US Equities again rose to new highs yesterday as earnings from Pfizer to Xylem beat estimates and data indicating slower growth again fueled bets that the Federal Reserve will maintain stimulus with no tapering. The S&P closed up another 0.6% to 1772 for its third straight record close. It seems to me that the Fed has created this ‘good news is bad news bad news is good news’ scenario. The S&P has now closed up 13 of the past 15 trading sessions which is nearly a record. Consumer Confidence came in weaker than expected yesterday and is now back to its lowest level since August 2011. On the currency markets the US Dollar was the big winner with the Euro trading back to the 1.3740 from 1.3820 yesterday.
Today is another very busy day foir economic data. This morning we have Euro-Zone GDP, Consumer Confidence and CPI. We also have German Unemployment. Later this morning we have 10-Year Bond Auctions from both Germany and Italy.This is followed from the US at 12.30 pm by CPI and the ADP Employment change and this will be closely watched by the Fed ahead of the FOMC statement at 6 pm.
December S&P 500
As expected, the S&P has yet again rallied into an FOMC Meeting. They will release their statement at 6 pm where no change is expected to tapering as Bernanke is not scheduled to have a press conference after the meeting. The S&P has rallied over the last few days without me being able to get a long position on. The Daily Sentiment Index is now over the 90% bulls that I have been looking for and the market is now overbought on a Daily, Weekly and Monthly basis.
Today I will be a small seller from 1770/1775 with a 1778 stop. If I am taken short and subsequently stopped out I will use any ‘five handle sell off rule’ to reset my short position with a stop just above whatever high is put in. My only interest in buying the S&P is on a dip to 1753/1757 with a 1749 stop.
Euro/USD
I have no position in the Euro but my long US Dollar Index position finally started to work yesterday. I cut half my long 79.15 position from last week at 79.60 and I will leave a 79.20 stop on the other half. I will lower my sell level for the Euro to 1.3800/1.3830 with a 1.3850 stop. I still do not want to be long the Euro at this time.
December DAX
The Dax just missed my 8960 buy level before having a nice rally and I am still flat. The Dax refuses to trade lower and I have to respect the price action despite how overbought the market is trading. Today I will raise my buy level to 8970/9000 with a 8955 stop which is just below yesterday!s low. I do not want to be short the Dax at this time.
December FTSE
The FTSE is also rallying without me being able to get a long position on. Just like the Dax above I will raise my buy level to 6690/6710 with a 6670 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow is still lagging behind the S&P and if it can break and close over 15720 it will be bullish. The Dow traded up to my 15680 sell level before the close last night and I am now short in small with a 15720 stop. Just like the S&P, this market is now overbought on a Daily and Weekly basis. I will also be a buyer of the Dow on any dip to 15600/15630 with a 15580 stop.
December BUND
No change as I am still a small buyer on any dip to 140.55/140.80 with a 140.35 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold worked well yesterday as shortly after I posted it traded down to my 1342 buy level before having a nice rally and I was able to cover this position at 1352 and I am now flat. I still like Gold and today I will be a small buyer on any dip to 1332/1339 with a 1328 stop. I still do not want to be short Gold at this time.
Silver Rolling Contract
Silver also traded down to my 22.30 buy level shortly after I posted and I am still long as was quiet ahead of the FOMC tonight. I will leave my stop the same at 21.95 and if I am stopped out I will be a more aggressive buyer from 21.30/21.60 with a 20.95 stop.
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