The RBNZ has just delivered a universally expected 25-point cut to the OCR (to 2.75%) and says that some further easing seems likely and that further currency deprecation is appropriate. This takes a bite out of pre-RBNZ NZD strength. It’s a little confusing (to say the last) making easy sense of yesterday’s market moves, that saw US stock indices jump 1% at the NYSE open and following on from the Nikkei inspired surge in Asia and European bourses, only to leak lower throughout the session with the S&P closing down about 1.5%.
For anybody following my new Platinum Service it made 185 points yesterday and is now ahead by 1270 points for September. The previous months saw gains of 2195, 1810 and 3045 points respectively.
For those who have a life outside following the tick-by-tick gyrations in global markets, they would be forgiven for thinking that a surge in US job openings as reported in the JOLTS report (a known Yellen labour market favourite) and to its highest level since at least 2001 (Bloomberg data doesn’t go back further this) caused equity markets to freak out at heightened prospects of the Fed now proceeding to lift rates next week. That would be plain wrong. Equity (and Bond Yield) intra-day highs were in place at least an hour before the report was released. US data watchers in any event are noting that the rise in job openings (by almost 500,000 in July) was dominated by low paying jobs (i.e. in the retail and hospitality sectors), that the rate of hiring did not improve materially, and too that the ‘quit- rate’ (another Yellen favourite that measures how confident folks are of leaving one job and easily finding another) didn’t rise at all.
In fact, it looks to be no coincidence that equity markets turned lower almost immediately Apple commenced its latest product unveiling, that featured an updated iPhone, revamped Apple TV and bigger iPad including a new $99 pencil (sorry, stylus). Stock market investors were clearly unimpressed, marking Apple’s stock down from above $114 to below $110 in the last two hours of New York trade, and dragging the broader Indices down with it. As the Zero Hedge website quips this morning – is the Fed now pencil-dependent?
On the subject of the Fed and after the IMF and World Bank implored the Fed not to lift rates this month, Paul Krugman and Larry Summers the latest to weigh in on the same side of the debate. This is the second big call by Mr Krugman this week coming on the back of stating that Australia may be heading into recession, and that the RBA should cut Interest Rates further.
All up US yields – and September Fed ‘lift-off probabilities’ – aren’t much changed over the past 24 hours (2 yr. yields up less than 0.5bp and 10s less than 2bps). In currencies, The NZD has benefited most from the ‘risk-on’ tone that Europe and the US inherited from Japan and was the standout performer heading into the RBNZ decision. AUD gave back some of its Asia gains to be flat on 24 hours ago, while Sterling eased back after poor Industrial Production and Trade data. CAD lost ground despite BoC inaction.
This morning on the economic front we already had the release of French Industrial Production which came in very weak at -0.8% versus +0.2% expected. At 12.00 pm we have the latest Bank of England Rate decision and Asset Purchase announcement. Finally we have US Weekly Jobless Claims and Wholesale Inventories at 1.30 pm and 3.00 pm respectively.
September S&P 500
The S&P had one of its largest Key Day Reversals over the past few years yesterday as the market which had opened 20 Handles higher in Chicago from Tuesday’s close only to get slammed for 45 Handles with the main brunt of the down move coming after the latest Apple launch. As I mentioned countless times over the past few months the S&P does not like to leave an ‘Open Gap’ and especially when we have two large ‘Gap’s on consecutive trading days. Unfortunately I was too greedy with my 1992 sell level as I tried to be too clever with my sell range which I had changed three times before posting yesterday morning as the market hit 1991 after I posted. Subsequently the S&P traded lower to my 1968 buy level as I had expected that this ‘Open Gap’ from Tuesday would be filled. I covered this position at 1973 as I emailed all my Platinum Members to exit this long position ahead of the Apple launch and I am now flat. The S&P still has a ‘Gap’ left from last Friday’s close at 1918 to yesterday’s low at 1934. I do not know whether the ‘Gap’ will be filled ahead of next week’s FOMC Meeting. Today I will be a small buyer on any dip lower to 1934/1939 with a 1929 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1920 with a 1912 stop. Despite the huge Key Day Reversal yesterday I do not want to be short the S&P at this time.
EUR/USD
My long 1.1150 Euro position worked well yesterday as shortly after I posted I was able to T/P on this position at 1.1180. Overnight the Euro traded higher to my 1.1235 sell level. I am still short and today I will lower my stop on this position to 1.1270. I will also be a small buyer on any dip lower to 1.1130/1.1160 with a 1.1095 stop.
September Dollar Index
Unfortunately the Dollar just missed my 96.70 sell level by 2 points after I posted yesterday morning and I am still flat. Today I will lower my sell level slightly to 96.55/96.85 with a 97.10 stop.
September DAX
The DAX was nicely trading in my sell level yesterday when I was writing my commentary but unfortunately by the time that I posted the DAX started to get hit hard to the downside and I am still flat. Today I will be a small buyer on any further dip to 10080/10140 with a 10040 stop. Given the huge move lower yesterday I do not want to be short the DAX at this time.
September FTSE
The FTSE plan also worked well yesterday as the market was rallying as I posted yesterday morning which enabled me to go short at 6275. The FTSE was the slowest market to fall yesterday with the market eventually hitting my T/P level at 6240 as outlined earlier to my Platinum Members and I am now flat. Today I will lower my sell level to 6210/6250 with a 6275 stop. My only interest in buying the FTSE today is on a dip lower to 6070/6110 with a 6045 stop.
Dow Rolling Contract
While I was unlucky withy my S&P sell level yesterday, I had much better luck with the Dow which spiked higher to my 16690 sell level just after I posted yesterday morning. Unfortunately I covered this short position way too early at 16620 as outlined earlier to my Platinum Members and I am now flat. The volatility in the Dow has just been incredible over the past few weeks and I have no doubt that before we get through the September/October timeframe that we will at least re-test the 15250 low from August 24. Today I will be a small buyer on any dip lower to 16160/16220 with a 16110 stop. Despite the Dow also having a major Key Day Reversal yesterday I do not want to be short the market at this time.
September BUND
No change as I am still a small buyer on any dip lower to 153.70/154.10 with the same 153.45 stop which is just below the key support at 153.60.
Gold Rolling Contract
I am glad that I have moved my buy level in Gold lower over the past few days as Gold finally hit my 1107 buy level yesterday afternoon with an 1100 low print. I am still long and I will leave my stop the same at 1095. If I am stopped out of this trade I will be a more aggressive buyer in front of 1084 with a 1074 stop.
Silver Rolling Contract
Silver also traded lower to my 14.60 buy level yesterday afternoon. I am still long and today I will raise my stop on this position to 14.20.
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