Yesterday was a another quiet day as US Equities continue to languish with no indications that US Lawmakers are anywhere near a compromise on the spending cuts and revenue increases that will avoid the worst excesses of the Fiscal Cliff. The US Dollar is weaker across the board. Whilst it is tempting to suggest a weaker Dollar, this environment suggests that the negative correlation between risk and the US currency is reversing, this is almost certainly wrong as more likely it reflects the fact that as markets continue to thin out into the year-end, each asset class is marching to its own tune/order flow. The de-linking of Gold from the USD or EUR, as it moves lower, is another example of a correlation breakdown that is not of any great significance.
Today, on the economic data front, we have PMI Services from Germany, the Euro-Zone, and the UK this morning, followed later in the US by Factory Orders, Non Farm Productivity and ADP Employment change which will be closely watched ahead of Non Farm Payrolls on Friday.
Dec S&P 500
Another very quiet day as the market awaited key economic data later in the week and for some direction on the Fiscal Cliff impasse. The market traded up to my 1409 sell level with a 1411.5 high and I took profit on this position at 1403.5 and I am now flat. I am surprised by this morning’s Gap up but, just as in Europe with Greece, a deal will be done on the Fiscal Cliff as the ramifications of a no deal will be massive. We still have the Key Day Reversal in the market from Monday and this morning I am a seller from 1416/1420 in small with a 1425 stop. A break and close over 1425 will be very bullish. I will also look to by any dip to 1402/1406 with a 1399 stop.
Dec DAX
The Dax has traded up to my sell level this morning and I have gone short at 7500. I am not comfortable in being short as this market is very bid and I will leave a 7520 stop. I will also look to cover my position on any dip to 7460 and I will look to buy the market from 7430/7450 with a 7420 stop.
USD/EUR
After I posted yesterday morning the Euro traded up to my 1.3110 sell level and I took a small profit at 1.3080, as the Euro would not follow the US Equities lower and I am now flat. Even though the Euro is overbought I still fancy we will test the 1.3250/1.3400 level before we go lower. This morning I will look to buy a dip to 1.3070/1.3100 with a 1.3060 stop and I will also look to sell on any rally to 1.3170/1.3190 with a 1.3220 stop.
Dec Bund
No Change from yesterday as I want to sell from 142.80/143.00 with a 143.20 stop and I will also look to buy on any dip to 142.00/142.20 with a 141.90 stop.
Dec FTSE
The FTSE is back to the 5900 level and is overbought on a daily basis and at the top of the Williams Index. This morning I have raised my sell level to 5915/5930 with a 5945 stop. I do not want to be long the FTSE at this time.
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