In contrast to every other trading day so far this year the negative correlation between risk sentiment and the US Dollar has reasserted itself in yesterdays markets. Thus Equity weakness which sees the major Indices off 0.4% yesterday on average is associated with across the board US Dollar strength against all bar the Yen and which continues to recoup some of its easily won losses. Benchmark soverign bonds have rediscovered a little of their safe-haven status with 10 Year Treasuries and Bund yields both 2-3 bps lower. Beyond ongoing retracement of the turn of year market euphoria part of the reason for the somewhat dour market mood is concerns about Europe’s economic situation even if the existential risks to the Euro-zone are seen to be much diminished. On the whole, yesterday’s slug of European data was disappointing with German Orders falling 1.8% while Euro-Zone Retail Sales rising just 0.1%. The Earnings season started after last night’s close with Alcoa reporting earnings in line with expectations.
This morning we have UK Nov Trade, German Industrial Production with nothing of
note in the US.
March S&P 500
Unlike Monday when I made a small profit on my 1452 long at 1457 I was stopped out yesterday on my 1452 long at 1449 and I am still flat. This one of the quietest weeks in the S&P in a long time and especially for January when the market is generally very active this time of the year. We still have the huge Gap down to 1422 from Jan 2 and we have now spent over a week away from filling it. The longer we leave the Gap unfilled, the more bullish the market will become. Today I am a small buyer from 1446/1450 with a 1444 stop. I am only interested in going short if we trade up to the 1464/1468 area otherwise I will stand aside.
Silver Rolling Contract
Silver worked really well and I was able to take profit at 30.50 on my 29.9 long from Monday and I am now flat. I still like Silver and I will use a pullback to 29.90/30.10 to get long again with a 29.70 stop.
March BUND
The Bund also worked well yesterday and I was able to take profit at 143.50 on my 142.85 long position and I am now flat. I still like the Bund after the hammering it got over the last few weeks and I will look to rest my long position on any dip to 142.70/142.90 with a 142.50 stop.
USD/JPY
A few people managed to get short USD/JPY on Tuesday but unfortunately I had my sell level too high. If anybody is short I recommend them to cover from 85.80/86.30 and I will also look to go long at 85.50 with a tight 85.10 stop as I look for the market to again challenge the 87.50/88.00 over the next few weeks as Japan continues to print money.
March FTSE
The FTSE continues to trade in a very quiet range and I am a buyer on any dip to 5975/5995 with a 5960 stop and I still want to sell on any rally to 6070/6090 with a 6105 stop.
March DAX
The Dax after an initial surge last week is struggling this week and I am a buyer on any dip to 7650/7680 with a 7635 stop. I still want to be a seller on any rally back to 7810/7830 with a 7850 stop.
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