The US Payrolls Report released last Friday was solid despite the headline increase of 214K in October coming in below the 235K expected. September Payrolls were revised upwards by 8K to 256K and August up by 23K to 203K. That was the second upward revision to August meaning that the Mid-Summer dip in Payrolls growth which was originally reported at 142K actually never happened. Payrolls have now been above 200K for nine consecutive months.
The unemployment rate fell to 5.8% thanks to a 683K surge in the household survey employment measure but there was no sign of an increase in wage pressures. Earnings rose 0.1% in October and the annual rate was unchanged at 2% yoy. US Treasuries fell across the curve post-payrolls with the 10 Year Bond ending 9bps lower at 2.30%. US equity markets lost ground early but ended the session ended flat to slightly higher.
The big mover on Friday was the US Dollar which as expected had a nice fall with the Index, having hit a high of 88.30 on Friday morning, currently trading at 87.60. The move lower in the Dollar was helped by the 2.4% rise in Gold. Over the weekend China reported its latest Trade data which came in at a better than expected $45.4 bn versus $42.0 bn.
Today we have no data of consequence due from the UK or the Euro-Zone while the US banks are closed for Veterans Day Holiday. However the stock market is open as normal.
December S&P 500
I pay a lot of attention to the Daily Sentiment Index and other surveys in relation to broader market sentiment as they give a fantastic reading on which way traders are thinking especially when the market is skewed heavily in one direction. Over the weekend the American Association of Individual Investors Survey was released. This showed that the percentage of Bears declined to 15.05% thus registering a new 9-year low. This implies that 85% of all AAII Survey respondents are short, intermediate or long term bullish. The last time there were fewer Bears was July 14 2005 at 14.04% and this was one week before the S&P Homebuilding stock index peaked. This Index subsequently dropped 88% and signalled the peak in Real Estate in general. Historically the AAII Survey tends to be blunt in that extremes in the results do not always coincide exactly with the end points of waves but whenever any sentiment survey makes a new 9-year extreme it is a strong signal in which investors should pay attention. This coupled with a waning in volume is a worry going forward.
On Friday I was very unlucky with my S&P plan as my sell level was 2034 and the high only reached 2033.5 whilst my buy level was 2020 and the low was 2020.5 – as a result I am still flat. As I mentioned on Friday, with the S&P closing over 2013 I had to respect the price action despite the negative surveys and today I will again be a small buyer on any dip to 2014/2020 with the same 2008 stop. My strategy of selling spikes will continue until the market finally rolls over to the downside and today I will still be a seller on any rally to 2035/2040 with a 2044 stop.
Euro/USD
The Bollinger Band and Williams Index certainly paid dividends on Friday as the Euro had a nice rally in the afternoon which enabled me to cover my long 1.2390 position from Thursday at 1.2470 and I am now flat. I still like the Euro at these levels and the price action is certainly favourable despite the ECB’s attempt to weaken the currency following last Thursday’s ECB Meeting. For this reason I will again be a buyer on any dip to 1.2420/1.2450 with a 1.2380 stop. I still do not want to be short the Euro at this time.
US Dollar Index
After I posted on Friday I was stopped out of my short 87.65 position at 88.05 but then I had an order to to go short again in front of 88.40 which I did at 88.25. I am still short and I will lower my stop on this position to 88.00 as I look for the Dollar to trade lower to at least 87.00. In my opinion the Dollar is very oversold at these levels and is due at least a decent correction first before trading lower.
December DAX
My concerns that the Dax would roll-over to the downside certainly proved to be the case on Friday helped by the increasing tensions in Ukraine. The market just missed my 9460 sell level before falling over 200 points and I am still flat. Today I will lower my sell level to 9360/9400 with a 9445 stop. I still do not want to be long the Dax at this time.
December FTSE
The FTSE plan worked well on Friday as shortly after I posted the market was trading at my 6580 sell level with a 6595 high. Following the release of the US Non Farm Payrolls Report the FTSE had a nice drop which enabled me to cover this position at 6550 and I am now flat. Today I will again be a small seller on any rally to 6600/6630 with a 6655 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow plan also worked well on Friday as the idea of selling spikes continues to work well. After the Payrolls were released the market spiked higher to my 17600 sell level and after a nice sell-off I was able to cover this position at 17550 and I am now flat. Today, given how overextended this market is to the upside, I will again be a seller on any further rally to 17620/17660 with a 17690 stop. I still do not want to be long the Dow at this time.
December BUND
After I posted on Friday the Bund had a nice sell-off which enabled me to cover my short 151.35 position from last week at 150.90 and I am now flat. Just like the equity markets I am also looking to sell spikes in the Bund market and today I will again be a small seller on any further rally to 151.55/151.85 with a 152.05 stop.
Gold Rolling Contract
The $40/$100 Dollar rally in Gold that I have been looking looking for finally started to happen on Friday as it rallied over $45 from its Friday lows. The Daily Sentiment Index Reading for Gold coupled with it trading outside its Bollinger Band and at the bottom of its Williams Index again proved to be valuable trading tools. I covered half of my long 1140 position near the end of the New York close at 1175 and I will raise my stop on the other half to 1155 as I look for Gold to trade back above 1200 at the very minimum.
Silver Rolling Contract
As I mentioned on Friday if Silver breaks 15.80 I will add to my existing 15.30 position. As it moved higher I re-bought at 15.82. I am now long in reasonable size and I will raise my stop on this position to 15.25. If Silver breaks 16.25 I will raise my stop to 15.75.
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