Friday was pretty quiet, in FX especially, after US CPI data failed to surprise, following a slow Asia session where activity was constrained by end-of-Ramadan holidays in Singapore, Malaysia and Indonesia. Gold was one of the biggest movers on the day, -$11.25 to a new 5-year low of $1134.14. This followed an announcement by China that its gold reserves had risen by 60% since 2009 to 1,658 tonnes (53.31m fine troy ounces), a number that underwhelmed relative to the prior beliefs of many gold analysts. The increase means that gold now accounts for just 1.6% of China’s $3tn reserves stockpile, well down on global averages thought to be closer to 10%.
For anybody following my New Platinum Service it made 100 pints on Friday and is now up over 1200 points for July. Last Month it made 3045 points.
Earlier Friday the Shanghai Composite added 3.5% and which means the index is now 13% up from its (July 8) recent lows. There may be more strength to come from news Friday that the China Securities Finance Corp (CSFC), the main provider of loans to brokerage firms and for margin lending, now has access to $483bn of borrowed funds from a combination of the 5 biggest state owned banks and the central bank (Bloomberg reports). This is massive compared to the mere $19bn stock-support fund established by the country’s 21 largest brokerage firms and CSFC two weeks ago.
The other big equity news Friday was a new all-time high for the NASDAQ (+0.91% to 5,210) led by a 16% jump in Google (to above $700 for the first time) after its Q2 earnings report showed profits and revenue exceeding analysts’ expectations and costs rising at their slowest pace since 2013. The Dow in contrast fell 0.19% led by the Oil sector, and the S&P500 finished +0.22 at 2127. VIX was -0.16 to 11.95 – its lowest close since 5 Dec 2014.
News that Germany had become the final country to ratify last Monday’s agreement as precursor to commencing talks on the 3rd bail-out package for Greece, came before European markets closed but to no market fanfare. Greece is now expected to receive bridging finance on Monday in time to redeem the bonds held by the ECB as well as the amounts overdue to the IMF. EU officials were said to be targeting mid-August for agreement on the EUR86bn new rescue plan. Greek banks will re-open Monday with still-heavy restrictions on withdrawals and transfers.
In FX EUR/USD lost a further 0.4% to 1.0830, leading the DXY 0.25% higher to 97.86. AUD was (just) the biggest G10 loser, -0.46% to 0.7372. The NZD in contrast managed a minor short covering rally, +0.22% to 0.6527. The US data saw US June headline CPI +0.3% led by a 3.4% rebound in Gasoline prices, with the core (ex food and energy) measure +0.2% m/m – both in line with consensus forecasts. The rise in core CPI, led by a 0.4% in owners’ equivalent rent, pushes annual core CPI back up to 1.8% from 1.7%. Key now will be if we soon see the Fed’s preferred core PCE deflator inflation measure pick up (from 1.3%). It should.
US June Housing Starts surged 9.8% on the month, with Permits +9.4%. The data was flattered by a surge in Permit Applications and Starts ahead of the June 15 expiry of a tax break for multi-family developments in the New York area. But even excluding the East Coast numbers, the data still looked strong. The University of Michigan’s July preliminary Consumer Sentiment Index disappointed, 93.3 from 96.12 (96.0E). Weaker equities – which have since rebounded – and higher gasoline prices are seen largely to blame. China’s June Home Price data was released Saturday, showing declines on the month in 33 of 70 cities, with 27 showing increases (up from 20 in May). On Reuters’ calculations, Nationwide House Prices rose by 0.4% in the month, after a 0.2% May gain. This reduced annual house price deflation to 4.9% from 5.7%, Reuters says. This is a positive omen for an (eventual) pick up in Chinese Steel and Iron Ore demand
This morning on the economic front we have German PPI and Euro-Zone Current Account at 7.00 am and 9.00 am respectively. We have no US data this afternoon while at the later time of 3.00 pm the UK will release its CBI Trends and Business Optimism.
September S&P 500
The S&P traded in a very narrow range on Friday despite the NASDAQ closing at record highs led by the 16% surge in Google. I am still flat the S&P and today I will still be a small seller on any further rally to 2123/2128 with a tight 2132 stop. Given the fact that the S&P has now closed over the previous resistance at 2108 I have to respect this move and today I will be a small buyer on any dip to 2104/2111 with a 2099 stop.
EUR/USD
Shortly after the European Markets opened on Friday the Euro followed Gold lower with the market eventually hitting my 1.0845 buy level. I am still long especially with the Euro trading at the bottom of its Bollinger Band and Williams Index. I will leave my stop the same at 1.0795.
September Dollar Index
The Dollar also rose after I posted on Friday to my 98.20 sell level. I am still short but nervous considering the Dollar closed over the previous key resistance at 97.70/98.00. Given the fact that I am short at 98.20 and the fact the Dollar is very overbought I am going to raise my stop to 98.60.
September DAX
The DAX plan worked well on Friday as shortly after the market opened the DAX traded higher to my 11770 sell level before having a nice sell-off which enabled me to cover this position at 11710 as outlined to my Platinum Members and I am now flat. Today I will again be a small seller on any rally higher to 11760/11810 with an 11840 stop. I will also be a small buyer on any dip lower to 11560/11610 with an 11490 stop.
September FTSE
My short 6750 FTSE position from last Thursday also worked well on Friday with the market having a nice sell-off which enabled me to cover this position at 6710 as again outlined to my Platinum Members and I am now flat. Today I will again be a small seller on any further rally to 6750/6780 with a tight 6805 stop.
Dow Rolling Contract
The Dow is trading very heavy in comparison to both the NASDAQ and the S&P as the strong Dollar is having an effect on the Dow stocks. I am still flat the Dow and today I will raise my sell level to 18170/18220 with an 18260 stop. I still do not want to be long the Dow at this time.
September BUND
I am glad that I have stayed flat the BUND over the past few days. The BUND has strong resistance from 153.20/153.50 and today I will be a seller in this area with a 153.75 stop. I still do not want to be long the BUND at this time.
Gold Rolling Contract
As expected Gold got slammed on Friday and closed at a new five year low. As most Members know I am looking for a bottom in Gold somewhere between here and 1080 that lasts for more than a few days. The move lower in Gold has led to me going long in small size at 1130. I will leave my stop the same at 1119 but I am not expecting too much upside unless we can break back and close over 1145.
Silver Rolling Contract
No change as I am still long at 15.05 in small size with the same 14.40 stop.
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