As we said in today’s Mid Session Review there was no room for “shorts”.
News coming from Greece supported the price action as Athens approved laws today to enforce budget targets and ensure privatization proceeds are used to pay off debt, completing its obligations before tomorrow’s Eurogroup meeting. According to Reuters news, Germany had pushed for the measures, according to sources close to the matter.
The confirmation European were waiting from came with the US opening bell as unexpected rise in US existing home sales for October added to the already brighter sentiment towards the world’s biggest economy as progress in debt negotiations with congressional leaders are made.
The Stoxx50 rose 2.83% to 2,495.90, in the regional benchmarks space: the German Dax rose 2.52% to 7,125.88, the Italian Ftsemib led gainers rising 3.05% to 15,308.96 while the Spanish Ibex rose 2.34% to 7,765.70.
Risk-sensitive sectors such as banking and resource shares ranked among Monday’s major gainers in Europe. In Germany, shares of Commerzbank AG rallied 4.9% as Deutsche Bank AG added 4.3%, and among French banks, shares of Credit Agricole SA jumped 4.6%, while Société Générale SA rose 4.1%. Banks were also on the rise in the U.K., with shares of HSBC Holdings PLC trading up 3.3%, as the bank said it is in talks to sell its stake in China’s second-largest insurance firm.
In the currency market the Euro rose 0.62% versus the greenback to 1.2808$, the US dollar fell versus the Yen trading to 81.19Y or 0.25% lower. The ICE dollar index, which measures the U.S. unit against a basket of six major rivals, dipped 0.41% to 80.86 from 81.286 in North American trade late Friday. The index rose 0.5% last week.
Gold futures for December delivery rose 1.09% to $1,733.30$ an ounce as dollar weakness and new stimuli expected in Japan after the December election were all “long” supportive. Meanwhile an escalation in Middle East tensions lifted oil prices on Monday, amid supply concern; Crude for January delivery traded at $89.46 a barrel or 2.90% higher. The advance followed a 1.2% climb in the January contract on Friday.
As my partner Sam pointed out during our meeting risky assets were screaming for a bounce, we had the bounce today and shorts have been squeezed out. We were waiting for $FESX_F to test the 80 mark, it not only tested the resistance but also broke through quite easily towards the 500 mark. At this point the question is: are we back to the risk on mode? Was it a short squeeze? Was it news driven?
I have been tempted all day long to fade the move, but our job as traders is based on controlling ourselves our emotions and our head, the EUR/$ breakout confirmed the long side as the side to play and although I personally did not see any reason to by the market I should have bought it, but I haven’t. This is called “accountability”.
Do not forget: in trading you have the freedom to create your own results.
Have a great evening.