Another choppy day of trading with hints of risk-off still dogging equity markets and supporting Bond markets, while Commodities were non-directional with Copper down marginally but other metals mostly rose, including the Yellow metal. Oil partially made up from yesterday’s falls. And just now, the USD has risen after Yellen’s rate lift-off still in 2015 comments in a speech hitting the wires after the US Markets closed last night. The AUD trading back down to and below 0.70. Pre-Yellen, the best performer overnight was the NZD, up 1.22% in the wake of yesterday’s announcement from Fonterra increasing its payout, a hint to more confidence in the outlook for milk prices.
For anybody following my new Platinum Service it made a hard earned 43 points yesterday and is now ahead by 2628 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
The AUD made some net gains above 0.70, after initially testing into the mid/lower 0.69s in the London and NY sessions. At the other end of the currency spectrum, the Norges Bank cut rates by 25 bps to 0.75% (the consensus expected no change), unseating the NOK, USD/NOK up 2.44%, spiking higher after the rate cut announcement. Getting a lot of wire coverage in US markets was the second revenue downgrade from Caterpillar in as many months, coming with job cuts as the Oil and Gas downturn bites into this key equipment supplier’s earnings. Their stock fell 6.27%.
Data released yesterday was important but did not significantly skew currencies and markets. The German IFO Business survey remained upbeat but came before the VW issues. US Durable Goods Orders were in line with expectations, as were Jobless Claims, while the one really strong growth stand out of the US economy remained Housing with New Home Sales up 5.7%, higher than expectations.
The Atlanta Fed’s GDPNow estimate for Q3 US GDP now stands at 1.4%, down from 1.5% as at Sep 17, still well below the Blue Chip consensus of 2.5%, though there is still key August and of course September data to come.
As for the long awaited Fed Chair Yellen speech, scanning the headlines, her comments have a USD-supportive (though familiar) and that’s how the FX market has initially traded: she’s still saying lift-off appropriate later this year; outlook data dependent; below 2% inflation still likely due to transitory factors; strategy to tighten at gradual pace; most including myself expect 2015 lift-off; not far away from full employment; prospects appear solid.
As expected the markets are reacting favourably to her speech last night with both the S&P and DAX trading at the same levels as I marked prices 24 hours ago. Unfortunately markets got slammed after I posted before turning around in another violent rally.
This morning on the economic front we have Euro-Zone Money Supply at 9.00 am. This is followed by US GDP at 1.30 pm. At 2.45 pm we have Markit Composite Services/Manufacturing PMI. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment. Earlier at 2.15 pm the Fed’s Bullard will speak on Monetary Policy.
December S&P 500
My idea for the S&P to rally ahead and after the Yellen speech proved to be correct but I must confess I did not see the S&P breaking 1900 first on the Caterpillar news before having another 35 Handle rally. We still have this huge ‘Open Gap’ from earlier this week at 1936/1964 and the odds are now shortening that the ‘Gap’ will be filled sooner rather than later. Yesterday the S&P having traded lower to my 1910 buy level before stopping me out of this market right near the lows of the day at 1899. Subsequently I emailed all Platinum Members to buy the S&P again at 1906 with a 1896 stop which thankfully worked out as we were able to T/P on this position at 1915 and I am now flat. As I expect this large ‘Open Gap’ to be at least partially filled I am going to look to buy the market again on any dip lower to 1916/1923 with a 1911 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1903 with a 1895 stop. I do not want to be short the S&P at this time.
EUR/USD
My Euro plan worked well yesterday as when the Equity markets were getting slammed the Euro had a nice rally to my 1.1270 sell level before having a nice sell-off which enabled me to cover this position at my 1.1240 T/P level as I wanted to be flat ahead of the Yellen speech, and I am still flat. The Euro is trading a lot lower this morning following the Yellen speech that rates will rise sooner rather than later and today I will again look to buy the Euro on any dip lower to 1.1080/1.1110 with a 1.1055 stop. Given the large move lower overnight I do not want to be short the market at this time.
December Dollar Index
No change as I am still a small seller on any rally higher to 96.70/97.00 with a 97.30 stop.
December DAX
This market is becoming more and more frustrating to trade as I am getting the direction right but unfortunately my stops are too tight as you need a really wide stop to try and trade this market presently. Yesterday after I posted the DAX had a very nice rally on the strong IFO release to over 9700 before getting hit on more VW news and Caterpillar which saw the DAX traded as low as 9360 before rebounding 300 points this morning. Shortly after I posted I bought the DAX in very small size at 9530 before getting stopped out at 9460 and I am now flat. To me the recant price action is telling you that this market wants to bottom and today I will again be a small buyer on any dip lower to 9510/9570 with a 9460 stop. I still do not want to be short the market at this time.
December FTSE
The FTSE plan worked well yesterday as the market traded lower to my 5910 buy level before having a nice rally which enabled me to T/P on this position at 5960 as outlined earlier to my Platinum Members and I am now flat. I still like the FTSE at these levels as I expect the market to rally into month end next week and for that reason I do not want to be short the market at this time. Today I will again be a buyer on any dip lower to 5960/6000 with a 5930 stop.
Dow Rolling Contract
The Dow plan also worked well yesterday as the market traded lower to my 16110 buy level with a 16010 low before having a nice 300 point rally following the Yellen speech which enabled me to cover this position at my 16160 T/P level as I wanted to be flat before Yellen spoke. Despite the large sell-off in the Dow yesterday the McClellan Oscillator only closed with a negative reading of -36 meaning the internals of this market are in better shape than the headlines suggest. Given the fact that it is month end next Wednesday I do not want to be short the Dow at this time and today I will raise my buy level to 16200/16260 with a 16150 stop.
December BUND
Very frustrating to see the BUND trading a lot lower this morning as I had my stop too tight at 156.30 on my short 155.98 short position which was hit after the Equity markets got hit yesterday afternoon and I am now flat. Today I will again look to go short on any rally higher to 155.90/156.20 with a 156.50 stop which is just above yesterday’s high print.
Gold Rolling Contract
Yesterday was certainly not my lucky day as Gold just missed my 1130 buy level with an 1130.50 low before going on to have a $27 rally and I am still flat. Today I will raise my buy level slightly to 1128/1135 with a 1121 stop.
Silver Rolling Contract
My long 14.80 Silver position worked well yesterday as the market having briefly traded `below my buy level shortly after I posted had a nice rally on the back of Gold moving higher which enabled me to T/P at 15.15 and I am now flat. Today I will again look to buy Silver on any dip lower to 14.70/14.95 with a 14.50 stop.
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