Markets took their cue from Fed Chair Janet Yellen yesterday afternoon, testifying before the US House Financial Services Committee on Bank Regulation. In the Q&A session she confirmed that a Fed move in December is a “live” possibility, providing that the economic data hold up. This saw markets move to price in a high probability of a December move, increasing the chances from 50% up to 60% towards the end of New York session, the big Dollar appreciating as a result. She told the committee that “moving in a timely manner, if the data and the outlook justify move, is the prudent thing to do”.
For anybody following my new Platinum Service it lost 20 points yesterday. This service is now ahead by 115 points for November. The previous five months saw gains of 1600, 2833, 2195, 1810 and 3045 points respectively.
With US bond yields higher – the two-year up five basis points and the 10 up 2bps to 2.23% – stocks fell back somewhat, the Dow off 0.21% and S&P 500 down 0.33% into the close. Big dollar strength was broad-based, underperformers being the Oil currencies from lower Oil prices; the AUD is down 0.5% to 0.7151 and NZD down 0.95%.
US Dollar strength was given some impetus by a stronger than expected US ISM Non-Manufacturing report, up from 56.9 to 59.1, reflecting what could only be described as a vibrant US service sector, encompassing a near six point gain in the New Orders Index to 62 and the Employment component pushing up further from 58.3 to 59.2.
In other news yesterday China’s President Xi outlined a five-year growth plan to double GDP and per capita income by 2020, requiring six and half percent growth.
This morning on the economic front we have German Factory Orders at 7.00 am. At 9.10 the ECB will publish its latest Economic Bulletin. This is followed at 10.00 by Euro-Zone Retail Sales. At 12.00pm we have the Bank of England Rate decision and Asset Purchase Target. They will also release their latest Inflation Report at this time. Finally from the US we have the Challenger Jobs Cuts Announcement and the Weekly Jobless Claims at 12.30 pm and 1.30 pm respectively.
There is lots more on for Central Banks this morning with the BoJ publishing the Minutes of its October 6-7 meeting, followed this afternoon by Fed Vice-Chair Fisher’s to the national economists club in Washington, surely with even more in the way of wire service coverage on the economy and monetary policy. Later today the Fed’s Dudley, Tarulio and Lockhart will all speak at different venues in Europe and the US.
And if these speakers are not enough we have ECB President Dragi also speaking later this morning, where at least he should be happier given the lower Euro over the past 48 hours.
December S&P 500
The S&P plan worked well yesterday as the market initially traded lower to my 2095 buy level with a 2092 low before having a nice rally to 2102. At the time that the S&P entered my buy level I already had five open positions and therefore I emailed all my Platinum Members that I was cutting my long S&P position at 2099.50 and I am now flat. With the key Non-Farm Payrolls due tomorrow and the fact that Fed Chair Yellen again mentioned the Jobs Numbers in her Testimony to the Bank Regulation tomorrow is going to be a big day for the markets going forward. The fact that we have NFP tomorrow I cannot see the S&P falling too much more ahead of this data and for that reason I will be a buyer today on any dip lower to 2086/2091 with a 2082 stop. Given the importance of tomorrow’s data I do not want to be short the market today.
EUR/USD
The Euro plan did not work out yesterday as shortly after Yellen spoke the US Dollar rallied which saw me go long the Euro at 1.0920 before unfortunately very quickly stopping me out of this position at 1.0875 and I am now flat. Today I will again look to buy the Euro on any further dip lower to 1.0800/1.0830 with a 1.0770 stop. Remember the 1.08/1.0830 is key support and technically if this level is taken out it should be bearish for the Euro. Of course later this morning ECB President Dragi is due to speak and it be interesting to see what his latest comments on QE are about. No doubt we are in for a volatile trading session for the Euro today.
December Dollar Index
Thankfully I lowered my stop on my short 97.55 Dollar position from Tuesday which was stopped out yesterday afternoon at 97.90 following Fed Chair Yellen’s Q&A to the Banking Regulation and I am now flat. The Dollar again stopped at the key 98.10/98.40 major resistance level. Given how strong this resistance is I will be a small seller on any rally higher to 98.35/98.65 with a tight 98.80 stop. I still do not want to be long the Dollar at this time.
December FTSE
Shortly after I posted the FTSE traded higher to 6437 which thankfully missed my 6440 stop before having a nice sell-off which enabled me to cover this position at my 6385 T/P level and I am now flat. Today I will again look to go short on any spike higher to 6430/6460 with a 6480 stop. I still do not want to be long the FTSE at this time.
December DAX
The DAX having opened strongly yesterday morning, surprisingly sold off when you consider how weak the EUR/USD is trading. Eventually the market hit my 10850 buy level. I am still long and today I will leave my stop the same at 10795. If I am stopped out of this position I will be a more aggressive buyer from 10695/10745 with a 10650 stop. I still do not want to be short the DAX at this time.
Dow Rolling Contract
Unfortunately I tried to be too clever in getting a short Dow position on board as the market fell short of my 17995 sell level by 19 points before having a 130 point sell-off and I am still flat. I still believe this market is way overvalued especially when you consider how strong the US Dollar is trading. Where I am in Florida the property market has literally come to a standstill over the past four months, which is surprising when you consider that the Dow is only 4% from record highs. The internals of the market remain weak and this what makes tomorrow’s NFP data and especially and revisions so important. Today I will lower my sell level slightly to 17950/18010 with an 18060 stop. I still do not want to be long the Dow at this stage.
December BUND
No change as I am still a seller on any rally higher to 157.10/157.40 with a tight 157.70 stop. I still do not want to be long the BUND at this time despite what Dragi may say later this morning.
Gold Rolling Contract
When I woke up this morning I was already had five positions on board which is too many and thankfully I emailed my Platinum Members to exit their 1120 Gold long position for a small loss at 1119 and I am now flat. Incredibly Gold is now $80 lower since last Wednesday as yet again the Hedge Fund Community get cleaned out in Gold. This huge move lower has seen Gold close down 10 of the last 11 trading sessions and is trading at the bottom of its Williams Index and outside the bottom of its Bollinger Band. For these reasons I will look to buy Gold today from 1099/1106 with a 1093 stop. Gold has key support at the 1070/1085 area and I just cannot see Gold breaking this key support any time soon.
Silver Rolling Contract
No change as I am still long in small size at 15.60 with the same 14.95 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 14.80 with a 14.40 stop.
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