The market headline writers are already having a field day trumpeting the rise in the Dow Industrial Average to a new record high, surpassing the previous October 2007 level of 14155 to close 1% higher near 14250. A better than expected US Non-Manufacturing ISM report has been helpful complementing other recent US data which is playing to the view that Fed largesse, and the prospect that it will continue at full throttle for a long time whilst (Fed Vice Chairman Janet Yellan is the latest to tell us) continuing to trump concerns about the upcoming additional fiscal drag from the US spending sequester. On the latter, Senate majority leader Harry Reid says the Senate will act on its own spending bill next week. Yesterday’s pronouncements by outgoing Chinese Premier Wen that China plans to hit a 7.5% growth target this year with Inflation targeted at 3.5% has generally been viewed as supportive for global growth prospects. Benchmark 10 Year Yields are generally higher, in keeping with strong risk appetite, whilst Euro Peripheral Bond Yields are lower with Italy down 14 bps despite lack of obvious progress towards avoiding fresh Italian Elections.
This morning we have Euro-Zone GDP at 10.00am whilst in the UK, Mr King from the BOE is to testify to the UK Parliament Banking Panel. Later in the US we have Factory Orders, MBA Mortgage Applications, ADP Employment change (which will be closely watched ahead of Fridays Non Farm Payrolls) and finally the Fed releases its Beige Book.
March S&P 500
As expected the S&P continues its relentless rise higher taking its lead from the Dow which made a new closing record high. I took profit too early on my 1525 long from yesterday morning at 1535 and I am now flat. Even though the S&P is at the top of the Bollinger Band and Williams Index it is very difficult to go short mainly because it is hard to find a reason. Any sell extreme we have had in the market this year has not had a follow through sell off the next day and until this happens the trend is still our friend. My own view
is the S&P will find it difficult initially to get through the very important 1565/1580 resistance zone. Today I am only interested in been long the market and I am a buyer on any dip to 1529/1535 with a 1524 stop. If we break and close back below the 1525 area it will be our first warning of an impending sell off. The S&P really needs to break 1490 for a couple of days for me to change my mind.
Euro/USD
The Euro worked well yesterday as having just missed my 1.3090 sell level before trading down to my buy level at 1.3020. I took a nice gain at 1.3060 on this position and I am now flat. Today I will raise my sell level to 1.3100/1.3130 with a 1.3150 stop. I will still look to buy the Euro on any dip to 1.3000/1.3020 in small with the same 1.2965 stop.
GBP/USD (Cable)
Cable also worked well as we traded down to my 1.5100 buy level. I took a nice gain at 1.5140 and I am now flat. This morning I still like Cable but the market is having difficulty having more than just short term spikes before sellers return. Today I am a small buyer on any dip to 1.5050/1.5080 with a 1.5020 stop as I still look for Cable to break 1.5200 before running into difficulty at 1.5300/1.5350 resistance zone.
March Dow Rolling Contract
The Dow finally made a new record high and traded into my sell zone. I have gone short at 14260 in very small and I will leave my stop the same at 14350. The Dow is extremely oversold and at the top of the Bollinger Band and Williams Index and I will use any sell off to 14170/14200 to take profit.
March DAX
The Dax has finally played catch up and broke the important 7870 resistance area. I went short at 7860 and I was stopped out at 7885 for a small loss and I am now flat. Yesterday was another example how important it is to have stops in the market. Today given how overbought the Dax is I will be a seller on any further rally to 7970/8000 with a 8020 stop.
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