Yesterday was another whippy market across most asset classes after the Greek Prime Minister says he won’t back down on his referendum decision and that both he and Finance Minister Yanis Varoufakis confirmed they are campaigning for a ‘No’ vote in Sunday’s poll. Both seemingly remain utterly convinced such an outcome will result in Greece’s creditors immediately offering the debt relief the two have so far proved incapable of getting the institutions formerly known as the Troika to put into writing. While markets for the most part continue to treat the latest outpourings of headlines on Greece as White Noise, the same cannot be said for the unfolding US economic calendar.
For anybody following my new Platinum Service it made 50 points yesterday. The month of June generated a total return of 3045 points.
The US dollar closed stronger against every other G10 currency last night and US Bond Yields are higher across the curve, more so at the longer end (bearish steepening) after all three US economic releases beat consensus expectations. Encouragingly, US equities look to have taken the Fed policy connotations of the data in their stride, though this may be in part because the week’s key economic news that will – Greece aside – have most bearing on upcoming Fed deliberations, still lies ahead. Markets reacted quite strongly to the ADP employment print (237k vs. 218k expected) even through in truth this tells us nothing other than that last month’s official Payrolls print was strong. More significant – though as it turned out less market sensitive, was the Manufacturing ISM (53.5 up from 52.8 and 53.2 expected, and with the Employment sub-component particularly strong.
We also saw Construction Spending rise by 0.8%, double the expectation, and led by business, not Housing, activity. The positive ISM news was not replicated in the UK where its own manufacturing PMI slumped to 51.4 from 51.9, the weakest since April 2013. The news saw Sterling lose almost a cent, though over the past 24 hours the loss is smaller and GBP actually sits nearer the top than the bottom of the G10 scoreboard. More surprisingly, the NZD is the ‘least worst’ performing G10 currency despite another weak Global Dairy Trade auction. Prices fell a further 5.9% to be down 40% on the year, in what one expert describes as “The perfect storm – supply expansion, soft demand, and trade embargoes. It’s a toxic mix”.
Other things to note yesterday include the ECB’s decision not to raise the haircuts applied to the collateral offered by Greek banks in return for their Emergency Liquidity Assistance (ELA) support, though they also refuse to countenance any increase in the limit of ELA support. Greek citizens are said to be currently emptying ATMs at the rate of €40-50mn a day.
Today promises to be a very active trading session especially with the US Markets closed tomorrow for the July 4th Independence Holiday. This morning at 10.00 am we have Euro-Zone PPI. This is followed at 12.30 pm by the latest Minutes of the last ECB Meeting. With the US Markets closed tomorrow the US will release its Non-farm Payrolls a day earlier at 1.30 pm where the consensus is for a 230K rise after last Month’s 280K print. Although as we approach this release it may be revised higher after yesterday’s stronger than expected ADP Employment Change. Also at 1.30 pm we have the US Weekly Jobless Claims. Finally at 2.45 pm and 3.00 pm the US will release its latest ISM New York and Factory Orders respectively.
September S&P 500
The S&P plan worked very well yesterday as shortly after I posted the S&P rallied to my 2075 sell level before having a nice sell-off which enabled me to cover this position at 2069 and I am now flat. At one stage the S&P looked like it was going to sell-off but with an hour to go in the Chicago session the market re-grouped and had a nice rally into the close. As most members know at this stage I will always go into the Unemployment data flat and of course there will be no exception for today. If the market rallies after the Payrolls are released I will be a small seller from 2085/2090 with a 2095 stop. Remember we still have a large ‘Open Gap’ from last Friday’s close at 2096 to Monday’s afternoon high at 2084. I will also be a small buyer on any dip lower to 2052/2059 with a 2046 stop which is just below Tuesday’s low print.
EUR/USD
After the Euro rallied strongly following its gap lower on Monday the Euro lost this momentum over the past 24 hours mainly on the back of the much stronger US economic data. Yesterday after I posted the Euro traded lower to my 1.1070 buy level but unfortunately we only got a rally back to 1.1110 which missed my target by 10 points. With the Non-Farm Payrolls due at 1.30 pm and the risk today is that we get a stronger print especially after yesterday’s stronger ADP data I have decided to cover this position for a breakeven and I am now flat. Following the Payroll data if the Euro trades lower to 1.0970/1.1010 I will again be a small buyer with a 1.0940 stop which is just below the low made on the open last Sunday night. I will also be a small seller on any rally higher to 1.1150/1.1180 with a 1.1210 stop.
September Dollar Index
My short 95.90 Dollar position from last Tuesday was stopped out late yesterday at 96.35 and I am now flat. I am going to stay flat until we get the Payroll data and if the Dollar rallies after this data release I will again look to go short on any spike higher to 97.10/97.40 with a 97.70 stop. I still do not want to be long the Dollar at this time especially with the Greek Referendum due on Sunday.
September DAX
The volatility in this market is just incredible. Yesterday after I posted the DAX had nice drop but unfortunately just missed my 10960 buy level by 15 points before going on to have nearly a 300 point rally before getting hit for nearly 200 points in the afternoon. With this volatility it makes it incredibly difficult to predict what the next Greek headline will be, which of course will send the market moving 100/200 points in a flash. I am sticking to my guns of only trying to buy dips which I mentioned yesterday as the risk/reward is for a last minute deal to be done with Greece and her Creditors. Remember it was only in April that the DAX was trading at all- time highs at 12500 so a lot of the potential bad news is already priced into the market. The DAX has reasonable support at 10800 and very strong support at 10600. Today I will move my buy level higher to 11040/11100 with a 10960 stop. Remember I am only trading in very small size with a wider stop.
September FTSE
The FTSE plan worked well yesterday as the market dropped to my 6500 buy level shortly after I posted and after a quick rally I was able to cover this position at 6535 and I am now flat. As I pointed out at my lecture last Tuesday the FTSE was trading outside the bottom of its Bollinger Band and Williams Index and although the price action was very bearish it would only be a matter of time before we get a rally. The Bollinger Band and Williams Index are two of the most powerful tools for trading in my opinion. Today I will again be a buyer on any sell-off to 6480/6520 with a 6460 stop.
September BUND
The BUND sold off aggressively after I posted yesterday morning with the market eventually hitting my 151.20 buy level. I am still long and I will leave my stop the same at 150.80. If I am stopped out of this position I will be a more aggressive buyer in front of 150.20 with a 149.85 stop.
Gold Rolling Contract
Gold looks very heavy this morning and the fact that I am still flat I will lower my buy level to 1146/1156 with a tight 1135 stop. Remember a break and close below 1140 should see an acceleration lower before we then get the large reversal higher that I am looking for.
Silver Rolling Contract
No change as I am still a small buyer on any further dip lower to 15.00/15.35 with a 14.40 stop.
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