Equities pulled lower initially yesterday and it appeared as though the poor Non Farms Data seen on Friday was beginning to play out in market sentiment. However, despite our bearish fundamental outlook we maintained a long entry in the S&P 500, having learned that as long as central bankers are in charge, and monetary policy remainsaggressivelysupportive, we were more likely to see equities supported. This type of execution can feel counter-intuitive but it isincrediblyimportant when trading at an institutional level; trade what you see on the charts in front of you, rather than trying to force a fundamental view. Many bears in the past havealreadylearnedthislesson the hard way. Our entry at the pivot level in the S&P at 1544.75 was perfect as the market tested our entry repeatedly before moving through target one, 1550.75 just before the market close.
Today’s Fundamental View
For today we are subject to the same conflict, where in many respects we would like to see equities lower based on our fundamental view but, like yesterday, we will still look to implement a long strategy in risk assets. On the data front we see another quiet day with only US Redbook at 13:55 GMT providing any kind of potential action before Wholesale sales and inventories at 15:00 GMT. Of more importance will be the speaker activity this afternoon, with Fed's Lacker, Lochartand Kocherlakotaall speaking this later today and the markets will still be expecting soothing monetary comments after thedisappointingdata on Friday. On the S&P our entry long is at 1557.50, which was the high seen last Thursday. The prudence of this entry reflects the afore mentioned conflict, although traders looking to take opportunity from a further push higher in risk should take comfort from the weight seen in safe haven Government bonds seen this morning.
After a strong EU open all major equities have been trending lower. Should the S&P break 1550.00 today you may see a quick test of yesterday's entry, 1544.75.