As Europe and the US co-ordinated sanctions against Russia, the heat was taken out of the earlier buoyant equity market. European equities were stronger and Bond Yields at their lows perhaps in anticipation of more ECB action. Bond Yields are now at record lows which is astonishing since we have had an EU debt crisis but the sanction news came after Europe closed and reversed the positive news from the US. There may be caution ahead of the big newsflow later today.
Economic sanctions against Russia may have been somewhat expected but they have been put into action and co-ordinated by the EU and US. This is likely to be an adverse outcome for Russia but also Western Companies which deal with Russian counterparts and their economies. The possibility of these sanctions having a flow-on effect outside Russia, particularly Germany and other European Countries is a headwind to sentiment. The sanctions include the prevention of sale of new technology to aid development in the Oil Industry and State Owned Russian Banks or financial institutions cannot issue new stock or debt in Europe as any new debt or stock cannot be traded by EU or US banks. BP and Renault have already said that these will affect their business.
Earlier the US had been buoyed by further good earnings data and a very robust Consumer Confidence Index which rose to 90.9 from 86.4 last month and the highest reading since October 2007. However there were further signs of a weak patch in Housing with the Case Schiller House Price Index dropping in the month for the first time since January 2012.
This morning on the economic front we have Euro-Zone Consumer Confidence and Business Climate Indicator at 10.00 am. This is followed at 1pm by German CPI. At 1.15 pm we have the US ADP Employment Change whilst at 1.30 pm we have US GDP which is expected to rise 2.9%. Then at 7 pm we have the US FOMC Rate Decision.
September S&P 500
Finally we are starting to see some two-way volatility returning to the equity markets after the lull of the previous three months. The S&P plan worked well yesterday as shortly after I posted the market was trading at my 1970 buy level before having a nice rally which enabled me to cover this position at 1976 and I am now flat. Today is one of the most important days for economic releases for July culminating in the FOMC Rate announcement at 7 pm.
Fed Chair, Yellen is not due to give a press conference after the Fed releases its Statement. Today I will be a small buyer on any dip to 1960/1964 with a 1957 stop. I will lower my sell level slightly to 1978/1983 with a 1986 stop.
Euro/USD
Given the importance of today’s economic data I have decided to cover my long 1.3430 Euro position this morning for a small loss at 1.3410 and I am now flat. If the Euro continues to sell-off after the data release later I will look to re-buy this position on any dip to 1.3355/1.3380 with a 1.3335 stop. My only interest in selling the Euro is still on a rally to 1.3480/1.3510 with a 1.3530 stop.
US Dollar Index
Very frustrating as the Dollar continues to rally but unfortunately I have not been able to get a long position on board. I have to respect the fact that the Dollar has now closed over the key 81.00 resistance level for a number of days and this is technically very bullish. For this reason I am raising my buy level to 80.90/81.10 with a 80.65 stop on any long position.
September DAX
The Dax plan worked well yesterday as shortly after the US markets opened it rallied up to my 9685 sell level and after a nice sell-off, after the EU and the US imposed sanctions on Russia, I was able to cover this short position at 9645 and I am now flat. This is a very important day for Germany especially with the release of its CPI at 1 pm. Today I will again be a seller on any rally to 9710/9740 with a 9760 stop. I will also raise my buy level to 9570/9600 with a 9545 stop.
September FTSE
The FTSE plan also worked well as shortly after I posted it was trading at my 6755 buy level and after a nice rally I was able to cover this position at 6785 and I am now flat. Today I will be a small buyer on any dip to 6520/6540 with a 6695 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Very late in the trading session the Dow started to get hit hard and eventually it traded down to my 16925 buy level. I would expect the Dow to rally ahead of this evening’s FOMC and I will look to cover this position ahead of this announcement as I want to be flat when we get the Fed Statement. Ahead of this decision I will raise my stop to 16900.
September BUND
Just after I posted yesterday morning I was stopped out of my 148.20 short position at 148.55 and I am now flat. The Bund is now trading at new contract highs. To me the Yield is telling me that we have some serious economic depression coming around the corner as the 10 Year Yield is now approaching 1%. The Bund is again overbought and today I will look to sell on any rally to 148.75/148.95 with a 149.15 stop.
Gold Rolling Contract
I am glad that I lowered my buy level for Gold yesterday, to 1295, as the market eventually traded down to allow me enter a long position. I am still long and I will leave my stop the same at 1283 which is just below last week’s low.
Silver Rolling Contract
Silver had a nice rally after I posted yesterday morning which enabled me to cover my long 20.40 position at 20.75 and I am now flat. It is still trading heavy which is a worry going forward. Today I will only be a buyer on any drop to 20.10/20.35 with a 19.85 stop.
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