Not a massive session as far as new market direction was concerned yesterday ahead of Non-Farm Payrolls at lunch time. The US dollar sits fractionally a tad higher in net terms this morning, though not from any particular strength in the big Dollar markets support or Fed Rate pricing. It was a down session for Sterling in the aftermath of the Bank of England unchanged rate decision, its Quarterly Inflation Report and Bloomberg TV interview with its Governor Mark Carney. As entirely expected the Bank of England left rates unchanged with an 8-1 vote, with its Quarterly Inflation Report suggesting that there is not enough CPI pressure to justify a rate hike for most MPC members, and that the outlook for global growth had weakened since August.
For anybody following my new Platinum Service it made 115 points yesterday and is now ahead by 230 points for November. The previous five months saw gains of 1600, 2833, 2195, 1810 and 3045 points respectively.
Despite their softer tones and outlook, to keep the market guessing, in his Bloomberg TV interview after the BoE decision, Governor Carney outlined his view that it would still be prudent to think that the Bank of England would be increasing rates this year. Most currencies marked time against the US Dollar yesterday.
The Aussie this morning sits in very familiar territory trading just below nought 0.7150 in the aftermath of yesterday’s speech from RBA Governor Glenn Stevens which reaffirmed that if rates were to move it would be much more likely to be an easing for now at least he still harbours some concerns about Housing, not knowing how successful or otherwise policy measures to cool some heated parts of the sector will be. The domestic form a little better of late as well. Iron ore and Copper prices lower overnight.
Yesterday after I posted the ECB’s Draghi was speaking, again talking about the stabilising deflation risks, that the ECB has a higher degree of independence and must consider the weaker global environment impacts its ability to return to price stability. Again, talking he’s talking up the prospect of ramping up QE/trimming its Deposit rate at its December meeting. The Euro had something of an up and-down and up 24 hours, whipped around by the above comments, softer than expected German Factory Orders but an upgrade to the European Commission’s growth forecasts.
It was very light on for US data with only the Weekly Jobless Claims (and Q3 productivity after recent GDP). For once, Jobless Claims popped higher after the run of continuously low levels consistent with the stronger labour market. (Weekly noise or a late October wrinkle in the US labour market?) US fed funds futures backed off its December lift-off probability only a touch, down from 60% to 56%.
Fed hawk Dennis Lockhart spoke on CNBC saying he expects the case for a hike in December will strengthen up to the December meeting, the improving US Job market supporting lift-off this year. The more dovish Bill Dudley of the New York Fed said that in the current environment, he would like to see a little bit more in terms of wage inflation.
This morning on the economic front we have German Industrial Production at 7.00 am. This is followed at 9.30 am by UK Industrial Production and the Trade Balance. Then it’s all pretty much about the Non-Farm Payrolls at 1.30 pm, with the likelihood of a print anywhere near close to expectations underpinning current pricing tilted towards Fed Rate lift-off in December. The consensus is looking for a print of 182K but it is the Average Earnings component and revisions to the previous three months which will be closely watched by the markets. Just before the close at 8.00 pm we have US Consumer Credit.
We also have even more Fed speak following the NFP with James Bullard and Lael Brainard both speaking.
December S&P 500
The S&P plan worked well yesterday as the market finally traded lower to my 2088 buy level before having a nice rally which enabled me to cover this position at my 2095 T/P level as outlined earlier to my Platinum Members and I am now flat. As most Members know at this stage the only two times of the month when I am flat into a major Economic announcement is the NFP and FOMC Meeting. Tomorrow could be a huge day for the markets and as I mentioned above it is the revisions to the past three months which will be significant coupled with the Average Earnings which has been very weak all year despite the tight labour market. If the market rallies on the release of the NFP I will be a seller from 2113/2121 with a wider 2127 stop. Remember as mad as it seems a break and close over 2130 will be at least short-term bullish with the possibility of the S&P trading as high as 2200. If the S&P sells off after the announcement I will be a reasonable buyer on any dip lower to 2064/2072 with a 2058 stop.
EUR/USD
I have not had much luck with my calls as five of my markets this week have just missed my buy/sell level before going on to have a significant move. Yesterday the Euro missed my 1.0830 buy level by 4 points before having a nice 60 point rally and I am still flat. Today I will stay flat until the NFP is released and if the Euro trades lower to 1.0680/1.0750 I will be a very aggressive buyer with a 1.0630 stop. Despite the hints of further QE from the ECB and Dragi I still do not want to be short the Euro at this time.
December Dollar Index
Today I will raise my sell level slightly to 98.50/98.90 with a 99.25 stop. I still do not want to be long the Dollar at this time.
December DAX
My long 10850 DAX position worked well yesterday as shortly after Dragi spoke the DAX as expected had a nice rally which enabled me to cover this position at my 10895 T/P level and I am now flat. I still do not want to be short the DAX at this time and today I will use any sell-off to 10730/10790 to go long with a 10680 stop.
December FTSE
I am still flat the FTSE which continues to struggle at the 6400/6450 area which is the 50% retracement of the move lower in late August. This resistance level also contains the 100 and 200 Day Moving Averages which are trending lower. Today I will lower my sell level to 6410/6440 with a 6470 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
Unfortunately the Dow again missed my sell level this time by 15 points before trading 150 points lower and I am still flat. Today I will leave my sell level unchanged at 17950/18010 with an 18050 stop.
December BUND
No change as I am still a seller on any rally higher to 157.10/157.40 with the same 157.70 stop. I will also be a small buyer on any dip lower to 154.90/155.50 with a 154.65 stop.
Gold Rolling Contract
Gold managed to close lower for the 11th time in the past 12 trading sessions which must be near some kind of record. The move lower led to me going long at 1105. Today I will raise my stop on this position to 1095 and I will use any rally higher to 1110 to go flat ahead of the NFP later today. If I manage to cut my long position at 1110, I will again look to buy Gold on any further dip to 1090/1097 with a 1084 stop.
Silver Rolling Contract
No change as I am still long in small size at 15.60 with the same 14.90 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 14.75 with a 14.35 stop.
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