Much of Wednesday’s market price action in Currencies, Equities and Bonds has been reversed in over the past 24 hours. The US Stock closed with an average gain of 1% after another volatile trading session. 10 year Treasury Yields are back above 2% (2.03%) and the US dollar is overall up about 0.5% higher having lost the best part of 1% on Wednesday. The exceptions here are the Commodity currency trio of NZD, CAD and AUD which for the most part are continuing to resist the allure of a weaker US Dollar. They are all stronger versus Wednesday’s closing level, and led by the now mighty kiwi – up another 1% in the last 24 hours and came within kissing distance of 0.69 in early afternoon NY trade. This emboldens expectations for the RBNZ moving again on rates at the October 29 window and after Governor Wheeler’s comments earlier this week.
For anybody following my new Platinum Service it made 80 points yesterday and is now ahead by 982 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
The fundamental catalyst for much of the price action was US CPI, where the core rate rose by 0.2% against the 0.1% consensus (headline was -0.2% as expected, held down by a 9% drop in petrol prices). The core print lifts the annual rate of increase to 1.9% from 1.8% and 1.6% at the start of the year. The biggest driver of the rise was rents, which have a higher weight in CPI than the Fed’s preferred PCE deflator measure; there is no guarantee that the latter will be following CPI higher just yet
The other significant market mover happened just before I posted yesterday morning roved to be the comment from Austrian central bank chief and ECB Governing Council member Nowotny, who’s remarks that the ECB is ‘clearly’ missing its price stability target led some to conclude this increase the odds of the ECB adding to either the intensity or duration of its current QE programme as early as December. EUR/USD dropped from above 1.1480 to below 1.1360 in short order following his comments.
US activity data was quite mixed. Jobless Claims dropped to 255k, matching the low last seen in July and bringing the 4- week average down to a new cycle low of 265k – levels fully consistent with further declines in the Unemployment Rate in coming months. This also impacted market somewhat alongside CPI. Incoming survey data meanwhile was not so flash, with the Empire Manufacturing Index lifting to -11.36 from -14.67but which was expected to rise to -8.0. The Philly Fed survey also rose, but only to -4.5 from -6.0 against -2 expected, but the New Orders Index plunged to -10.6 from +9.4. Five months ago it was 15.2.
NY Fed President Bill Dudley was last night’s rostered Fed speaker, saying that if the economy performs in line with his forecast he’s be in favour of a hike this year, but then acknowledging that recent economic news suggests the economy is slowing. He’s covered his bases there.
Finally, Citigroup beat its earnings estimate but in part thanks to lower legal cost/provisions, while Goldman’s missed its number, citing a slump in FICC revenue.
This morning on the economic front we have Euro-Zone CPI and the Trade Balance. At 2.25 pm we have US Industrial Production, This is followed at 3.00 pm by the JOLTS Job Change and this data is very closely watched by Fed `Chair Janet Yellen. At the same time we have the University of Michigan Consumer Survey. Finally just before the close at 9.00 pm we have the Net Long Term TIC Flows.
December S&P 500
Unfortunately three times after I posted yesterday morning the S&P just missed my 1984 buy level before having a nice 30 Handle rally as I broke my own rule of trying to go short in front of an Options Expiry that we have today. Very late in the trading session the market traded higher to my 2007.50 average sell rate before very quickly stopping me out of this position at 2014 and I am now flat. The close above previous resistance at 2007/2010 could be significant as there is a possibility that the market could now retrace the whole breakdown from the 2035/2050 major resistance from August 20th. Today I will be a buyer on any further dip to 2005/2010 with a 1998 stop. I do not want to be short the S&P today.
EUR/USD
Yesterday just before lunch the Euro finally sold off to my 1.1370 buy level, Subsequently the Euro just missed my 1.1430 T/P level twice after my buy level was reached and with the Commodity prices getting hit again this morning I have decided to cover this position here at 1.1390 and I am now flat. Today I will again look to buy the Euro but only if we trade lower to 1/1280/1.1330 with a tight 1.1245 stop. I still do not want to be short the Euro at this time as no Central Bank wants a strong currency in this ongoing currency war across the Globe.
December Dollar Index
I am still flat the Dollar and today I will raise my buy level to 93.20/93.60 with a 92.90 stop. Remember a break and close below 92.62 will be extremely bearish and opens up the possibility of an eventual move lower to at least 88.50.
December DAX
The DAX plan worked well yesterday as shortly after I posted the DAX traded higher to my 10080 sell level before having a nice 60 point sell-off. I covered my position at my 10055 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small seller on any further rally to 10230/10280 with a 10320 stop. I will also look to buy the DAX on any dip lower to 9990/10040 with a 9955 stop.
December FTSE
Very late in the New York trading session the FTSE hit my 6350 sell level. I am not comfortable in been short at this time and I have decided to cover this position here for a small profit at 6335 and I am now flat. Today I will only look to go short on any spike higher to 6370/6400 with a 6430 stop. The 6400 level should act as strong resistance. I do not want to be long the market at this time.
Dow Rolling Contract
The rally in the Dow continues with the market now nearly 1200 points higher since its post- NFP low two weeks ago. The McClellan Oscillator which was under pressure after last Friday’s 2015 high at +303, turned around yesterday with a +178 close. Yesterday’s move higher hit my 17150 sell level. I have decided to cover this position here at 17145 as even though I am looking to put on a more Macro Short position in the Dow with the Options Expiration today I do not want to be short as the price action is telling you this market is going to trade higher first. Today I will therefore move my sell level higher to 17230/17280 with a 17320 stop.
December BUND
I am still flat the BUND and today I will lower my buy level slightly to 156.00/156.40 with a 155.75 stop. Remember my only interest in selling the BUND is still on a rally higher to 158.70/159.20 where I will be a very aggressive seller with a 159.50 stop.
Gold Rolling Contract
The GOLD plan worked very well yesterday as shortly after lunch Gold traded lower to my 1176 buy level before having a nice rally to 1192 which enabled me to cover this position at my 1185T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the market on any dip lower to 1160/1168 with a 1153 stop.
Silver Rolling Contract
Silver traded lower to my 15.95 buy level yesterday. I am still long and today I will leave my stop the same at 15.40.
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