US stock markets closed with small losses yesterday in contrast to the European Bourses which closed strongly led by the UK FTSE which had one of its best days of the year so far. Markets are opening stronger this morning as news that Shell are buying BG Group for 47bn Pounds and stock and this news is certainly giving the FTSE another boost. Earnings season kicked off after the close last night with Alcoa first up. However their earnings disappointed with the stronger US Dollar mainly the blame. Meanwhile Bond Yields are unchanged while Oil prices closed 3.5% higher despite news of the Iran Nuclear deal.
European Bond markets had another strong day yesterday where the peripheral yields are 6/7bps lower with the exception of Greece which is 57bps lower ahead of today’s scheduled EUR460mn payment to the IMF which is now fully expected to be made.
US Dollar strength, and related EUR/USD weakness does not look to have been directly related to the incoming economic calendar. For the Dollar, most of the day’s gains were secured prior to the release of the February ‘JOLTS’ job opening report and reputedly one of Janet Yellen’s favourite labour market statistics. This rose to a bigger than expected 5133 (ie 5.13mn openings) from 4965 in January, the second largest in history of a series that began in 2000.
Fed speak came from arch-dove Kocherlakota, who said Fed rate ‘lift off’ should not begin until H2 2016 and that the Fed could buy assets again if the economy faltered. QE4 anyone?
As for Euro weakness it is worth noting that the ECB’s bond buying in the first month of its QE programme totalled EUR52.5bn – so very much in line with the EUR60bn target once allowance is made for long term refinancing operations (TLTROs) and covered bond purchases, both of which also swell the ECB’s balance sheet.
The other significant economic news was the UK Services PMI, which rose to a stronger than expected 58.9 from 56.7 last month.
This morning on the economic front we have Euro-Zone Retail Sales at 10.00 am. This is followed at 12.00 pm by US MBA Mortgage Applications. Finally at 7.00 pm the US will release its Minutes from the March 17/18 FOMC Meeting. Earlier at 2.30 pm the Fed’s Dudley will speak on Monetary Policy in New York.
June S&P 500
The S&P plan finally worked out well yesterday as after I posted the S&P traded higher to my 2079 sell level before a very late sell-off enabled me to cover this position at 2071 and I am now flat. The intra-day volatility in the S&P has been incredible in nearly every trading session so far in 2015 with the lack of liquidity listed as the main reason. Take yesterday as soon as the S&P opened in Chicago the market must have moved nearly 25 handles in both directions in the first 15 minutes of trading. I still believe that that this market is an accident waiting to happen but until we break and close below the now key support of 2035/2040 I am going to continue with my strategy of selling rallies with a tight stop. Today I will again look to go short on any move higher to 2077/2082 with a tight 2086 stop. With the FOMC Minutes due at 7.00pm we may see some two-way volatility ahead of their release and for this reason I will also be a small buyer on any further dip lower to 2058/2063 with a 2053 stop.
EUR/USD
Shortly after I posted yesterday morning the Euro continued to sell-off which unfortunately stopped me out of my long 1.0925 position at 1.0870. The Euro continued to trade lower with the market eventually hitting my 1.0840 buy level before having a nice rally which enabled me to cover this position at 1.0880 and I am now flat. I am convinced that with more and more Fed officials coming out and saying that rate ‘lift off’ may not happen until late 2015 or even early 2016 that the US Dollar will weaken as this realty begins to sink in. Today I will again be a small buyer on any dip back to 1.0810/1.0850 with a 1.0785 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1.0750 with a 1.0690 stop. I still do not want to be short the Euro at this time.
June US Dollar Index
After I posted yesterday morning the Dollar continued to strengthen with the Dollar eventually hitting my 97.70 sell level. I am still short and as I want to give this trade some room I will leave my stop the same at 98.20.
June DAX
Unfortunately after I posted yesterday morning the DAX which began to rally just missed my 12180 sell level by three points before having a nice sell-off and I am still flat. Today I will again be a seller on any rally higher to 12180/12230 with the same 12260 stop. My only interest in buying the DAX is still on any dip to 11960/12010 with an 11915 stop.
June FTSE
I am very surprised with how strong the FTSE is trading considering that we have the UK Elections in a few weeks. However news of the Shell takeover of BG Group is obviously having a positive effect on the market this morning. Yesterday the FTSE plan worked out well as shortly after I posted the FTSE traded higher to my 6910 sell level before having a nice sell-off ahead of the New York close which enabled me to cover this position at 6880 and I am now flat. With the market trading higher again this morning I will look to go short again on any further rally to 6975/7000 with a tight 7020 stop. Remember a break and close over 7000 will be short term positive.
Dow Rolling Contract
The Dow plan worked out very well as shortly after I posted the Dow rallied to my 17970 sell level before having a very nice sell-off into the close which enabled me to cover this position at 17880 and I am now flat. Today I will again look to go short on any rally higher to 17960/18010 with an 18040 stop. Given the fact that we have three confirmed Hindenburg Omen signals on the clock I do not want to be long the Dow at this time.
June BUND
No change as I am still a small seller from 159.10/159.30 with the same 159.50 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 159.75 with a 160.10 stop.
Gold Rolling Contract
No change as I am still a small buyer on any further dip lower to 1198/1205 with the same 1191 stop which is just below last Thursday’s low. Remember a break and close over 1220/1230 will be very bullish and opens up the possibility of a move higher to at least 1305.
Silver Rolling Contract
I am still long from last week at 16.90 with the same 16.60 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 16.40 with the same 15.90 stop.
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