Equity markets continued to make new highs yesterday with the Dow, S&P and Russell Index closing at new record highs as global investors down-play risks and just chase yield. A good example of this ‘chasing yield’ was the successful Bond Auction held in Portugal where investors bought €3 billion of 10 Year Bonds at a yield of 5.7%, with the issue being very oversubscribed and in fact bids were received for about €10.2 billion.

Commodities succumbed to a generally stronger US Dollar with energy, metals and gold all down. Note that the Copper price whilst down 0.1% yesterday has had a nice run up in early part of May and is now about 7% up on its recent low – another sign of improving investor sentiment. On currency markets the US Dollar has been generally stronger over the past 24 hours but the Euro gained in early European trading on the back of Portugal’s successful Auction, their first for three years. However the Euro could not hold onto its gains, probably reflecting concerns about the new and more dovish sentiment coming out of the ECB. The Yen was also stronger against the US Dollar as it met resistance just below the 100 level. The Aussi Dollar remains heavy after yesterday’s rate cut and following on from the poor Retail Sales No’s released earlier.

Today is another quiet day for economic releases. This morning we have German Industrial Production and Germany is also due to sell Bonds. There is nothing of note from the US except Stein from the Fed is due to speak at a conference in Chicago.

June S&P 500

The S&P continues its relentless march higher for 2013 and is now up 15% year to date and an incredible 20% since its low on November 16th last. Every indicator that I follow is telling me to be short but as Keynes famously said ‘markets can remain illogical longer than I remain solvent’. The secondary indicator that I follow is very overbought when its has a reading of +30, last night this indicator closed with a reading of +40. The McClellan Oscillator (which is a measure of the Internal Strength of the market) closed at +178 which is the highest reading this year. Also the Daily Sentiment Index that I mentioned yesterday is now approaching an unsustainable ‘90% bulls’ and is pointing to a top in the market of some significance. My small 1514 short position from Monday is still alive as we never broke the 1522 stop as yet. I think this market is trading heavy and for this reason I am going to widen my stop to 1525 as it is a small position. If I am stopped out and the S&P subsequently falls 5 handles from what ever top is put in the market, I will go short one more time with a stop just above what ever high is put in. My only interest in buying the S&P at this time is if we close the Gap and I will be a buyer from 1593/1597 with a 1589 stop.

Euro/USD

No change from yesterday as the Euro just missed my 1.3050 buy level before moving higher and I am still flat. The Euro has traded in such a narrow range over the past few weeks that I do not want to chase the market here and for this reason I will leave my levels the same as yesterday. I am a buyer on any dip to 1.3030/1.3050 with a 1.3015 stop and I will also look to sell the market on any rally to 1.3190/1.3220 with a 1.3250 stop.

June DAX

Just like the S&P, the Dax continues to trade higher as we are now up nearly 800 points since the weak PMI Services data were released two weeks ago.The Dax traded up to my 8190 sell level and I am still short as my 8220 stop has not been hit. I am still convinced that we are going to get a setback in these equity markets and if I am stopped out of the Dax at 8220 I will look to go short again. I will reset the short at 40 points below whatever high is put in and I will leave a stop just above that high. I do not want to be long at this time.

June FTSE

The FTSE having looked heavy last week is now trading strongly again. After I posted yesterday morning, the FTSE rallied to my 6492 sell level before finally stopping me out late yesterday afternoon at 6520 and I am now flat.Today I will be a buyer on any dip to 6455/6475 with a 6445 stop. I will also look to go short on any rally to 6560/6590 with a 6605 stop.

June BUND

I really tempted fate by saying the Bund had not stopped me out of my 146.30 long position at 145.95 as shortly after I posted yesterday I was stopped out and I am now flat. I am surprised at how quickly the Bund has fallen as we are down 180 points since last Thursday’s highs. The fact that it broke the 145.80 support level is important and today I will be a small seller on any rally to 145.75/145.95 with a 146.10 stop. I will also look to buy the Bund on any dip to 145.00/145.20 with a 144.95 stop.

Gold Rolling Contract

Gold worked well yesterday as the market traded up to my 1465 sell level twice before going lower. I took profit at 1445 on this position and I am now flat. Today I will leave my sell level the same as yesterday, so I am a seller on any rally from 1465/1480 with a 1485 stop. I am still looking for Gold to at least test 1400 before going higher.