If anyone harboured thoughts that Global Markets were not completely in the thrall of the ”could they, would they” debate about the Fed’s 2016 intentions, they were disabused of the notion from the US get-go on Friday. Boston Fed President Eric Rosengren sent risk markets into a tail-spin at a breakfast presentation in Massachusetts, saying he backed gradual interest rate hikes and that waiting too long meant some asset markets like commercial real estate ”become too ebullient”.
Due to the number of Members taking up my 2 year Euro 2500 for my Platinum Service in recent months, this will be the last month I am offering this special price which will rise to Euro 2750 on October 1 2016. If anyone is still interested in this original deal which has been in situ since January 1 can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it unfortunately had it worse trading day since I started this service by loosing 270 points on Friday as everyone of my nine markets got hit. The Platinum Service is now down 72 points for September having made 1722 points in August and 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2000 points.
”My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalisation of monetary policy”, Rosengren said. ”If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate,” he said. ”A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of the recovery.”
Rosengren’s comments were nothing new compared to remarks that he had made last month, but the fact they were repeated after the intervening US economic data run(two weak ISM Surveys and a so-so August Employment Report)marked them out as significant. We can now count Rosegren as a likely dissenter, alongside Ester George and Loretta Mester, should the FOMC decide to stand pat on 21 September.
Market reaction to Rosengren’s comments was significant, but markets were later ”thrown into a loop,” as CNBC put it, over news that the central bank’s most dovish official, Governor Lael Brainard, will be delivering a previously unannounced speech today at the Chicago Council on Global Affairs. Brainard’s planned speech was in fact already known on Thursday, but markets being markets were quick to make two and two equal twenty two and determine that Brainard was set to depart from her previously uber-dovish script and give a hint that a September rate hike was ”on”.
In contrast to Rosengren, Fed Governor Daniel Tarullo described himself as being a member of the ”show me” camp at the Fed, wanting to see ”more tangible evidence of inflation” before raising rates. His message was ignored.
As for markets, US stocks crunched, the S&P 500 closing down -2.45% to 2127.8, the Dow -2.1% to 18085 and the NASDAQ -2.5%. The VIX jumped by 5 points to 17.5. In Interest Rates, if you looked at the front end of the US curve, you would be forgiven for wondering what all the fuss was about. OIS pricing for the probability of a 21 September Fed Hike moved from 27% to just 29% and December from 70% to 72%. However the 10 Treasuries rose 8bps to 1.68%.
In FX, the US Dollar rallied hard, most notably against commodity/”risk” currencies. The AUD/USD was the biggest loser, -1.33% to 0.7541, while Gold, Silver and Oil all got slammed on Friday.
This morning the Nikkei closed down 1.75% while European markets are opening 1.5/2.0% lower. We have no economic news due on either side of the Atlantic which must be some sort of record. However we have three Fed speakers later today, Lockhart at 1.05 pm, Kashkari at 6.00 pm and finally as mentioned above, Brainard at 6.15 pm.
September S&P 500
The S&P had its biggest fall since the UK Brexit vote on June 24 as one stock after another got crushed on Friday following two months of the lowest volatility since the 1960’s. Incredible the VIX traded 5 points higher from 12.4 to 17.5 for a huge 40% move. Today’s selling pressure was not limited to equities, as bond prices, commodity indexes, Forex and even the metals closed lower on the day. Friday’s huge move lower was enhanced by the 10 handle sell-off after the S&P Cash Market closed and with the September Futures market trading at 2109 as I write this commentary we are now well below the 2127 Cash close from Friday. The market left a huge ”Open Gap” from Thursday’s Chicago close at 2176 to Friday’s afternoon’s high at 2161 and as we know all ”Open Gap’s get filled at some point. The only good news about Friday was the fact that I had tight stops across all my markets otherwise you have been crushed. For the record I bought the S&P at an average rate of 2165.50 as I was looking for this down gap to get filled before getting stopped out of this trade at 2158. Subsequently I bought the S&P again at 6.20 pm looking for a rally into the 7.00 pm Chicago lunchtime which did not occur and I was stopped out of this trade at 2137 and I am still flat. The fact that the S&P broke the previous very strong support and 2015 high at 2130/2134 so easily is a worry as we are now back in the neutral trading area of 2040/2130 with 2080/2090 as fair price and which contained so much of the trading range for most of 2015. I cannot see the S&P leaving two consecutive down gap’s and today I will be a buyer from 2095/2105 with a 2087 stop. I will also look to sell the market on any rally higher to 2135/2145 with a 2156 wider stop.
EUR/USD
The Euro traded lower to my average buy level at 1.1225 before rallying overnight which enabled me to cover this position at my 1.1250 T/P level and I am now flat. Given the extent of the equity sell-off I cannot see the Fed hiking rates next week and today I will again look to buy the Euro on any dip lower to 1.1180/1.1220 with a 1.1145 stop.
September Dollar Index
The Dollar traded higher to my sell level with a 95.65 high print on Friday before selling off overnight. As I had so many open positions I did not sell the Dollar and if any of my members did sell the Dollar they are sitting on a small profit this morning and I would go ahead and cut this trade now. Today I will again look to sell the Dollar from 95.70/96.10 with a 96.40 stop.
September DAX
As I had so many open positions on Friday I waited to buy the DAX at the bottom of my buy range at 10525. I was lucky in that the DAX hit my 10480 stop just before the close at 9.00 pm given the fact that the market opened below 10400 when the Futures market re-opened at 7.00 am this morning. Remember the DAX and BUND Futures markets open from 7.00 am to 9.00 pm and then close overnight. The DAX has very strong support at 10250 and today I will be a buyer on any further dip lower to 10230/10300 with a 10185 stop. I still do not want to be short the DAX at this time.
September FTSE
The FTSE was the only equity market to work for me on Friday as after the market hit my 6795 buy level I emailed my Platinum Members to cut this position at my revised 6810 T/P level and I am still flat. The FTSE followed the other equity markets lower and that sell-off as continued overnight. The FTSE has strong support at 6625/6655 and I will be a buyer in this area with a 6590 tight stop. Given the extent of the sell-off I do not want to be short the FTSE at this time especially with the September Contract expiring on Friday morning.
Dow Rolling Contract
Incredibly the Dow is now trading over 600 points lower since its mid-afternoon high last Thursday. My Dow plan also did not work on Friday with the market hitting my average buy level at 18330 before stopping me out of this trade for a small loss at 18265 and I am now flat. I know from the number of emails received on Friday and over the weekend that most of you stuck to just a max of 3 trades on Friday. This huge move lower in the Dow filled two open gaps from July 8 and July 11 at 18146 and 18226 respectively. The next big support for the Dow is from 17865/17895 and today I will be a strong buyer on any dip lower to 17850/17920 with a 17795 stop. If we trade into this area this will be a 50% retracement of the rally from late June.
December BUND
Since the inaction of the ECB and Dragi on Thursday, the BUND has been slammed with the Bond Yield back above zero. The BUND Yield in percentage terms moved 17% on Friday and you can only imagine the losses that both Pension Funds and Hedge Funds are sitting on this morning. Our good run in the Bund came to an end on Friday as after the Bund traded lower to my average buy level at 164.15 I was stopped out of this trade for a small loss at 163.80 and I am now flat. This huge move lower in the Bund last week has left a horrible Negative Weekly Candle on the December Chart warning of further significant losses. Today I will now look to sell the Bund on any rally higher to 163.95/164.30 with a 164.60 stop. My only interest in buying the Bund is on a dip lower to 162.40/162.70 with a 162.10 tight stop.
Gold Rolling Contract
Overnight Gold traded lower to my 1325 buy level before having a small rally so far to 1330. As I want to be flat Gold I emailed my Platinum Member earlier this morning to cut this position at 1328.50 and I am now flat. I am going to stay flat Gold today as I prefer only to buy Silver.
Silver Rolling Contract
My long 19.75 Silver position was stopped out at 19.05 and I am now flat. Today I will again look to buy Silver on any dip lower to 18.40/18.75 with a 17.95 stop which is just below the key 18.00/18.30 major support level.
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