Price wise, there was not a lot to note in early Friday’s European markets, much of the day’s price action having occurred during the Asia-Pacific session (in FX at least). News-wise, the biggest excitement came around midday NY time when the Fed revealed that confidential data including Fed staff forecasts for the Fed Funds rate had been inadvertently posted to the Fed’s website alongside other material back on June 29 (so obviously not spotted at the time). These showed point projections of 0.35% for the end-2015 Fed Funds rate, 1.26% for end 2016 and 2.12% for end 2017. The forecasts, prepared in front of the June FOMC meeting, were unchanged from March, and sit below the median June FOMC ‘dot point’ projections of 0.625%, 1.625% and 2.875% for end ’15, ’16 and ’17 respectively.
Finally after a rollercoaster day in which seven of my nine markets got triggered on Friday my New Platinum Service lost 65 points and is now ahead by 1340 points for July. Last month it generated a return of 3045 points.
The 2yr note yield dipped from just above 0.70% to a low of 0.66% on the news before closing at 0.68%. In my view the revelation is no big deal, though does tend to re-enforce prevailing money market sentiment that sees the Fed lifting rates no more than once this year. US Bond Yields were in any event under mild downward pressure from a big downside miss in the New Home Sales data, and weak US stocks where the main indices lost around 1% +/-. In FX, EUR/USD finished flat at 1.0984 and USD/JPY was 0.1% lower at 123.81. So the 0.13% rise in the DXY was largely on the back of latest Commodity Currency weakness. AUD/USD just made another new low offshore (0.7260) before ending in NY at 0.7281, -1.01% on the day (and the first time below 0.73 since 3 May 2009). Friday’s lows are being re-tested in early Asia-pacific trade Monday. USD/NZD was 0.44% lower to 0.6578. It has re-started the new week little changed so above Friday’s 0.6555 low. In EM, the Brazilian Real and South African Rand were the biggest losers, USD/ZAR +1.72% to a new record high of 12.67, USD/BRL +2.01% to its highest since 2003. The Rouble was also very weak, -1.20%.
In rates, US 2yr yields ended the NY session -1.6bps at 0.6781 (so about 2bps up on the week) and the 10yr -0.5bp to 2.2624 (-8.5bps on the week). In stocks, the S&P500 lost 1.07%, the Dow 0.92% and the NASDAQ -1.12%. Eurostoxx 50 was -0.88% and the Dax -1.43%. VIX rose 1.1 to 13.74. In Commodities, Gold staged a rebound, +$8.41 to $1,099. CFTC data showed hedge funds (a separately recorded subset of overall ‘non-commercial’ operators) holding net shorts for the first time since the data started being recorded in 2006 (-11,345 contracts). Overall speculative positioning fell but remained positive at 28.3k and above the record low of 16.6k recorded in July 2013. The LMEX index finished -0.08% and iron ore lost $0.30 to $51.42. WTI crude lost further ground, -$0.31 to $48.14.
US June New Home sales fell sharply and unexpectedly, – 6.8% to an annual rate of 482k (+0.3% or 548k E) with the weakness compounded by a big downward revision to May (- 1.1% instead of the +2.2% first reported). There was a tendency to dismiss the data as prone to extreme month to month volatility, and to note that New Home Sales are small relative to the (strong) Existing Home Sales numbers reported earlier in the week. That said they did have some impact. The Markit US manufacturing PMI rose to 53.8 (53.6E, 53.6P) Earlier Friday, the Eurozone ‘flash’ composite PMI fell to 53.7 from 54.2 (54.0E) with small falls recorded for both manufacturing and services in both Germany and France. This despite the fact the survey period reportedly commenced just after news of the deal to keep Greece in the Euro was announced.
This morning on the economic front we have German IFO Business Climate/Current Assessment/Expectations at 9.00 am. This is followed by Euro-Zone M3 Money Supply at 9.05 am. At 1.30 pm we have the always volatile US Durable Goods Orders. At the later time of 3.00 pm we have German Retail Sales. Finally at 3.30 pm we have the Dallas Fed Manufacturing Activity Index
September S&P 500
So far July has been a very frustrating month for trading the S&P with Friday continuing on this theme. Shortly after the US Markets opened the S&P traded lower to my 2092 buy level before stopping me out of this position for a small loss at 2086. The move lower on Friday at least closed the ‘Open 2070/2086 Gap’ from two weeks ago with Friday’s low print at 2069.75. Despite the negative price action over the past few trading sessions I will not be short this market ahead of Wednesday’s now crucial FOMC Meeting. Shortly after the markets opened last night I bought the S&P at 2077 with a 2069 stop which is just below last Friday’s low print. Given how difficult this market has been to trade over the past few weeks with the S&P having made no net process so far in 2015 I am only trading in small size. I still do not want to be short the S&P ahead of Wednesday.
EUR/USD
In contrast to the S&P above the Euro plan again worked well on Friday as the idea of buying dips continues to pay dividends. Shortly before lunch the Euro traded lower to my 1.0940 buy level before having a nice rally which enabled me to cover this position at 1.0990 as outlined earlier to my Platinum Members and I am now flat. I still believe that the Fed are not going to raise Interest Rates too much as the economic situation in my opinion does not warrant a serious of rate hikes especially with the US only creating lower paid jobs. Today I will again be a small buyer on any dip lower to 1.0925/1.0955 with a 1.0895 stop.
September Dollar Index
The Dollar plan also worked well on Friday as shortly after lunch the Dollar rallied higher to my 97.70 sell level before having a nice sell-off which enabled me to cover this position at my 97.30 take profit level as outlined earlier to my Platinum Members and I am now flat. Today I will again be a seller on any rally higher to 97.70/98.10 with a 98.40 stop.
September DAX
The volatility on the DAX is again on the increase with the market falling over 500 points from its highs made earlier last week following the Greek bailout. Unfortunately my DAX plan did not work on Friday as shortly after the US Markets got hit to the downside the DAX traded lower to my 11360 buy level before stopping me out of this position at 11290 and I am now flat. As I have mentioned over the past few weeks I am only trading the DAX in very small size. Today I will again be a small buyer on any dip lower to 11200/11260 with an 11140 stop. I still do not want to be short ahead of the FOMC on Wednesday.
September FTSE
The FTSE continues to lead the main Stock markets lower with the market been especially weak on Friday. As I mentioned in last Friday’s commentary the FTSE has major support from 6400/6430 and today I will be a reasonable buyer on any further dip to 6420/6450 with a 6380 stop.
Dow Rolling Contract
Just like the FTSE above the Dow had a very bad trading session on Friday as the number of Hindenburg Omen’s on the clock continue to mount. Long term I am very bearish for the Dow but I still believe we will have one more decent rally before this black swan event for the Dow occurs. Last Friday’s plan did not work well as shortly after the US Markets got hit to the downside I went long near the bottom of my buy range at 17630 as I was already long the other main Indices at this stage only to be stopped out of this long position at 11560 and I am now flat. Today I will again be a small buyer on any further dip to 11480/11540 with a 11440 stop as I do not want to short any Index ahead of the FOMC on Wednesday.
September BUND
No change as I am still a small seller from 153.90/154.30 with a 154.55 stop
Gold Rolling Contract
My long 1080 Gold position taken early Friday morning worked well as Gold had a nice rally after the US Stock markets started to fall which enabled me to cover this position at 1091 as again outlined to my Platinum Members and I am now flat. There is no doubt that Gold has strong support from 1070/1085 and today I will again be a small buyer on any dip lower to 1078/1090 with a 1065 stop.
Silver Rolling Contract
My Long 15.05 Silver position from nearly three weeks ago was finally stopped out on Friday near the lows of the day at 14.40 and I am now flat. Just like Gold above I really believe that Silver is at or very close to a medium term bottom. Today I will again be a buyer from 14.20/14.60 with a 13.80 stop.
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