US Rate rises are coming, that was the message from both Equities and the US Dollar yesterday. US Bond Yields were not quite as definitive but did end the day mostly higher. European Markets were more mixed with Bond Yields higher as there was some periphery concerns. Data differentiation caused much of the currency divergence for a change, but the stronger US Dollar theme was the over-riding factor. The Dollar Index again cracked 81.50 but failed to push higher and it will be interesting to see if it can hold here especially with limited data flow ahead.
The Fed’s, Fisher was trying to help out with his usual hawkish comments last night. It seems the market may just be swinging around to believe him in the view that rate rises may come sooner. But it was very strong US Non Manufacturing ISM that captured most attention. The series was at a high not seen since December 2005 with mostly solid details. US Factory Orders were also impressive, just to add to the good news, thus providing that the US Economy is rising of its own accord now and not just rebounding from Q1.
EU Services PMI’s were sadly far more lacklustre. The final reading came in a touch lower and Retail Sales were again disappointing. Coupled with a rise in Russian troops lining the Ukraine Border and rising speculation of an imminent flare-up in tensions this has allowed both the Euro and Dax to underperform.
This morning on the economic front we have UK and Manufacturing Production at 9.30 am whilst German Factory Orders which were released earlier and again disappointed. At 12.00 noon we have US Mortgage Applications whilst at 1.30 pm we have the latest US Trade Balance. Finally at 3 pm we have the UK NIESR GDP estimate.
September S&P 500
It was another wild trading session for the S&P yesterday which, having been down early after the US opened, rallied strongly on the ISM data only to fall apart on the increasing tensions in Ukraine which happened after the European Markets had closed. I was lucky with the S&P as the market had a nice sell-off shortly after I posted as the market traded down to my 1924 buy level before it rebounded on the ISM data which enabled me to cover this position at 1929 and I am now flat. So far the market has bottomed again at the 1905/1910 key support level. If the S&P breaks this support then the next support is at 1890 followed by 1863/1883 which I will try to narrow if we trade this low. Today the S&P is again trading at the bottom of its Bollinger Band but interestingly the Williams is again trying to turn higher. The McClellan Oscillator closed with a reading of -248 last night, again at an oversold reading, making it very difficult for me to short the market.
Today I will only be a small buyer on any dip to 1905/1911 with a 1899 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1894 with a 1887 stop. Today I will lower my sell level to 1928/1933 with a 1938 stop which is just above last Monday’s high.
Euro/USD
Shortly after I posted yesterday the Euro started to sell-off again after the respite of the previous few trading sessions. It traded down to my 1.3375 buy level and I went long but only in small size and I will leave my stop the same at 1.3345 which is just below the overnight low. I am not comfortable being long the Euro as the trend has changed and I certainly do not want to have this position ahead of Dragi’s press conference tomorrow after the latest ECB Meeting. I will look to exit this long position on any rally back to 1.3400. I will also look to go short on any further rally to 1.3405/1.3425 with a 1.3460 stop.
US Dollar Index
The Dollar is again pushing the 81.50 key resistance level. I am still flat and today I will raise my buy level to 81.20/81.40 with a 80.95 stop.
September DAX
I cannot remember the last time that I was stopped out of the same contract twice in the one day but that is exactly what happened to me in the DAX yesterday. To make it more painful was the fact it had traded very well all day and even closed higher but once Russia started to move troops to the Ukrainian Border it just fell apart. I was first stopped out of my long 9210 position, taken yesterday morning, and then after the market traded down to my 9130 buy level I was very quickly stopped out at 9085.
The fact that the Dax is so oversold and under-performing versus the other major indices has seen me buy the market again this morning at 9100. I will put my stop at 9060 on this position which is just below this morning’s low. I will also lower my sell level to 9185/9235 with a wider 9275 stop. I have to use a wider stop given the volatility.
September FTSE
The FTSE continues to hold in better than the other major indices and, following the US sell-off late yesterday, it finally traded down to my 6595 buy level. I am still long and I will raise my stop on this position to 6575. I will also look to cover this long position on any move back to 6625/6640.
Dow Rolling Contract
In contrast to the Dax, I was very lucky with my Dow yesterday as shortly after I posted it traded down to my 16490 buy level and after a spike higher on the better than expected ISM data I was able to cover this position at 16530 and I am now flat. The Dow is also very oversold and at the bottom of its Bollinger Band the Williams Index is trying to put in a buy signal this morning. Today I will again be a buyer on any dip to 16370/16400 with a 16325 stop. Given how oversold the Dow is trading I still do not want to be short the market at this time.
September BUND
The Bund worked out well for me yesterday as shortly after I posted it had a nice sell-off which enabled me to cover my 148.50 position from last week at 148.05 and I am now flat. I still believe this market is trying to put in at least a meaningful top and today I will again be a seller from 148.30/148.80 with the same 148.80 top which is just above contract highs made last month.
Gold Rolling Contract
Shortly after I posted yesterday morning Gold traded down to my 1285 buy level and after a small rally into the close last night I covered this position at 1293 and I am now flat. Today I will again be a small buyer on any dip to 1277/1284 with the same 1273 stop.
Silver Rolling Contract
My fears in relation to Silver trading heavy unfortunately came to pass yesterday as I was stopped out of my 20.35 position at 19.85 and I am now flat. It is very over-sold at this time but I am not going to chase the market higher from here. Today my only interest in buying the market is on a dip to 19.10/1955 with a 18.75 stop.
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