Yesterday was another holiday-thinned choppy session in Currency and Equity markets with little in the way of firm trends. Nonetheless, risk sentiment remains positive overall keeping the US Dollar under downward pressure. Over the past week sentiment has been buoyed by expectations of policy action from both the Fed and the ECB and this was enhanced by conciliatory comments from Fed’s Rosengren which reinforced these expectations, keeping the risk rally alive. He said that the Fed should bring out QE3 and lower the interest rate on reserves, this lead to a 1% rally in European Equities. As I have been saying for the last 6 weeks you can only short these markets for a quick trade when they are overbought as you are fighting the Central Banks and the Fed. In other news, UK Manufacturing Production fell 2.9% in June which was the largest fall since November 2008 and German Orders fell 1.7% in June versus expectations for a 0.8% fall. Later this morning we have the inflation report from the BOE.
Sept S&P 500
The S&P just missed my buy level with a 1390 low before a rally took the market to my sell level at 1402 with a 1403.5 high. As the markets are quiet I took profit at 1396 and I am now flat. Today I will raise my sell level to 1402/1405 with 1407 stop and I will look to go long from 1389/1393 with a 1386 stop. As long as we now stay over 1390 the market is still bullish but getting overbought. Again if I see 5-7 handles on any trade I will take my profit.
EURO/USD
The Euro worked great as we traded into my sell level and I went short at 1.2430 and I have now taken profit at 1.2390. Today I will look to go short again from 1.2440/1.2460 with a 1.2475 stop and I will also look to go long on any dip to 1.2350 with a 1.2330 stop. Again given the thin markets if I see 40 points I will take profit and start again.
EURO/JPY
This trade worked really well as I was able to take profit at .9745 on my .9695 long and I am again flat. As I said on Monday I really like this trade and I will look to go long again on any dip from .9690/.9710 with a .9675 stop. If I am taken long I will again look to take profit in front of .9750.
Sept FTSE
The FTSE also worked well as I took profit on my 5788 short at 5750 where 5740 was the low and as I said yesterday I wanted to rest my short at 5800 if I was able to take profit. I am still short at 5800. The market is overbought and looks heavy to me. I will leave a 5825 stop on this position and if we dip back to the 5740/5760 I will look to take profit here.
Sept BUND
I was stopped out of my 142.80 long at 142.60. The market then dropped down to 142.20 and I went long again at 142.25. We are very oversold and at the bottom of the Bollinger Band and Williams Index. I will leave a 141.95 stop as it is a small position and I will look to take profit on any rally back to the 142.80/143.00 area.
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