The Global Financial Markets are breathing a sigh of relief after yesterday’s 2.5% rally in the Dow. Happy days: the Fed may wait a little while before raising rates and China seems to have everything sorted. We can dismiss the unsettling China import numbers as a blip and have confidence in the measures to ensure the economy is stable. That message was taken with gusto, with US equity markets up over 2% and European bourses rising over 1%. Shanghai had an afternoon rally, ending up 2.9%. US Bond Yields rose, as did the major European yields. Oil prices were higher, as was iron ore.
For anybody following my new Platinum Service it made 240 points yesterday and is now ahead by 1085 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
Meanwhile, in FX, the AUD was a strong outperformer, and the rally in EM currencies highlights the risk-on tone. The USD was weaker, as EUR was supported. There was very little on the news- front with the sentiment rally coming from the Asian session yesterday. We did get the US’s NFIB Small Business Sentiment Survey, but that was a little better, as expected. The strong labour market component was known last week. German Trade data showed positive exports and imports and didn’t move markets; neither did the small upward revision to Q2 GDP for the Euro area.
Yesterday, NAB’s business survey showed a jump higher in business conditions (+11from +6) but confidence was lower (+1 from +4). Conditions were at their highest since 2009, with trading and profitability higher; employment remains subdued. Confidence appears to have suffered from the equity market weakness and concerns regarding China’s growth. The AUD responded positively to the survey. Interestingly, the AUD failed to respond to the very weak China import data. The headline trade surplus for China was very good, but that was due to a sharp slump in imports, rather than a pick-up in exports. One explanation could be the decline was due to the port explosion and fire closing the world’s 4th largest port and preventing imports from entering China. This may be the reason behind AUD’s lack of response. Or it may be a sign of just how short the market is already.
The Global Financial Institutions continue to call on the US to delay its tightening cycle. This time it was the World Bank (last time it was the IMF). They worry about the impact this will have on Emerging Markets. This was a worry that the Fed’s Williams noted yesterday, amongst the positive comments regarding the improved domestic economy. It is becoming more difficult for policy markets to make decisions independent of the global economy now. Although the impact the recent ructions have had on domestic financial conditions (as Williams noted) via equity prices and the stronger USD, show the direct domestic linkages. The longer they put it off, the happier markets will be, until the day comes that they actually have to start.
This morning the markets are again opening strongly led this time by the incredible 1400 point or 7.7% rally in the Nikkei which is the biggest one day move since the GFC crisis in 2008.
September S&P 500
The S&P plan worked well yesterday. Soon after I posted the market kept rallying with the S&P eventually hitting my 1957 sell level before having a nice 13 handle drop to 1944 soon after the US markets opened which enabled me to cover this position at 1950 as outlined earlier to my Platinum Members and I am now flat. As mentioned in my economic commentary the S&P is opening sharply higher this morning on the back of the 7.7% gain in the Nikkei. Yesterday’s move higher has now left a large ‘Open Gap’ from last Friday’s close at 1918 to yesterday’s afternoon’s low at 1944, while this morning’s large move higher has the potential to leave another 20 Handle Gap. In my experience it is very unlikely that both large ‘Gaps will be left open at the same time and I would expect this latest ‘gap to be at least filled over the coming days. Normally this incredible rally that we have had since the last hour of trading last Friday I would expect to happen next week ahead of the FOMC Meeting but this time it has come 7/9 days earlier. The S&P has very strong resistance at the 1990/1996 area and I would expect initially that this level should hold. For this reason I will be a seller from 1992/1997 with a 2003 stop. A break and close over 1995 will be short-term positive. My only interest in buying the S&P today is on a dip lower to 2065/2070 with a 2059 stop.
EUR/USD
The Euro finally traded lower to my 1.1150 buy level earlier this morning. I am still long and today I will raise my stop on this position to 1.1130. If I am stopped out of this trade I will be a more aggressive seller on any further sell-off to 1.1070/1.1100 with a 1.1045 stop. I will also be a small seller on any rally higher to 1.1225/1.1255 with a tight 1.1280 stop.
September Dollar Index
No change as I am still a small seller on any rally higher to 96.70/97.00 with a 97.30 stop.
September DAX
The DAX plan also worked well yesterday as shortly after lunch the DAX traded higher to my 10350 sell level before having a nice sell off to 10260. As I was already short the S&P, Dow and the FTSE at the same time I emailed all my Platinum Members to cover this position at 10310 and I am now flat. The next key resistance for the DAX is from 10600/10700 which is from where the breakdown originated on August 21 and led to the massive 1300 point fall before markets recovered. I would expect the DAX to have great difficulty in breaking this key resistance at least initially. Today I will be a small seller on any further rally to 10520/10570 with a 10610 stop. If I am taken long and subsequently stopped out I will be a more aggressive seller in front of 10660 with a 10730 stop. I do not want to be long the DAX at this time.
September FTSE
The FTSE plan also worked well yesterday as the market had a nice rally shortly after I posted with the market trading higher to my 6175 sell level. Subsequently the FTSE got hit and this enabled me to cover this short position at my 6130 T/P level as outlined earlier to my Platinum Members and I am now flat. Just like the other main Indices the FTSE is opening strongly this morning and today I will again look to go short on any further rally to 6260/6290 with a 6310 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
Incredibly the Dow is now over 600 points higher since its post NFP print last Friday. The Dow plan worked well yesterday as shortly after I posted the Dow traded higher to my 16430 sell level before having a nice sell-off which enabled me to cover this position as outlined earlier to my Platinum Members at 16370 and I am now flat. Just like the other major Indices the Dow is also approaching key resistance at the 16690/16760 area and today I will be a small seller in this region with a 16810 stop. Given the huge move higher that we have had over the previous few days I do not want to be long the Dow at this time.
September BUND
No change as I am still a small buyer on any dip lower to 153.70/154.10 with the same 153.45 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1102/1112 with the same 1095 stop.
Silver Rolling Contract
Finally my long 14.45 Silver position worked out well yesterday as I emailed all my Platinum Members to cut this position at 14.70 and I am now flat. Today I will again look to buy the market on any dip lower to 14.30/14.60 with a 13.95 stop.
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