The big news yesterday was the Key Day Reversal in the German DAX which had risen to new highs after the stronger than expected Retail Sales was released just before I posted yesterday morning. The DAX which had risen to new all-time highs at 11470 after the release of the Retail Sales then proceeded to get hit hard to the downside with the market falling nearly 2%. In Currency markets the Australian and Canadian Dollar both outperformed in the past 24 hours, each for their own reasons.
As I had reported yesterday morning the RBA had left rates unchanged and this was enough to see the Australian Dollar spike higher, pushing up from 0.7760 through 0.78 and to 0.7820 where we are currently trading. No change in policy was no change but the attachment of an easing bias had the market second guessing of a follow-up rate cut to January’s with the Central Bank noting that it was appropriate to hold interest rates steady for the time being and that further easing may be appropriate over the period ahead.
Canada’s Q4 GDP took centre stage, with December Quarter Growth come in at a stronger than expected 2.4%, well north of the 2.0% median forecast, a result sweetened by an upward revision to Q3 by a similar margin to 3.2% from 2.8%. The Canadian Dollar popped higher on this release and has managed to keep these gains this morning.
The only US data released yesterday has been Monthly Car Sales for February which came in at 16.16m versus 16.7m expected.
Overnight India was the latest Country to cut rates with the Reserve Bank of India cutting its Purchase rate to 7.5% from 7.75%. This is a second cut so far this year with Governor Rajan citing weakness in Asia’s third largest economy.
This morning on the economic front we have German, Euro-Zone and UK Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by Euro-Zone Retail Sales at 10.00 am. At 1.15 pm we have the very important US ADP Employment Change which is expected to come in at 210K versus last month’s 213K. The US Services Markit PMI is due to be released at 2.45 pm and then at 3.00 pm we have the ISM Non-Manufacturing Composite. Finally at 7.00 pm the Fed will release its Beige Book.
March S&P 500
Finally after a week of very quiet action for the S&P the market finally obliged with the S&P trading lower to my 2101 buy level with a 2096 low before having a small rally which enabled me to cover this position at 2106 and I am now flat. I would expect today to be volatile especially given the importance of the economic data to be released later. Today I will again be a buyer on any dip lower to 2089/2095 with a 2084 stop. My only interest in selling the S&P is still on a rally higher to 2115/2120 with a 2125 stop. Again if I am taken long and subsequently stopped out of any long position, I will use my 5 Handle Rule to go short again with a stop above whatever new high is printed.
EUR/USD
The Euro is opening lower this morning. I am still flat and I will still be a small buyer on any further move lower to 1.1100/1.1130 with the same 1.1080 stop which is just below January’s 1.1094 low print. A break and close below 1.1080 will be short-term bearish. My only interest in selling the Euro is still on a rally to 1.1220/1.1250 with a tight 1.1270 stop. It is interesting that since we finally broke and closed below 1.1250 last week that the Euro has so far been unable to break back above this now key resistance level.
March DAX
One of my favourite technical signals is the Bollinger Band especially when it is aligned with the Williams Index. These two signals have been telling you that the DAX is extremely overbought after its near 20% rally from its January low print. Yesterday I was very unlucky with my 11480 sell level as the high reached was 11470 before the market went on to have a significant Key Day Reversal to the downside. I mentioned yesterday that a break of 11325 would be the sell extreme that I have been looking for. I went short at 11320 and after a nice sell-off I was able to cover this position at 11270. With the DAX back trading higher this morning I have gone short again at 11320. I will leave an 11370 stop on this position. If I am stopped out of this trade, I will be a more aggressive seller in front of 11420 with a 11480 stop which is just above yesterday’s contract high.
March FTSE
The FTSE plan did not work out well yesterday as shortly after lunch the FTSE traded lower to my 6880 buy level before stopping me out of this position for a small loss at 6855 and I am now flat. The key level to watch for the FTSE is at 6750 and as long as we can hold this key pivot then the market is fine. Today I will again try the downside on any move lower to 6800/6830 with a 6775 stop. I do not want to be short the FTSE at this time as the market has been steady to higher so far in 2015.
Dow Rolling Contract
I am still flat the Dow as I still firmly believe that the Dow is an accident waiting to happen to the downside especially with the stronger Dollar having a major effect on a lot of the Dow stocks. However we still need a decent sell extreme first before it is time to get too bearish and I will continue with my strategy of selling rallies with a tight stop. Today I will lower my sell level slightly to 18230/18280 with an 18320 stop.
June BUND
Since I posted yesterday morning the Bund is continuing to trade lower. I am still flat and today I will lower my sell level slightly to 156.95/157.30 with a 157.50 stop.
Gold Rolling Contract
My long 1205 Gold position worked out well yesterday as Gold had a nice spike higher soon after I posted which enabled me to cover this position at 1212 and I am now flat. As I mentioned yesterday Gold needs to break and close over the now key resistance at 1220/1230 for the market to look healthy again. Today I will again try the long side on any further dip lower to 1190/1197 with a 1183 stop.
Silver Rolling Contract
No change as I am still long from early yesterday at 16.40 with the same 15.90 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 15.60 with the same 14.90 stop.
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