The past 24 hours has been one of mixed emotions as far as risk sentiment is concerned. It was not helped initially by yesterday’s weaker China Manufacturing reading, and the quickly emerging shadow of Volkswagen’s issues, but there was something of a soothing balm from the flash Euro Manufacturing PMIs with France’s bouncing back above 50, Germany’s at a still relatively solid 52.3 and for the single currency area virtually steady at 52.0, as expected. Draghi held back on any immediate sign of more QE European stocks managed a gain after a rocky start, though US equities had a weak mid-session staged a rally in the afternoon but still closed down.
Please note that due to a very early travel schedule, tomorrow’s Daily Commentary will not be posted until 9.45 am.
For anybody following my new Platinum Service made 235 points yesterday and is now ahead by 2585 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
While the Euro managed to eke out some net gains. ECB President Draghi has been testifying and hinting at possible likely downward revisions to their forecasts, but contingent on how the uncertainty in Emerging Markets plays out. The ECB is certainly apparently prepared to do more on QE if needed, but is not at that point now/yet. He said that renewed downside risks to the outlook for growth and inflation have emerged. In his words, “for many of these changes, it is too early to judge with sufficient confidence whether they will cause lasting slippage from the trajectory that we initially expected inflation to follow when we decided to expand our asset purchase program in January”.
The EUR made some gains, helped by the in-line EZ Manufacturing reads pointing to more growth (and a minor upward revision to French GDP recent history), and no more QE as yet, the Euro has been the exception, with the USD rising against most of the other majors and again for currency specific reasons. The AUD had the hangover from yesterday’s worse than expected flash China Manufacturing PMI and was the worst performer of the majors, while the CAD has also been weighed down by a miss on July core Retail Sales (including downward revisions) and a pull-back in Oil prices overnight.
The AUD dropped half a cent after the release of the Caixin China flash PMI to around the 0.7030/40 area, steadied through most of the London session before testing 0.70, and is trading below that level this morning. Chinese spot iron ore prices fell 1.62% yesterday but remains above $50/t at $55.3.
Overnight the Futures market have had another volatile trading session as the Nikkei which was closed for the previous three days had a 500 point fall to close down 2.75% at 17,571. Earlier this morning Citigroup lowers economic World Growth Forecast to 2.6% from 2.7% for 2015.
This morning on the economic front we already had the release of German GIK Consumer Confidence with came in lower than expected at +9.6 versus +9.8 expected. At 9.00 am we have the German IFO Business Climate and Current Assessment/Expectations. This will definitely be a market mover. The US will release its Chicago Fed Manufacturing Index, Initial Jobless Claims and Durable Goods Orders at 1.30 pm. Finally we have New Home Sales and the Kansas Fed Manufacturing Index at 3.00 pm and 4.00 pm respectively. Fed Chair Janet Yellen is giving a lecture after the markets close this evening at 10.00 pm.
December S&P 500
The S&P traded in a relatively narrow range yesterday as the large ‘Open Gap’ from Tuesday at 1939/1964 still remains unfilled. As I mentioned yesterday I cannot see the market leaving such a large ‘Gap’ without at least been partially filled over the coming days. The fact that Fed Chair Janet Yellen is speaking this evening the markets may rally ahead of this event especially considering the reaction to her no change in Interest Rates at last weeks’ FOMC Meeting. Today I will leave my buy level unchanged at 1907/1914 with an 1899 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 1875/1883 with a 1867 stop. Again given the volatility I am trading in smaller size with a wider stop. My only interest in selling the S&P is on a close of this large ‘Open Gap’ at 1958/1965 with a 1971 stop.
EUR/USD
My long 1.1125 Euro position worked well yesterday as shortly after Dragi spoke the Euro had a nice rally which enabled me to cover this position at my 1.1160 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small buyer on any dip lower to 1.1110/1.1140 with a 1.1080 stop. Given the fact that we have now closed below the key 1.1250 pivot point for the past few days I will be a small seller on any rally higher to 1.1250/1.1280 with a very tight 1.1305 stop.
December Dollar Index
The Dollar plan also worked well yesterday having been unsuccessful over the previous trading sessions as shortly after I posted the Dollar rallied to my 96.60 sell level. Subsequently the Dollar sold off which enabled me to cover this position at my 96.30 T/P level and I am now flat. Today I will again be a small seller on any rally higher to 96.55/96.85 with a 97.10 stop.
December DAX
The volatility in the DAX had just been incredible over the past week with this volatility enhanced on the back of the VW news. This is one of the main reasons why I trade the Indices rather than individual stocks as you just do not know what is going on in the back ground of companies. My long 9570 position taken just before I posted yesterday morning worked very well as the market had a nice rally to 9710 which enabled me to T/P on this position at 9680 as outline earlier to my Platinum Members and I am now flat. The VW share price is rebounding slightly this morning as it is up over 3% as I write this commentary. Today I will again be a small buyer on any dip lower to 9510/9560 with a 9460 stop. If I am taken long and subsequently stopped out of this trade I will be a very aggressive buyer on any further dip lower to the Aug 24 low at 9250 with a 9180 stop. Given how oversold the DAX is on a Daily basis I do not want to be short the market at this time.
December FTSE
No change as I am still a small buyer on any dip lower to 5880/5910 with the same 5850 stop.
Dow Rolling Contract
The internals of the US stock market are continuing to hold in with the McClellan Oscillator closing with a small negative reading at -13. I would have expected this reading to have been more negative given the rout that we have had in the Dow since last week. Today I will leave my buy level unchanged at 16040/16110 with the same 15980 stop as I do not want to be short ahead of Fed Chair Janet Yellen’s speech later this evening.
December BUND
No change as I am still short from yesterday morning at 155.98 with the same tight 156.30 stop. If I am stopped out of this position I will be a more aggressive seller in front of 156.70 with a 157.10 stop.
Gold Rolling Contract
My long 1125 Gold position worked well yesterday as the market had a nice rally shortly after I posted which enabled me to cover this position at my 1131 T/P level and I am now flat. Today I will again be a small buyer on any dip lower to 1122/1130 with an 1115 stop.
Silver Rolling Contract
The fact that I do not like to be flat Silver as I still expect this market to rally I have decided to buy Silver again this morning at 14.80. I will leave a 14.40 stop on this position.
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