It was the makings of a risk-on mood for markets yesterday on a day when the Bank of England’s Monetary Policy Committee (MPC) was hanging tough about the healthy outlook for the UK economy and still harbouring thoughts of a UK Rate Rise coming into focus in the first part of next year. The MPC again voted 8:1 to keep policy unchanged and pretty much holding to the positive domestic economic outlook and emerging inflation risks as outlined in last month’s Inflation Report. There was not much net reaction neither from either Sterling nor in the Gilt market to the BoE, even though they were probably more upbeat than might have been expected.
For anybody following my new Platinum Service it made 300 points yesterday and is now ahead by 1570 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
In a day of “risk on”, Cable underperformed relative to the likes of the AUD and the Euro. In the BoE’s view, external headwinds must be weighed against the prospects for a continued healthy domestic expansion, the BoE expecting inflation to pick up at around the turn of the year though the drop in Oil prices had raised questions about the near term outlook and uncertainty about how the Pound’s strength will feed through into prices.
In a day for second tier data releases, US Jobless claims were right in line with expectations printing at 275K while the market had another reminder of the deflationary impact of lower Oil prices and the strong Dollar on upstream US inflation from still falling import prices. Import prices in August were down another 1.8% and off 11.4% y/y; even excluding petroleum, import prices are down 3.0% y/y, some late inflation mail for the Fed heading into next week’s FOMC.
There are two big US releases ahead of the FOMC, retail sales Tuesday and CPI Wednesday after Consumer Sentiment this afternoon. The strength in the AUD continued on in the wake of yesterday’s post-Employment Report bounce. In a risk-on mood, it’s has been a strong performer among the majors, up 0.8%, eclipsing the NZD that was still languishing after yesterday morning’s rate cut and the “prepared to do more” tone from RBNZ Governor Wheeler’s comments following the rate cut.
This morning on the economic front we already had the release of German CPI which came in flat as expected. At 12.30 pm the Bank of England’s Forbes will speak on Monetary Policy in Cardiff. This is followed at 1.30 pm by US PPI. At 3.00 pm the University of Michigan Consumer Sentiment index preliminary reading for September will be released. This will generate most of the market’s interest among the releases in today’s trading session. Finally at 7.00 pm we have the US Monthly Budget Statement.
Sunday night/Monday morning promises to be volatile as China is due to release its latest Retail Sales and Industrial Production.
September S&P 500
For a change I got some luck with my S&P stop level as after the market traded lower to my 1937 buy level the S&P traded as low as 1929 but did not break this level and I was able to cover this position at my T/P level at 1946 as outlined earlier to my Platinum Members and I am now flat. Regular readers will know that with the September Contract due to expire next Friday, traditionally whatever low is put in on the Thursday/Friday in the week before expiration is the low ahead of these Quarterly Expirations. However to complicate this tradition we have one of the most important FOMC Meetings in a very long time next Thursday, plus we still have the outstanding ‘Open Gap’ from last Friday’s close at 1918 to Wednesday’s day session low at 1934 which has yet to be filled. Then just to complicate things further we have one of the largest ‘open interest’ for the September Future’s Contract which has to be unwound by next week. To me next week promises to be one of the most volatile expiration weeks in a very long time plus this is coming on the back of Wednesday’s huge Key Day Reversal to the downside. Today I will again be a small buyer on any dip lower to 1933/1938 with a 1928 stop which is just below yesterday’s low print. Again if I am taken long and subsequently stopped out of any long position I will be a more aggressive buyer in front of 1920 with the same 1912 stop. Given the fact that we have the FOMC and Contract Expiration next week I do not want to be short the S&P at this time.
EUR/USD
My short 1.1235 Euro position worked well yesterday as just as I posted the Euro traded lower to 1.1171 which enabled me to cover this position at my 1.1190 T/P level as again outlined to my Platinum Members and I am now flat. Unfortunately the move lower in the Euro just missed my 1.1160 buy level before having a nice 140 point rally. The move higher in the Euro yesterday has again seen the Euro close over the key 1.1250 pivot point. Today I will be a small buyer on any dip lower to 1.1220/1.1260 with a 1.1180 stop.
December Dollar Index
This is the last day for trading the September Contract and today I will move to the December Contract which trades at a 20 premium to the September Contract/Cash Dollar Index. I am still flat and today I will lower my sell level to 96.10/96.40 with a 96.70 stop.
September DAX
I was very unlucky with my DAX 10140 buy level as the low made was 10159 before the market went on to have a nice180 point rally and I am still flat. Today I will lower my buy level to 10030/10090 with a 9980 stop as the price action looks heavy this morning. Despite the heavy price action I do not want to be short the market ahead of next week’s key events.
September FTSE
The FTSE plan worked very well for Premium Members yesterday as shortly after I posted the FTSE traded to a 6215 high which enabled these members to go short at 6210. Subsequently the FTSE had a nice drop which enabled me to cover this position at 6170 and I am now flat. For Platinum Members I had raised the sell level to 6220 shortly before I emailed these Members. This morning the FTSE is again opening heavy and today I will look to buy the market on any dip lower to 6070/6100 with a 6045 stop. Just like the other main Indices I do not want to be short ahead of next week.
Dow Rolling Contract
The volatility in the Dow continues to increase and yesterday was no exception. Shortly before lunch the Dow traded lower to my 16190 buy level before having a nice rally which enabled me to cover this position at my 16265 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small buyer on any dip lower to 16120/16190 with a 16060 stop.
December BUND
I have now rolled to the December Contract which is trading at just a 4 point premium to the September Contract. I am still flat and today I will be a buyer on any dip lower to 154.10/154.50 with a 153.80 stop.
Gold Rolling Contract
My long 1107 Gold position worked well yesterday as the market had a nice rally in the afternoon which enabled me to cover this position at my 1114 T/P level 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 1095/1105 with a 1089 stop.
Silver Rolling Contract
Silver had a nice rally after I posted yesterday morning which enabled me to cover my long 14.60 position at my 14.80 T/P level and I am now flat. Today I will again be a buyer on any further dip lower to 14.20/14.50 with a 13.90 stop.
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