Further weakness in oil prices, a more settled Chinese renminbi and a solid US July retail sales report caught the market’s attention yesterday. News of disruption to the major Chinese port of Tianjin after the explosion Wednesday has not so far affected the outlook for Iron ore prices too much. BHP reported that its discharge berths were unharmed by the explosion; Rio saying they are re-directing six fully-laden vessels. Wire reports suggest that alternative supply ports can be used. Dalian iron ore futures prices closed virtually flat (+0.13%) after opening stronger earlier in the day.
For anybody following my New Platinum Service it finished flat yesterday and is still ahead 582 points for August. The previous two months saw gains of 1810 and 3045 points respectively.
US Retail Sales in July rose 0.6%, right in line with expectations, though upward revisions to July sweetened the in-line headline growth, the report confirming that consumer spending has made a solid start to this quarter and delivering an upward revision to Q2 growth. Even so, the Atlanta Fed’s GDPNow real time estimate of Q3 US GDP was revised down to 0.7% from 0.9% a week ago. They upped their estimate of consumption for the quarter to 3.1% from 2.9% after retail sales but this was more than offset by a larger growth drag from inventory adjustment now estimated at -2.2% points for Q3, from their previous -1.8% estimate. On the price side, falling July import prices was a reminder of the deflationary impact from the US Dollar and oil.
Oil-linked currencies were lower, the oil market fretting over excess supply. The AUD eased somewhat on net, remaining settled, opening this morning toward the higher end of its overnight range. After the previous 24 hours of gyrations in the CNY from PBoC intervention to arrest its expected decline and keep the market guessing day to day, with the CNY fix early this morning coming in at 6.39 which has halted the devaluation of recent days for the time being.
This morning on the economic front we already had German and French GDP which both came in weaker than expected at +0.4 and 0.0% respectively although the French Finance Minister Sapin says France’s growth for the first half of 2015 is the strongest in three years. At 10.00 am the Euro-zone will report the overall GDP growth for the whole region. At the same time it will also release its latest CPI data. This afternoon we will have US PPI and Industrial Production at 1.30 pm and 2.15 pm respectively. Finally at 3.00 pm we have the well watched University of Consumer Sentiment where the expectation is for a print of 93.5 up from last month’s 93.1 reading.
September S&P 500
Unfortunately I had a misprint on my S&P stop yesterday at 2075 which I did not discover until I was already stopped out of a long position which was initiated at 2080 after the S&P dropped shortly after the US markets opened. I meant to have this stop at 2073 as I would never leave such a tight stop which was only three Handles away from my buy range. Hopefully you did better than me on this position as the market had a nice run higher to 2088.5 shortly after I was stopped out. There is no doubt that when the market is in a topping formation which I certainly believe to be the case with the US stock market as we now enter a bear market which makes trading very difficult. The Dow just had a ‘Death Cross’ yesterday which is elaborated on below. By their nature bear markets are designed to frustrate both Bulls and Bears as the market will see powerful declines coupled with unexpected violent rallies meaning most Bulls and Bears will loose in this coming sell-off.
Today I will again be a small buyer on any dip lower to 2069/2074 with a 2064 stop. My only interest in selling the S&P is on a rally to close the recent ‘Open Gap’ at 2099 by looking to go short from 2096/2101 with a 2106 stop.
EUR/USD
The Euro plan worked well yesterday as shortly before lunch the Euro traded lower to 1.1070 which enabled me to go long at 1.1090 before the market had a nice rally to my 1.1145 take profit level as outlined earlier to my Platinum Members and I am now flat. I am encouraged by the fact the Euro was able to close over 1.11 for the second consecutive and if we can again close over this level this evening it will have been a very positive and constructive move for the Euro. The next resistance is Wednesday’s high at 1.1220 before the major resistance at 1.1400/1.1450 a break and close over should see a move higher to the 38.2% retracement of the whole down move at 1.1800. Today I will again look to go long on any dip to 1.1080/1.1115 with a 1.1055 stop which is just below yesterday’s low. If the Euro breaks 1.1220 I will also be a small buyer with a tight 1.1180 stop.
September Dollar Index
I am still flat as the market just missed my 97.25 sell level yesterday before trading lower. Today I will lower my sell level to 96.70/97.00 with a 97.30 stop.
September DAX
Frustrating as I moved my sell level higher to 11170 from 11150 yesterday as the market made a high at 11159 before falling nearly 200 points and I am still flat. Today I will be a very small buyer on any dip lower to 10890/10960 with a 10850 stop. I will also be a small seller on any rally higher to 11150/11190 with an 11240 stop.
September FTSE
The FTSE had a very weak trading session yesterday with the market trading on its highs shortly after I posted before spending the rest of the day trading lower. Eventually the market hit my 6540 buy level. I am still long and today I will raise my stop on this position to 6515.
Dow Rolling Contract
I am still flat the Dow as the market missed my sell level yesterday. Today I will leave my sell level the same at 17530/17580 with a 17625 stop. Yesterday the Dow generated a ‘Death Cross’ which is where the 50 Day Moving Average closes below the 200 Day Moving Average. While this event does not always lead to a large sell-off the market lets look at what happened the last three times we had a ‘Death Cross’
1) The previous Death Cross occurred on August 24th, 2011 with the Industrials at 11,321. What followed was a sharp decline to 10,404 on October 4th, 2011.
2) Before that a Death Cross occurred on July 7th, 2010 with the Industrials at 10,018. Stocks remained essentially flat afterwards, falling only to 9,936 on August 27th, 2010 before starting a new rally.
3) The Death Cross previous to that was on January 3rd, 2008 with the Industrials at 13,056. What followed was a massive stock market crash to 6,469 on March 6th, 2009. This Death Cross proved to be an ominous warning of things to come.
September BUND
No change as I am still a small seller on any rally higher to 155.40/155.70 with the same 156.05 stop.
Gold Rolling Contract
Gold just missed my 1112 buy level overnight and I am still flat. Given the fact that I am already long Silver I am going to lower my buy level slightly in Gold today to 1100/1110 with a 1093 stop.
Silver Rolling Contract
Shortly after I posted yesterday morning Silver traded lower to my 15.30 buy level. I am still long and today I will raise my stop on this position to 14.95.
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