At the start of a new quarter, markets are struggling for a clear frame of reference, not yet sure whether bad economic news is good news for risk if it keeps the Fed at bay for longer, or is bad news because it serves to amplify concerns about the overall health of the global economy. Or indeed, whether the Fed getting on with the job of getting Interest Rates off the zero lower bound is good or bad news for risk.
For anybody following my new Platinum Service it made 50 points yesterday on the first trading day for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively. If anybody is interested in this new service please email me on bryan@tradernoble.com for details.
After yesterday’s very mild upside surprises in China manufacturing PMIs (albeit stuck at depressed levels) proved to be somewhat cathartic (for risk, Emerging Market and the AUD) yesterday’s US Manufacturing ISM initially had a depressing impact on US equities, which had been rallying into the data. At 50.2 down from 51.1 and 50.6 expected, the data confirmed what we pretty much knew from the various regional Fed manufacturing surveys – which is that the Manufacturing sector has stalled. Equities subsequently recovered with the S&P closing with a small (0.2%) gain while 10 year Treasuries pulled up from their immediate post-ISM intra-day lows of 2.01 to close at 2.04%.
The glass half full view of the economy (well 85% full actually) is that the Non-Manufacturing economy is going gangbusters and this is what is driving the ongoing tightening in labour market conditions. In this respect the little noticed NFIB (small business) hiring plan index published on Wednesday held strong at 12.0 (just above its year-todate average). Initial Jobless Claims meanwhile, though up to 277k from 267k, remain fully consistent with ongoing strong jobs growth/falling unemployment.
Fed official meanwhile have done their best to keep the 2015 tightening door wide open. Richmond Fed President Lacker (who dissented in favour of an immediate rate rise last month) said that an October rate rise is possible and that he’s concerned the Fed could move too slowly. San Francisco Fed President Williams meanwhile also says October is live but adds that the global slowdown poses risks to the US economy. He says it won’t take much to tip the balance, but adds that the Fed could cut rates after raising them, if conditions worsen. Bring on the next easing cycle.
Other economic news saw the UK manufacturing PMI steady at 51.5 and the Eurozone equivalent unchanged at 52.0 from the ‘flash’ estimate. The next set of EZ figures will be keenly awaited for evidence of the initial impact of the VW diesel emissions revelations.
In currencies, it’s been 24 Hours without much to say for itself, other than that USD/JPY once again lost its grip on the ¥120 handle following Bloomberg news headlines that the ‘BOJ is said to see little immediate ned for adding stimulus’. With many in the leveraged FX community apparently geared up for something new from the BoJ this month (they meet twice in October, including next week) the risk of disappointment appears to be quite high.
This morning on the economic front we have UK Markit Construction PMI. This is followed by the main event for the week namely US Non-Farm Payrolls at 1.30 pm. US payrolls day has come round again, but amid a still lingering sense that it is global market/economic conditions staying the Fed’s hand at present, This afternoon’s September numbers might not be completely crucial for upcoming FOMC deliberations. Much stronger or weaker than expected data could of course instantly challenge that view. Consensus looks for a near-200k gain in payrolls, steady Unemployment rate at 5.1% and an uptick in annual average earnings growth to 2.4% from 2.2%. We also need to be on guard for potential revision to last month’s data first reported at 173k). August numbers have been prone to significant upward revision in recent years. Finally at 3.00 pm we have US Factory Orders.
Fed Vice-Chair Stanley Fischer and St. Louis Fed President Bullard are both due to speak post-Payrolls, so we can hopefully look forward to some almost real-time judgement on the numbers and which Janet Yellen continues to claim are singularly the most important input to the Fed’s decision making process.
December S&P 500
As expected the S&P could not sustain its strong opening yesterday afternoon with the opening ‘Up Gap’ subsequently retraced completely on the awful ISM data. Unfortunately the S&P missed my 1931 sell level with a 1929 high and I am still flat. As most Members know at this stage, this is the one day of the month that I go into an economic release flat. As mentioned above there is a strong possibility that the August data will be revised higher and if this is the case I will still be a small seller on any rally to 1934/1940 with a 1945 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller from 1959/1965 with a 1969 stop. I will also be a small buyer on any dip lower to 1895/1902 with a 1889 stop.
EUR/USD
Thankfully the Euro rallied after I posted yesterday morning which enabled me to cover my long 1.1185 position from Wednesday at my 1.1200 T/P level and I am now flat. If we get a stronger than expected NFP today then the Euro will probably test the 1.11 support zone. If this is the case I will be a small buyer of the Euro on any dip lower to 1.1060/1.1100 with a 1.1030 stop. I still do not want to be short the Euro at this time.
December Dollar Index
My short 96.60 Dollar position from Wednesday also worked well yesterday with the Dollar selling off after I posted which enabled me to cover this position at my 96.30 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to go short on any subsequent rally post the NFP at 96.90/97.30 with a 97.50 stop.
December DAX
Yesterday the DAX had one of its largest downside Key Day Reversals in a very long time with the market moving over 300 points from its high just before I posted yesterday as the DAX broke its Wednesday low by over 100 points and also closed near its low print. Thankfully we had no buy levels in this market yesterday as this move lower was vicious. However the late turn around in the S&P into the Chicago close last night sees the DAX trading back above 9600 this morning. Given the extent of yesterday’s Key Day Reversal I will look to go short on any subsequent rally higher to 9695/9745 with a 9790 stop which is just above yesterday’s high print.
December FTSE
For once I was lucky with my FTSE call yesterday as just after I posted the FTSE spiked higher to my 6145 sell level before having a nasty sell-off which enabled me to cover this position at my 6110 T/P level as again outlined to my Platinum Members and I am now flat. Today I will again look to sell the FTSE on any move higher to 6135/6170 with a 6190 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The volatility in this market over the past three months has been incredible with the Dow selling off over 350 points after I posted for the market to rally back 250 of those points this morning and I am still flat as thankfully I had no buy level for that down move yesterday, Again just like the S&P above I will stay flat until we get the release of the NFP at 1.30 pm. If the Dow rallies on this release I will be a small seller on any rally higher to 16450/16520 with a 16560 stop. I will also use any sell-off to yesterday’s low at 16050/16110 to buy the Dow with a 15990 stop.
December BUND
Unfortunately my BUND plan did not work out yesterday as the BUND rallied to my 156.55 sell level shortly after I posted before stopping me out of this position soon after the US equity markets got slammed near the highs of the day at 156.85 and I am now flat. In my Opinion I just cannot see the BUND make new highs as there are so many Hedge/Pension Funds trapped long above the market on the initial QE announcement form the ECB. For this reason I will again look to sell the BUND on any rally higher to 156.95/157.30 with a 157.55 stop.
Gold Rolling Contract
Gold is continuing its recent sell-off from last week’s 1150 high. I am still flat Gold and today I will lower my buy level slightly to 1092/1102 with a tight 1086 stop.
Silver Rolling Contract
Silver continues to trade better than Gold at this time. I am still long the market form last week at 14.75 and I will leave my stop the same at 14.30 on this position.
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