A big ‘risk-off’ day last Friday with US stock indices off around 2% and the VIX adding back 1.76 to trade back above 20 (20.7). Friday was one of the four ‘triple witching’ occasions of 2015 (expiration of stock index futures, index options and individual share options) –sometimes known as freaky Friday – and which may have had the effect of pushing stocks further in the (southerly) direction they were already headed. On the week the S&P was off just 0.34%. No real news drivers for Friday’s price action and where losses were sector wide (led by financials) but which clearly represented a reversal of the positive stride with which Wednesday’s Fed announcements were taken.
For anybody following my new Platinum Service it made 170 points on Friday and is now ahead by 1780 points for December. The previous six months saw gains of 1510, 1600, 2833, 2195, 1810 and 3045 points respectively. If anyone is interested in my Platinum Service please check out my Membership Link on the tradernoble.com website.
US Treasury yields fell in a bull-steepening session: 2s – 3.2bps to 0.9388%, 5s -2.6bps to 1.6762%, 10s -1.9bps to 2.2040% and the 30-year -0.6bp to 2.9220%.
In FX, the US dollar gave back Thursday’s gains, the DXY – 0.58% to 98.69, BBDXY -0.39% and the ADXY adding back 0.23%. Yet again the Euro demonstrated its tendency to rise when risk aversion strikes, EUR/USD +0.41% to 1.0870. The Japanese Yen fared even better so reversing the initial weakness seen on Friday’s BoJ policy announcements which – all up – are seen as improving the BoJ’s ability to keep fulfilling its current QQE policy but not really enhancing it. USD/JPY was -1.16% to Y121.16.
A little surprising perhaps to see AUD pulling back up so much given risk-aversion and higher volatility, but a bounce in commodity prices (ex-oil) and the generally softer dollar offered support, AUD/USD +0.65% to 0.7175. NZD +0.39% to 0.6727 while CAD weakened amid further oil price weakness, USD/CAD +0.11% to 1.3953 having earlier broken above 1.40 for the first time since June 2004.
In Commodities, both WTI and Brent lost another 40 cents, to $34.55 and $36.66 respectively. Both are 3% down on a week ago. Hard commodities in contrast benefited from the softerUS Dollar, the LMEX index of traded metals +2.55%, Iron ore 1.7% to $40.10 and Gold +$15 to $1066 (still $20 lower on the week).
FX market positioning data as reflected in IMM/CFTC data released Friday for the w/e Tuesday Dec 15 (so up to 24 hours before the Fed announcement) shows overall speculative long Dollar positioning scaled back significantly after only a small reduction in the prior (ECB) week. Overall speculative Dollar longs vs. G10 currencies fell to 261.9k from 352.8k, (a contraction of over 25%). Paring of JPY, AUD and CHF shorts led the decline. JPY came in to -26.6k from – 68.1k and AUD to -10.5k from -33.6k. A month ago the latter was -66.5k. EUR shorts still large, at -160k from -172.3, GBP -16.9k in from -23.9k, CAD out to -51.0k from -39.0k, NZD +1.1k down from +8.9k and CHF +2.0k from -24.8k.
In Economic news Friday, the US Markit services PMI fell to 53.7 from 56.1k and 55.9 expected, pulling their composite reading down to 53.5 from 55.9k. Canada’s November CPI printed -0.3% for core m/m against 0.0% expected, so y/y fell to 2.0% from 2.1% and 2.3% expected.
This morning on the economic front we have UK CBI Reported Sales at 11.00 am. We have no data of note due from either the Euro-Zone or US today after last week’s glut of news reports.
March S&P 500
What a trading session last Friday turned out to be on what was one of the most volatile trading weeks of 2015. As I have mentioned on numerous these Quarterly Expirations can be a non event or turn out to be extremely volatile and the fact that this past expiration was the third largest in history added to the madness. On a day when the Dow closed down a massive 367 points the McClellan Oscillator only weakened by 34 points to close with a negative reading of just -105 which really surprised me and may well account for this morning’s higher open especially after the hit the S&P took in the last 30 minutes of trading.
Friday’s S&P plan worked very well as initially the market traded lower to a 2002 low which enabled me to buy the S&P at 2004 before we had a nice rally to 2014. As I had such a strong trading session on Friday I covered this long position at 2007 and I am now flat. Incredibly after the S&P hit this 2014 print the market reversed course to close at 1992 which was over 70 Handles lower than where we were at lunch time on Thursday. Today I will again look to buy the S&P on any dip lower to 1987/1993 with a 1982 stop. Given how oversold the S&P is on a Daily chart and the fact that the MO is holding in I do not want to be short the market at this time especially as we have yet to see a sustained Santa rally so far.
EUR/USD
I am still surprised that the Fed went and hiked Interest Rates last Wednesday for the first time in nine years in the face of a slowing economy. It is interesting to see that the US Bond prices rose which means lower Bond Yields as this shows an inverted Yield Curve. An Inverted Yield curve implies a recession is soon approaching. If I am right in this interpretation it will not take long for the US Dollar to start to weaken again. I am still flat the Euro and today I will raise my buy level to 1.0800/1.0830 with a 1.0775 stop which is just below last Thursday’s low print.
March Dollar Index
No change as I am still a seller on any rally higher to 99.20/99.50 with a 99.75 stop.
March DAX
The DAX plan also worked well on Friday as shortly after lunch the DAX traded lower to my 10600 buy level with a 10572 low before having a nice 90 point rally which enabled me to cover this position at my 10635 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the market on any dip lower to 10510/10575 with a 10460 stop. Remember the DAX will finish trading for the Christmas on Wednesday and will not open again until Monday so we may see a Santa rally commence at any time. For this reason I do not want to be short the DAX despite the negative price action.
March FTSE
The FTSE plan worked well on Friday as shortly after the market traded lower to my 6010 buy level I emailed all my Platinum Members to exit this position at 6035 and I am now flat. I am still expecting the FTSE to also have its Santa rally especially given how oversold the FTSE is trading. Today I will look to buy the market on any further dip to 5960/5990 with a 5935 stop.
Dow Rolling Contract
Shortly after I posted the Dow traded lower to my initial buy level at 17340 before having a nice 85 point rally which enabled me to cover this position at my 17400 T/P level and I am now flat. Thankfully we had no more buy levels as the Dow got hit for over 300 points from this 17425 lunch time high. This morning the Dow is oversold and the fact that the McClellan Oscillator is not as negative as last Monday when the Dow was trading near the same price level is encouraging for the Bulls in the short-term. Today I will look to buy the Dow on any further dip to 17040/17110 with a 16970 stop but only in small size given the volatility and wider stop.
March BUND
I was very unlucky on Friday as the BUND traded to a 159.19 high print just missing my 159.20 sell level before trading 60 points lower this morning and I am still flat. Today I will lower my sell level to 159.00/159.30 with a 159.55 stop.
Gold Rolling Contract
There is no doubt that the Gold market has been particularly difficult to get an edge in over the past two months. I am still flat Gold and today I will raise my buy level slightly to 1052/1060 with a 1045 stop which is just below last Thursday’s low print.
Silver Rolling Contract
My long 14.00 Silver position worked well on Friday as shortly after lunch the market traded higher to my 14.20 T/P level. Subsequently Silver traded lower and I went long again at 14.10. I will have a 14.40 T/P level on this position with a 13.60 stop.
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