Happy new year and best wishes for a healthy and prosperous 2016.
Investors ended 2015 in a defensive stance. Following the risk aversion tone seen in the previous day, equity markets were sold on Thursday while core Global Bonds benefited from a safe haven bid.
In a trading session characterized as choppy and thin, European and US equity indices closed 2015 with negative returns for the last day of the year. In Europe, losses for the day were driven by oil related companies which were not able to benefit from the spike in oil prices later in the session while in the US the negative sentiment was also affected by a large jump (20k) in weekly jobless claims to 287k. The Eurostoxx 50 index fell 0.6% on Thursday closing 2015 with a gain of 3.8% for the year while the DAX was unchanged on the day ending 2015 up by 9.6%. The S&P500 fell 0.9%, ending the year at 2044 and gaining a return of 0.7% for the year, its worst annual performance since the GFC in 2008. The Dow lost 1%, trimming its annual return for 2015 to 2.2% and the tech heavy NASDAQ index fell 1.25%, edging its performance for the year to 5.7%.
For anybody following my New Platinum Service it made 50 points on Thursday to close the month of December with a 2065 point gain.
In Currencies, the US Dollar was broadly stronger with DXY and BBDXY up 0.5% and 0.1% respectively. Against G10, the CAD was the outperformer boosted by the late run in oil prices and the Yen was the only other outperformer up 0.25%. The AUD was practically unchanged at 0.7286 and CHF was the biggest loser, down 1.33% with a big USD/CHF buy order reported late in the day. The Euro and GBP also lost ground against the USD, down 0.65% and 0.54 % respectively. Looking at 2015 performance, the DXY and BBDXY closed the year with annual returns of 9.3% and 9.0% respectively and the USD was stronger against all other G10 currencies. JPY and CHF were the best underperformers, -0.4% and -0.78% respectively, the Euro and AUD fell by 10.2% and 10.9% correspondingly and the CAD was the biggest underperformer down 16% and followed closely by the NOK at -15.73%. In EM currencies a combination of soft commodities and political turmoil saw the ZAR drop 33% against the USD in 2015, TRY followed closely at -25% and the RUB was down -19.4%.
An overall risk off tone, soft data and month end demand helped US Treasuries perform in the last day of 2015. 2y and 10y UST yields fell 2.3bps and 2.5bps respectively, ending the day at 1.05% and 2.27%. In Europe 10y Bunds were closed Thursday finishing the year with a Yield of just 0.629% and 10y UK Gilts yields declined by 2.8bps to 1.96%. Relative to end 2014 levels, 2y UST climbed 38bps in 2015 aided by eventual start of the Fed tightening cycle while moves higher in yields further out the curve were more subdued, partly due to a sluggish global growth outlook and the sharp decline in Crude Oil prices. 10y UST ended the year 9.8bps higher than where they started and 30y UST climbed 26.4bps ending 2015 at 3.01%.
In Commodities, oil prices posted gains in the last day of 2015 (WTI +0.7%, Brent 2.5%) with the move largely attributed to short covering and uncertainty on Iran’s ability to increase its oil exporting output given newly planned US sanctions. That said, oil performance for the year was one to forget. WTI fell 31% in 2015, a second straight year of annual losses while Brent fell for a third year in a row, losing 34.7% in 2015. Looking at other commodities, Iron ore managed to close last year with a small gain of 0.3% on Dec 31st , hardly a consolation when considering its fall of 39% for the entire year. Meanwhile, Gold was practically unchanged on Thursday, ending 2015 at $1060.5 and down 10.4% for the year.
Looking at data releases, US Weekly Jobless Claims jumped 20k to 287K, its highest level since July 2015, however many analysts warned that the rise could have been caused by the challenges in seasonality adjustments at this time of the year. Chicago’s PMI December reading fell to 42.9 from 48.7 in the previous month. Consensus was for a rise to 50 in December, instead the Index fell to its lowest level since July 2009. China’s PMI data released 1 Jan revealed the Manufacturing sector contracted for a fifth consecutive month in December ( in line with expectations) while the Service sector ended 2015 in a stronger footing. The official manufacturing PMI printed at 49.7 in December from 49.6 previously while the Non-Manufacturing PMI rose to 54.4 in December from 53.6 in November.
Lastly Fed Fisher was speaking late yesterday and he reiterated his support for higher rates if markets overheat. However he noted that the first line of defense should be the use of regulatory tools to prevent bubbles from developing.
Overnight China released its Caixin Manufacturing Index which came in very weak with a 48.2 print versus 48.9 expected. This is showing more contraction for the Chinese Economy and the markets are reacting negatively to this news with the stock market down over 7% as I go to post. This news is filtering through to all the main Indices this morning with the Nikkei closing down over 3% at 18450. Europe is opening 1.5/3.0% lower across the board.
This morning on the economic front we have Euro-Zone and German Manufacturing PMI at 9.00 am. At 9.30 am we have UK Money Supply, Manufacturing PMI and the Bank of England Consumer Credit. This is followed at 1.00 pm by German CPI. Finally at 3.00 pm we have ISM Manufacturing and Construction Spending.
March S&P 500
What a start to 2016 with the S&P currently trading 35 Handles lower than where we closed on Thursday. As I have mentioned over the past two months stating that the US was in recession since July and this view was enhanced further by the awful Chicago PMI December reading of just 42.9 on Thursday when I guess very few market participants were watching the markets on New Year’s Eve. Initially my S&P plan did not work out on Thursday as shortly after the PMI was released the S&P traded lower to my 2049 buy level before stopping me out of this position at 2042. Subsequently the S&P traded lower to 2036.50 before I used my 5 Handle Rule as outlined to my Platinum Members and I went long at 2042 before the market had a nice rally to 2055 which enabled me to cover this position at my 2053 T/P level and I am now flat. This morning – on what normally is a very strong trading day for Equity markets – I just cannot see such a huge ‘Open Gap’ not be at least partially filled when the US Markets open later and for this reason I will look to buy the S&P on any further dip lower to 1993/1999 with a 1988 stop which is just below the lows made on December 14. If I am taken long and subsequently stopped out of any long position I will again use my ‘5 Handle Rule’ to go long again with a stop below whatever new low is printed. Given the huge 80 move lower since last week I do not want to be short the S&P at this time.
EUR/USD
Given how weak the US economy is and the fact that the Fed should not have hiked Interest Rates last month it is only a matter of time before this view is reflected in a much weaker Dollar. Shortly after I posted on Thursday the Euro stopped me out of my long 1.0930 position at 1.0890. Overnight the Euro traded as low as 1.0827 before rebounding this morning on the back of the weaker stock markets. I have bought the Euro again at 1.0895 and I will leave a 1.0855 stop on this position. 2016 promises to be one of the most volatile trading years since the Global Financial Crisis which should effect all asset classes.
March Dollar Index
The Dollar plan worked well over night as shortly after the Dollar traded higher to my 98.80 sell level last Thursday the Dollar has sold off this morning which has enabled me to T/P on this position at 98.45 as outlined earlier to my Platinum Members and I am now flat. Today I will look to go short again on any move higher to 98.60/98.90 with a 99.25 stop.
March DAX
Wow what can you say about the DAX whose volatility never ceases to amaze. Shortly after I posted on Thursday I was stopped out of my long 10695 long position for a small lost at 10640 and I am now flat. This morning the DAX is trading 300 points lower on the back of the weaker Dollar and awful PMI data from both China and Chicago. The DAX has good support from 10230/10300 and today I will be a small buyer on any dip to this area with a 10175 stop. Given how oversold the DAX is trading my only interest in going short the market is on a rally higher to 10620/10680 with a 10730 stop.
March FTSE
The FTSE plan worked out well on Thursday for anyone who was trading as shortly after lunch the FTSE traded lower to my 6170 buy level before having a nice rally which enabled me to cover this position at my 6210 T/P level and I am now flat. Today with the FTSE trading substantially lower I will again look to buy the market on any further dip lower to 6015/6055 with a 5990 stop. Given how oversold the FTSE is trading and the fact that we are traditionally in the seasonally strong time of the year for the FTSE I do not want to be short the market at this time.
Dow Rolling Contract
I was lucky with my Dow call on Thursday as shortly after lunch the Dow traded lower to my 17525 buy level before I emailed all my Platinum Members to exit this position for a small gain at 17555 and I am now flat. I cannot believe that the Dow is now trading over 400 points lower this morning. Given the fact that I prefer to be long the Dow rather than the S&P especially with the weaker Dollar I will look to buy the Dow on any further dip lower to 17050/17110 with a 16990 stop.
March BUND
I am still flat the BUND as the market opens higher this morning on the back of the weaker equity markets. Today I will use any further rally to 159.10/159.50 to go short with a 159.80 stop.
Gold Rolling Contract.
Unfortunately I moved my buy level lower in Gold on Thursday as the market having traded lower after I posted is now trading $15 higher and I am still flat. Today I will raise my buy level to 1055/1063 with a 1049 stop.
Silver Rolling Contract.
No change as I am still long at 13.81 with the same 13.45 stop.
Recent Comments