With the echo of the FOMC still ringing in its ear, the market repriced the odds of the Fed moving in December, lifting the probability to a 50/50 call, those odds having been tracking at a less than one in three chance before the FOMC. US Treasury yields lifted further, 2y maturities up 2bps to 0.72% and 10s up 7bps to 2.1% percent creating some headwinds for equities. Equity markets have been soggy for most of the session though have made a late session attempt to rally back into positive territory as pharmaceutical giants Pfizer and Allergen announced friendly merger talks. The US Dollar closed lower after another volatile trading session yesterday, though more through some support re-emerging for currencies beaten town of late, such as Sterling and the Canadian Dollar.
For anybody following my new Platinum Service it made 145 points yesterday and is now ahead by 1569 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
The Australian Dollar though was not one to benefit yesterday as the market sets its sights on whether the RBA will cut rates at Tuesday’s Melbourne Cup Day board meeting. While the AUD has drifted lower, the odds of a move from the RBA next week in the interest rate market have lengthened a little in the past 24 hours, currently sitting at a 50%. An economists’ rate poll published by Reuters yesterday indicated a few more economists expect a move from the RBA, though the majority, including myself remain unconvinced. What that may well do though is dial up their easing bias further noting that there is “scope to ease, if needed, in the wake of recent inflation data”.
The first cut of US Q3 GDP released yesterday came in at 1.5%, almost bang on the 1.6% Bloomberg consensus and above the 1.1% Atlanta Fed’s most recent GDPNow estimate. News growth was dragged lower by a -1.44 percentage point drag from Inventories sweetened the result with real Final Sales up 3.0% after 3.9% growth Q2, indicating domestic growth remains on track. Even net exports was neutral to growth, not as bad as feared. The market will now plot the course of the US economy into the December FOMC with two big hurdles waiting next week, the ISM Manufacturing and of course the Non-Farm Payrolls this day week.
This morning on the economic front we have Euro-Zone Unemployment and CPI at 10.00 am. This is followed at 12.30 pm by US Employment Cost Index, Personal Income/Spending, and the PCE Deflator. At 1.45 pm we have the Chicago Purchasing Manager’s Survey. Finally at 2.00 pm we have the University of Michigan Consumer Sentiment. Later this afternoon the Fed’s Williams and George are both speaking on the economy.
This Sunday, the Chinese National Bureau of Statistics releases the official estimates of its Manufacturing and Non-Manufacturing PMIs, consensus looking for a marginal improvement in manufacturing from 49.8 to 50. There are no forecasts available for the Non-Manufacturing PMI which in September was 53.4.
Remember the US will change their clocks back by one hour this weekend and all US Market Openings/Closings and economic data will be back to normal European times.
December S&P 500
The S&P plan worked very well yesterday as shortly before the US Markets opened the S&P traded lower to my 2074 buy level before having a nice rally which enabled me to cover this position at my 2080 T/P level as outlined earlier to my Platinum Members and I am now flat. Despite the internals of the market refusing to participate in this huge rally for October I do not want to be short the market today given the fact that it is Month End and also the Fiscal Year end in the US. For these reasons I will again look to buy the market on any dip lower to 2074/2079 with a tight 2070 stop which is just below yesterday’s low print.
EUR/USD
My long 1.0935 position finally worked out yesterday morning despite the market coming close to my 1.0895 stop with a 1.0901 low print before having a nice rally which enabled me to cover this position at my 1.0960 T/P level and I am now flat. I am amazed the Dollar is this strong as to me the Fed have lost a lot of credibility over the past few months with their will they or wont they hike Interest Rates scenario that been all news wires throughout the whole year. There is no doubt next week’s NFP data is going to be key and especially the revisions and average earnings component with the later been exceptionally weak all year. Today I will again look to buy the Euro on any dip lower to 1.0895/1.0930 with a 1.0965 stop. I do not want to be short the Euro at this time.
December Dollar Index
I am still flat the Dollar and today I will lower my sell level to 97.70/98.00 with a 98.30 stop.
December DAX
My DAX plan worked well yesterday despite the market been weak all day. Shortly before lunch the DAX traded lower to my 10770 buy level before having a nice 50 point rally which enabled me to cover this position at my 10800 T/P level and I am now flat. Given the fact that we have month end today and despite the weak price action yesterday, I do not want to be short the market at this time. Today I will again look to buy the market on any dip lower to 10680/10735 with a 10645 stop.
December FTSE
The FTSE continues to underperform the other major Indices and there is no doubt the weakness in Gold and the Mining Shares are having a major impact on this weak performance. I am still flat the market and today I will lower my sell level to 6430/6460 with a 6480 stop. Given the weak price action I still do not want to be long the market at this time.
Dow Rolling Contract
Thankfully the Dow had a nice sell-off to a 17687 low print which enabled me to cover my short 17760 position from late Wednesday at my 17730 T/P level as outlined earlier to my Platinum Members and I am now flat. Given the fact that it is month and Fiscal end in the US my only interest in selling the Dow today is on a rally higher to 17870/17930 with a 17970 stop. Given the strength of the US Dollar I still do not want to long the Dow at this time.
December BUND
Very frustrating as the BUND which just missed my 158.90 sell level on Wednesday by just 30 points got slammed yesterday and is now trading 150 points lower and I am still flat. Today I will be a small buyer on any further dip lower to 156.20/156.50 with a 155.95 stop.
Gold Rolling Contract
Gold had nice follow through to the downside yesterday after Wednesday’s large Key Day Reversal. The market has now closed below the key 1150 support level and if Gold stays below this level this evening I will then look to pick levels to go short. Otherwise I am going to stay flat and observe the price action today.
Silver Rolling Contract
Thankfully we got out of my long 15.88 position on Wednesday at 16.00 as just like Gold, Silver also had follow through to its Key Day Reversal on Wednesday. Yesterday’s move lower saw me go long the market at 15.60 I am still long and today I will raise my stop on this position to 15.20.
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