Stocks fell as did benchmark Bond Yields on the last business day of the month and amid some mixed US economic signals. The US Dollar was overall little changed despite a further 0.34% rise in EUR/USD to 1.0986 and a particularly sharp fall in the NZD, to below 71 cents at one point and Friday’s clear under-performer. US revised Q1 GDP came in at -0.7% so not quite as weak as the -0.9% expected (and note any upward revision from a review of seasonal adjustment methodology will not arrive until the Q2 estimate is first released in late July). The Chicago PMI unexpectedly slumped, 46.2 from 52.3 and 53.0 expected but is not usually a reliable guide to the national ISM.
The better news was the final University of Michigan consumer sentiment index, revised up to 90.7 from the 88.6 preliminary estimate and 89.5 expected. Canada’s March GDP print of -0.2%, with February revised to -0.1% from flat, meant that overall Q1 GDP is put at -0.6% (annualised rate) not the +0.3% expected. The data is showing the savage bite being taken out of the economy by the slump in oil prices and hence mining activity. This will keep the Bank of Canada in play for possible further easing this year despite last week’s inaction. With the exception of NOK (but not CAD) and which keyed off a near $3 surge in Brent crude, Commodity Currencies are still suffering, led by NZD which finished at 0.7107 but has restarted the week trading below Friday’s 0.7088 low.
Hard commodity prices remained under the pump (ex-gold, +$2.18 to $1190.6) with the LMEX index off 1.55% and the 62% fines China iron ore import price off $0.48 to $61.85. AUD strongly outperformed NZD, the cross up 0.9% with AUD/USD off just 0.05% to 0.7645 and bringing the overall May decline to just over 4.5%. It has started the new week holding just above Friday’s 0.7629 low. USD/JPY finished higher again, +0.16% to Y124.15 albeit back from Thursday’s Y124.37 high, with the overall May gain 4.13%. GBP also lost 0.16% to $1.5291 and so has given back more than 5 cents of its post-election rally.
In Bonds, US Treasury yields were lower across the curve, with favourable tailwind from Bunds where the 10 year lost 4.3bps to 0.487%. US 2 year notes were -2.4bps to 0.6053% and 10s -1.4bps to 2.1214%. In stocks, the Shanghai composite slightly extended Thursday’s rout, -0.18% and so 7.4% off its mid-week highs. European stocks were very weak, the Euro-Stoxx 50 -2.19%, led by a 2.25% drop in the German DAX. The S&P 500 closed down 0.6% at 2107 but still closed up 1.1% in May.
This morning on the economic front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by German CPI at 1.00 pm. At 1.30 pm we have US Personal Income/ Spending and the PCE Deflator. At 2.45 pm we have US Manufacturing PMI. Finally at 3.00 pm the US will release its latest ISM Manufacturing and Construction Spending.
June S&P 500
The S&P plan worked well on Friday as by the time the European Markets had opened the S&P was trading near the bottom of my buy range at 2116 before having a nice rally ahead of the GDP release which enabled me to cover this position at 2122 and I am now flat. Despite the better than expected GDP and University of Michigan Consumer Confidence data the S&P had a bad close to the week and month. However as I have been mentioning over the past three weeks we need to see the S&P break the three key supports at 2095/2100, 2065/2070 and then the major one at 2035/2040 before I start to set up a more bearish posture. Today I will be a small buyer on any dip lower to 2094/2099 with a 2089 stop. However given the weakness of last Friday’s close I will be a small seller on any rally higher to 2115/2120 with a 2124 stop.
EUR/USD
I was very unlucky with my EUR buy level on Friday as shortly after the European Markets opened the Euro made a low of 1.0926 just missing my 1.0920 buy level before going on to rally over 1.10 and I am still flat. Today I will move my buy level higher to 1.0900/1.0930 with a 1.0870 stop. I will leave my sell level unchanged at 1.1060/1.1100 with the same 1.1160 stop.
June US Dollar Index
No change as I am still a small seller on any rally higher to 97.40/97/70 with the same 98.10 stop. I will also look to buy the Dollar on any further dip to 96.00/96.40 with a tight 95.70 stop.
June DAX
Thankfully the DAX opened below my 11590 buy level on Friday morning as the market got hit for a hefty 2.25% on more Greek woes. I still believe that the Euro-Zone will cobble together some sort of deal for Greece which will enable them to make this week’s repayment to the IMF on time. For this reason I will again be a small buyer on any further dip to 11290/11340 with an 11250 stop. I still do not want to be short the DAX at this time.
June FTSE
The FTSE plan worked well on Friday as shortly after the London Markets opened the FTSE traded lower to my 7000 buy level before having a nice rally ahead of the US GDP release which enabled me to cover this position at 7040 as outlined earlier in my Platinum Service and I am now flat. Subsequently the FTSE had a very bad finish to the week and month and the market is now approaching the key pre-Election 6880 major support. For this reason I will again be a small buyer on any dip lower to 6880/6910 with a 6855 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow plan also worked well on Friday as by the time the European Markets had opened the Dow was trading near the middle of my buy range at 18070 before having a nice rally ahead of the US GDP release which enabled me to cover this position at 18130 and I am now flat. Subsequently the Dow had a bad close and for this reason I will lower my sell level to 18100/18140 with an 18180 stop which is just above last Thursday’s high. I will also be a small buyer on any dip lower to 17870/17930 with a 17830 stop.
June BUND
No change as I am still flat the BUND and as I do not want to chase this market higher I will leave my buy and sell levels unchanged from Friday.
Gold Rolling Contract
Gold is trying to consolidate above 1180. I am still long at 1190 from last week and I will leave my stop the same at 1179.
Silver Rolling Contract
No change as I am still long at 16.65 with the same 16.20 stop.
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