.3620 stop. I am only interested in buying the market if we drop back to 1.3440/1.3460 with a 1.3415 stop.
GBP/USD (Cable)
At last Cable worked yesterday as I was able to take a nice profit at 1.5770 on my 1.5698 long position taken yesterday morning and I am now flat. As I said yesterday the 1.5670/1.5700 is key support and I will be a buyer here with a 1.5650 stop. I do not want to be short at this time.
March FTSE
Unfortunately I was stopped out of my 6255 short at 6290 and I am now flat. The FTSE is grossly overbought but, as Keynes says, Markets can remain illogical longer than I can remain solvent and this is certainly the case with the FTSE. The market continues to trade at the top of the Bollinger Band and Williams Index and the next main resistance level is 6330/6350 where I will be a seller with a 6365 stop.
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