“New Greek proposals received by Europgroup president Jeroen Dijsselbloem, important for institutions to consider these in their assessment”. So tweets Dijsselbloem’s spokesman Michel Reins. After some confusion over whether the deadline for the Tsipras government to submit its proposal for the consideration of first the institutions formerly known as the Troika, and then Eurogroup Finance Ministers, Greece looks to have handed in its homework at least a couple of hours early.
For anybody following my New Platinum Service it made 250 points yesterday and is now ahead by 330 points for the week. Last Friday it made 375 points following June’s total of 3045 points.
Whether it needs to score 10/10, or 8/10 to be followed by more to-ing and fro-ing on Friday morning, remains to be seen. From what we can glean from a draft of the proposals seen by the one newswire (Market News) there could be sticking points on pensions (Greece proposes higher contributions, not cuts to entitlements) and VAT hikes on hotels in the islands (yes in the large islands, not so the small ones, apparently). So while the mood music looks to have brightened a little in the past 12 hours or so, the EUR/USD rate has been unable to hold its tenuous grip on even the 1.11 level in European trade. This looks to be testament either to markets not yet rushing to judgment (doubtless very wise) or a view, with which have much sympathy, that any bounce on news come Monday morning of at least a handshake deal, is likely to be faded quite quickly. One reason for the latter view is that a Greek deal that averts the risk of fresh market ructions (that we most definitely expect under a Grexit scenario) would remove one of the factors with potential to restrain the Fed’s willingness to lift rates as early and September.
On this we’ve had three Fed speakers crossing the wires in the past few hours. Known FOMC hawk Esther George reiterates her view that the Fed should implement modest rate rise ‘now’ in order to allow a more gradual pace of tightening later. Meanwhile arch-dove Charles Evans reiterates his long standing view that the Fed should hold off moving before 2016. And thirdly, Fed Governor Brainard – who last month was bemoaning US Dollar strength as a threat to the economy – said following a speech on regulation only that the Fed was watching Greece and China closely. We’ve had the IMF yesterday downgrading its 2015 global economic forecast (3.5% to 3.2%) led by the US. The latter is down to 2.5% from 3.1%. – its fourth cut in the past 12 month. A year ago, it was projecting 4% growth this year. This obviously helps justify its claim for no Fed tightening this year.
Markets have long since ignored IMF forecast revisions (or indeed its forecast at all. As one London trader quips “don’t hire people to run the organisation from a country that cannot run itself’.
Yesterday was a good day for commodities, highlighted by a 9.9% jump in Iron Ore prices and 2-2.5% for oil. Alongside decent gains in European equity market and small rises on Wall Street, this has left the G10 commodity currency bloc (NOK, AUD, CAD and NZD) firmly at the top of the G10 currency scoreboard. Greece-related headlines will doubtless be thick on the ground – or rather the screens – throughout Friday, alongside the obligatory observation of the non-functioning Chinese stock market.
This morning the only economic data due from Europe is UK Industrial Production at 9.30 am, while the only US data release is Wholesale Inventories at 3.00 pm.
We have a speech from Fed chair Janet Yellen to look forward this afternoon. This is in Cleveland, Ohio, at 5.30 pm. Subsequent to this, Yellen appears twice next week’s in the semi-annual appearances to both houses of Congers formerly known as the ‘Humphrey Hawkins’ testimonies. The subject of today’s speech is the US economic outlook. It follows Wednesday’s June 16/17 FOMC minutes that shows some concerns regarding China and Greece starting to build, comments from San Francisco Fed President Williams that he still sees two Fed rate rises this year and the various Fed official overnight largely re-stating entrenched positions. We’d very much doubt Yellen will want to take markets any further off the scent of a 2015 commencement of tightening, but also doubt she’ll give any strong steer on one as early as September, all the more so given current external uncertainties. We also hear from Boston Fed President Eric Rosengren (current non-voter, considered dovish).
September S&P 500
The S&P plan finally worked out very well yesterday as just before 8.00 pm the Market traded lower to my 2040 buy level before having a nice rally which enabled me to cover this position way too early as outlined to my Platinum Members earlier at 2049 and I am now flat. As I have been saying since this Greek scenario started that no matter what the consequences we are going to get some sort of deal that ‘kicks the can’ down the road for another time as the ramifications of not getting a deal are too great. Incredibly the S&P again held its 200 Day Moving Average and now major support at the 2035/2040 level. If and when we break this level we could see a massive move to the downside and we certainly will not look to stand in its way. Now that we have this huge 30 Handle rally since last night the risk/reward has now turned to going short especially if the S&P cannot break its key resistance at 2080. Remember from last Monday week we still have a large ‘Open Gap’ from 2084/2096. Today I will be a small seller on any further rally to 2070/2076 with a tight 2082 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2095 with a 2101 stop. My only interest in buying this market is if the talks collapse on Sunday at the forthcoming EU Summit and the markets opens hard to the downside is to be a buyer from 2009/2019 with a 1999 stop.
EUR/USD
The Euro plan also worked well yesterday as shortly after I posted the Euro traded lower to my 1.1020 buy level before having a nice rally which enabled me to cover this position as outlined to my Platinum Members at 1.1070 and I am now flat. The Euro has strong resistance from 1.1170/1.1210 and today I will be a small seller in this area with a 1.1240 stop. My only interest in buying the Euro today is on a drop to 1.1000/1.1040 with a 1.0980 stop. Whatever happens to the Euro today I am going to go home flat this evening as I do not to have a position ahead of the open on Sunday night.
September Dollar Index
The Dollar plan also worked well yesterday as shortly before lunch the Dollar rallied to my 96.90 sell level before having a nice sell-off overnight which enabled me to cover this position at 96.50 as again outlined to my Platinum Members and I am now flat. The key level to watch for the Dollar is at 97.20/97.50 as a break and close over this pivot could see an acceleration higher to 100 again. Today I will again be a small seller on any rally higher to 96.60/97.00 with a 97.25 stop. Just like the Euro above I do not want to have a position ahead of the EU Summit on Sunday.
September DAX
It seems like every morning I start to write about the DAX market. I talk about the volatility of the previous day’s trading and today will be no exception with the market trading at 11250 this morning compared to 10800 24 hours ago. Thankfully we have had no short positions in the DAX since the Greek scenario magnified as you would be hammered by the news since last night. Looking at a Daily Chart of the DAX the 100 day Moving Average comes in at 11250/11290 and a break and close over this level could see an acceleration to the next major resistance at 11500. There is no doubt that the down move since April has done a lot of technical damage to the market and this will take a long time to repair. Today I will be a very small seller from 11290/11340 with a tight 11380 stop. Just like the Euro above I do not want to have a position ahead of Sunday. For the first time in weeks I do not want to be long the DAX at this time as the risk/reward has now reversed.
September FTSE
The FTSE has had a huge rally over the past 24 hours as indicated by the technical situation with regards to both the Bollinger Band and Williams Index. The FTSE which has been a downside leader in this whole mover over the past 8 weeks has major resistance from 6730/6780 and if we open higher to this level on Monday morning I will be a seller in this area with a 6825 stop. Otherwise I am going to stay flat this market and take another look when we open on Monday.
Dow Rolling Contract
The Dow plan also worked well yesterday with the market eventually hitting my 17520 buy level before having a huge 200 point rally which enabled me to cover this position at 17590 as again outlined to my Platinum Members and I am now flat. Today I will again be a small, buyer on any dip lower to 17550/17610 with a 17495 stop which is just below yesterday’s low. I will also be a small seller on any further rally to 18820/18880 with a 18910 stop. Just like the other main markets above I am going to go home flat this evening in the Dow as I do not want to have a position ahead of Sunday night’s opening.
September BUND
The BUND plan also worked well yesterday as the market was trading at my 153.40 sell level just as I posted. Subsequently the market had a nice sell-off which enabled me to cover this position at 152.90 and I am now flat. Incredibly the BUND is back trading at 151.70 this morning and today I will be a small buyer on any further dip to 151.10/151.40 with a 150.80 stop. Given the huge move lower since yesterday I do not want to be short the BUND at this time.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1142/1150 with a tight 1136 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip to 14.80/15.20 with the same 14.35 stop.
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