The rise in the USD and short dated UST yields on the back of Fed vice-chair Fisher’s comments over the weekend have been partly unwound in yesterday’s volatile trading session amid lack of new news and thin holiday trading. Meanwhile the fall in oil prices has weighed on equities with energy shares the underperformers.
For any of my UK members who may be interested I am doing a special all-day trading seminar over the Non-Farm Payrolls in London on September 2nd 2016. I will be assisted by Paul Wallace who is a trader that I have done a lot of joint presentations in both Dublin and London over the past 12 months. Paul is a very engaging and interesting speaker and together we will try and take you through how to trade markets live over an important economic indicator. If anyone is interested in this not to be missed event in my opinion you can check the details out on the following link:
https://summer2016londonlivetradingday.eventbrite.com
For anyone following my Platinum Service it made 155 points yesterday and is now ahead by 1055 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
The Fed Vice Chairman Stanley Fischer’s comments over the weekend that the Central Bank was close to meeting its targets on inflation and employment helped reinforce the hawkish message delivered by regional central bank chiefs last week. Taken as whole, reaction by the market appears to have been the desired one. A week ago the market was pricing around a 20% chance of a September hike and 45% in December, today the OIS curve is suggesting a 27% chance of tightening in September and 62% by December.
Interestingly, however, yesterday during the day pricing of a December hike reached a probability of 69% and 2 year US Treasury yields climbed to 0.7785%, their highest level since 23 June, a day before the UK voted to leave the EU. The small unwound in Fed hike expectations yesterday along with the pullback in US Treasury yields ( 2y UST are back at 0.7378% ) appears to be reflecting the view that as much as Fed commentary has been on the hawkish side, Fed speakers have refrained from expressing specific timing on the next hike. So although Fed speakers appear to be upbeat on the outlook for the US economy, the vague timeframe for the next hike also reflects a degree of uncertainty. Ultimately, it will all be about the data.
Moving on to currencies, the CAD has followed the move lower in oil prices and it’s the biggest underperformer against the USD, down 0.6%. News that Iraq will boost its crude exports dragged oil prices lower yesterday with Brent and WTI down almost 3%. GBP/USD has been the outperformer gaining 0.46%, the Pound seemingly is still benefiting from last week’s better than expected retail data with record speculative short positions also limiting the downside. The AUD/USD is little changed over the past 24 hours, but after reaching a low of 0.7584 yesterday afternoon the currency pair has been on a steady rise and is currently trading at 0.7627.
This morning on the economic front we have Euro-Zone Markit Manufacturing and Services PMI at 9.00 am. This is followed at 11.00 am by UK CBI Trends for Total Orders/Selling Prices. At 2.45 pm we have the US Markit Manufacturing PMI. Finally at 3.00 pm we have the Richmond Fed Manufacturing Index and New Home Sales, along with Euro-Zone Consumer Confidence which will be released at the same time.
September S&P 500
My S&P plan worked well yesterday as the idea of buying the dip continues to pay dividend in this extremely low volatile environment. The S&P traded lower to my 2176 buy level before having a nice rally to 2185 which enabled me to cover this position at my 2180 revised T/P level and I am now flat. The stock market’s inertia leaked into yesterday’s trading, as total stock market volume was the lightest since last March. The market will probably remain rangebound ahead of the important speech by Fed Chair Janet Yellen on Friday at 3.00 pm at Jackson Hole in Wyoming. As we await this important speech I just cannot see the market selling off ahead of this event and if it does we should see this any move lower quickly reversed. For these reasons I will again look to buy the S&P on any dip lower to 2172/2178 with a 2167 stop. I still do not want to be short the market at this time despite the weak internals of the market.
EUR/USD
My Euro plan also worked well with the Euro trading lower to my 1.1280 buy level shortly after the European Markets opened before rallying to a 1.1330 high print. This rally enabled me to cover this position at my revised 1.1305 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1260/1.1290 with a 1.1235 stop. Despite the Euro having a nine month trend-line at the 1.1350 level I have no interest in shorting the Euro at this time.
September Dollar Index
No change as my only interest in selling the Dollar is still on a rally higher to 95.40/95.70 with the same 96.05 stop.
September DAX
The DAX had a wild trading session yesterday with the market hitting my average buy level at 10450 before almost stopping me out at 10380 with a 10385 low print, before subsequently rallying back above 10500 in the afternoon. As I was nearly stopped out plus the fact that I had five open positions at the same time I emailed my Platinum Members to cut this long position at 10465 and I am now flat. Today I will again look to buy the DAX on any dip lower to 10360/10430 with a wider 10295 stop. The DAX has strong support at the 10330/10360 area and initially I would expect the market to rally off any test of this level. I still do not want to be short the DAX at this time.
September FTSE
The FTSE also traded lower to my 6820 buy level before bouncing. As I was having a good trading day yesterday plus the fact that Sterling was strengthening I decided to cover this position for a small gain at 6830 and I am now flat. Given the fact that the FTSE has strong support at the 6770/6800 level, my only interest in buying the FTSE today is on a dip lower to 6780/6810 with a 6755 tight stop.
Dow Rolling Contract
My Dow plan also worked well yesterday with the Dow trading lower to my 18480 buy level with a 18464 low print before bouncing 90 points. This rally enabled me to cover this position at my 18530 T/P level and I am now flat. Just like the S&P above I cannot see the Dow breaking down ahead of the Yellen speech on Friday and today I will again look to buy the Dow on any dip lower to 18400/18470 with an 18340 tight stop. I still do not want to be short the Dow at this time.
September BUND
My long 167.05 Bund position from Friday worked out yesterday as the market eventually rallied back above 167.60 which enabled me to cover this position at my too early 167.20 T/P level and I am now flat. Given the fact that the Bund has now left a buy extreme off last Friday’s 166.73 low print I will again look to buy the Bund on any dip lower to 166.90/167.30 with a 166.60 tight stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
While Silver has broken key support at 19.20, so far Gold has held its important 1310 support level. I am still flat Gold and today I will leave my buy level unchanged at 1311/1319 with the same 1305 tight stop.
Silver Rolling Contract
Silver is now trading 11% lower since its 21.17 high print on July 4. As mentioned in yesterday’s commentary Silver has important support at the 18.20/18.50 range and I still expect prices to bottom above here for at least a temporary move higher. For this reason I will leave my buy level unchanged at 18.20/18.60 with the same 17.75 stop. However a break and close below 18.00 will add to the short-term bearish scenario.
Recent Comments