Despite the very weak economic data from China, the Euro-Zone and the US the equity markets are all higher this morning having hit the buy levels highlighted in my daily commentary yesterday.
The Euro-Zone Manufacturing Index did post a small rise in September to 46.0 from 45.1 last month but the services PMI fell to 46.0 from 47.2 where markets were expecting a rise to 47.5. It meant that the Composite Index fell to 45.9 from 46.3 which is a 3 year low. Euro-Zone Consumer Confidence also deteriorated further in September. This data again points to negative GDP growth in Q3. In the US the Jobless Nos were little changed last week, falling 3K to 382K but above the median forecast of 375K. Meanwhile the Fed’s Kocherlakota said that the Federal Funds rate should remain near zero until the unemployment rate falls below 5.5% which is probably several years away. The Feds forecast for 2015 is a rate of 6.4%. The Philly Fed Manufacturing Index showed a contraction for the 5th consecutive month but the index did improve to -1.9 in September up from -7.1 in August. This helped equites to rally late on.
Markets have recovered a bit this morning after an article in the Financial Times which said the EU is working with Spain to put together a new rescue plan that will be announced on September 27th. Spain had a 10 year auction yesterday which went well with the rate at 5.67%, a full percentage point lower than the last one in August and the lowest yield since January. There is a G20 meeting for Finance Ministers in Mexico over the weekend. Today is contract expiration for all markets which will add to the volatility.
Dec S&P 500
The S&P worked really well and I was able to take profit overnight at 1455 on my 1446 long from yesterday morning and I am now flat. Today is a difficult day to trade given that it is the expiration for the futures September contracts which expire at 2.35pm and the options which don’t expire until 9.00pm. Today I will be a small buyer from 1448/1452 with a 1446 stop and I will also look to go short from 1465/1470 with a 1474 stop.
Dec BUND
I have just taken profit on my latest 140.20 short at 139.80 and I am now flat. I will be a seller again on any rally to the 140.20/140.40 with a 140.60 stop. I will only be a buyer if we trade down to the 139.00/139.30 area with a 138.80 stop on any long position.
Dec DAX
The Dax has now rolled to the December contract which more or less the same as the cash price. I was able to take profit yesterday on my 7305 long at 7370. Today the Dec Dax is in my sell zone and I have gone short in small at 7420. Given that I have had a good week I will leave my stop at 7455. I will also look to take profit on any dip back to the 7350/7370 area. If the market drops I will be a buyer in the 7300/7320 area with a 7280 stop.
Dec FTSE
The FTSE has now rolled to the December contract which is a 30 point discount to cash. I had my stop to tight yesterday on my 5850 long and I was stopped out near the low at 5830 before the market rallied 60 points.Today I will be a buyer in the December Contract from 5820/5840 with a 5800 stop. I do not want to be short the FTSE at this time.
Nov Crude Oil
Again the market just missed my buy level by 15 pips before Crude rallied over 2 Dollars. Today I will raise my buy level to 9080/9120 with a 9050 stop on any long.
EURO/USD
The Euro made a low of 1.2920 before ralling to the 1.300 level again. Today I will be a buyer from 1.2930/1.2950 with a stop below yesterdays low at 1.2910.
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