Better market sentiment has seen both European and US Equity markets record solid gains yesterday as they reversed their sell extremes from Monday by having a buy extreme in most markets. The economic data also provided some support. Services PMI’s in January improved in China, India, Europe and the UK whilst the ISM Non Manufacturing Index was better than expected at a solid 55.2 albeit down from 55.7, in December. The Euro has recovered its poise amid a sense that the sell-off on Monday, linked to political jitters in Spain and Italy, was somewhat of an over-reaction with the upward revisions to most of the European Services PMIs also helping. Yen weakness has resumed with a vengeance following news that the BOJ Governor Shirakawa has agreed to bring forward his exit by three weeks to March 19th coinciding with the retirement date of the two deputy Governors. Overnight the Australian Dollar is a lot weaker after much worse than expected Retail Sales were released.
This morning on the economic front we have German Factory Orders and the ECB releases its Bank Lending Survey. This is followed in the US by the MBA Mortgage Applications Index.
March S&P 500
Yesterday in my commentary I mentioned ‘Turnaround Tuesday’ for US Stock markets but I never expected that we get such a buy extreme to offset the sell-off on Monday. As you know I really respect these extremes and as I said yesterday the market is not going to give up without a fight. The S&P traded up to my 1503 sell level before reaching a high at 1510.75 before having a small sell off into the close. As the market has closed back above 1500 I decided to cover my short position at 1507 and I am now flat. I now believe the S&P is going to challenge the 1530 level before running into trouble and this morning I am a small buyer from 1504/1508 in small with a 1499 stop. It needs to break and close below 1490 for me to turn bearish.
Euro/USD
Very unlucky here as the market just missed my buy level before the Euro took off to the upside. This morning I will raise my buy level to 1.3470/1.3500 with a stop just below 1.3450 which is the low made yesterday morning.
March USD Index
Unfortunately the USD Index just missed my 79.40 buy level with a 79.45 low and is now at 7985 this morning. I am not going to chase it here and I will leave my levels the same as yesterday with a buy level from 79.20/79.40 with a 78.95 stop.
March DAX
The Dax has had a nice rally off the 7620 support level and the market continues to under-perform the other indices. This morning I have bought the Dax in small at 7660 and I will leave a 7635 stop which is just below the low made earlier this morning.
March FTSE
The FTSE traded up to my 6250 sell level with a 6257 high before trading lower and I was able to take a small profit at 6230 and I am now flat. Today I do not want to be short and this morning I am a small buyer from 6240/6260 with a 6225 stop which is just below the low made yesterday afternoon.
March BUND
After I posted yesterday the Bund sold off and reached my 142.40 buy level before stopping me out at 142.20 and I am now flat. The Bund also rejected the important 143.00/143.10 resistance zone with a 142.92 high before falling a 100 points. Today I am a seller from 142.40/142.70 in small with a wider stop at 143.15. I have to use a wider stop given the volatility and that is why I have reduced my position size.
GBP/USD (Cable)
Cable had a wild day yesterday having just missed my 1.5700 buy level before it rallied to over 1.58 before have a nasty sell-off. The market then traded down to my 1.5700 buy level before stopping me out at 1.5650. I am now flat and I am going to stand aside here and let the market settle before deciding on my next trade.
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