The past 24 hours was on of consolidation for markets with inconsequential data not pushing markets one way or the other. The OECD joined other forecasters revising down its global growth forecasts for the second time in three months, while Fed President Rosengren was also singing to the same December lift-off tune. The AUD has been range bound against a marginally softer USD, while the Euro is touch weaker as Portuguese politics sees their Bonds trade higher in yield, and more so relative to most other Eurozone counterparts (Spanish yields ticked slightly higher.)
For anybody following my new Platinum Service it made 25 points yesterday and is now ahead by 345 points for November. The previous five months saw gains 1600, 2833, 2195, 1810 and 3045 points respectively.
In its half yearly Economic Outlook released yesterday, the OECD forecasts the World economy to grow 2.9% this year and 3.3% next, revised down from 3.0/3.6% in September on Emerging Market weakness, Russia and Brazil in recession and China soft. For Australia, the OECD predicts 2.2% growth this year, picking up 2.6% in 2016 and 3% in 2015.
“All future committee meetings – including December’s – could be an appropriate time for raising rates, as long as the economy continues to improve as expected”. So said Boston Fed President Eric Rosengren yesterday afternoon, sticking with the pack in signalling that a December rate hike is “live”. While Rosengren has been one of the more dovish FOMC members, he’s been signalling a preference for a hike by year-end for some time. In his speech he cited the better-than-expected October US Employment Report and retail spending as offsets to export market weakness. He repeated his preference for gradual rises.
Portugal is threatening to flare up as a EUR issue. A month ago in the General Election, the main Socialist Opposition Party won the most seats but under the Constitution was controversially denied the opportunity to form a Government by the President. Yesterday, the four main Socialist parties agreed to form a coalition to unite against austerity. 10 year bonds have risen 15bp to a four month high of 2.83%. The Euro is a touch weaker against a somewhat softer USD.
The result of these news events saw European Equities close lower by 1/1.5% while the Dow finished 205 points lower having earlier been down 300 points before mounting a small rally in the last hour of trading.
This morning on the economic front we have no economic data of not due from the UK or the US. However the ECB’s Nuoy and Couere are both due to speak at 8.15 am and 11.15 am in Frankfurt and Berlin respectively. These speeches could both be interesting and a Euro mover at the same time. At 11.00 am we have the NFIB Small Business Optimism. This is followed at 1.30 pm by the Import Price Index. Finally at 3.00 pm we have Wholesale Inventories.
December S&P 500
The S&P fell 30 Handles soon after the US Markets opened before having a 10 Handle rally late in the trading session. The move lower led me to buying the market at an average of 2085 before very quickly stopping me out of this position at 2077. Subsequently I emailed all my Platinum Members that the 2060/2065 was the next big support for the S&P before the market had its late rally and I am now flat. Today I will be a small buyer from 2063/2068 with a 2058 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2044/2050 with a 2039 stop. Normally when the Fed starts to hike Interest Rates, initially the stock market’s rally which is making me reluctant to chase this market lower. Plus we are now in the seasonally strong time of the year which is also making me hesitant to sell the market, despite my reservations that this market is grossly overvalued as mentioned in yesterday’s commentary.
EUR/USD
My long 1.0715 Euro position worked well as shortly after I posted the Euro traded higher to 1.0790 which enabled me to cover my long position at 1.0765 as outlined earlier to my Platinum Members and I am now flat. I still believe that if the Fed hike Rates next month it will only be a token and I do not see a series of rate hikes over the coming 12 months as I do not believe the US Economy can withstand a normal Interest Rate Policy at close to 4/5% which prevailed before the zero interest rate policy was adapted back in 2008. Today I will again look to buy the Euro on any dip lower to 1.0670/1.0710 with a 1.0640 stop. I still do not want to be short the Euro at this time.
December Dollar Index
No change from yesterday as I am still a buyer on any dip lower to 98.20/98.50 with the same 97.90 stop. My only interest in selling the Dollar at this time is still on a rally higher to 99.70/100.10 with a 100.30 stop.
December DAX
As I was already long the S&P I waited until the DAX traded lower to my 10890 buy level before buying the market. Subsequently the DAX traded lower with the market eventually hitting my 10840 stop level and I am now flat. I was disappointed with the price action in the DAX especially late in the day when the US Stock Markets started to rally that the DAX failed to participate, which may be a warning sign going forward. Obviously the news out of Portugal is effecting the DAX. Today my only interest in buying the market is on a dip lower to 10620/10670 with a 10570 stop. Otherwise I will stay flat and observe the price action.
December FTSE
The FTSE continues as expected to lead the major Stock Markets lower. Obviously the weak Gold price is effecting the Mining Stocks and this component is certainly weighing on the FTSE. I am still flat the market and today I will lower my sell level to 6350/6380 with a 6405 stop. As I mentioned in yesterday’s commentary it is going to take a lot of positive news/developments for the market to break the key 6400/6450 strong resistance level.
Dow Rolling Contract
Shortly after I posted early yesterday morning the Dow came within 50 points of my 17980 sell level before falling 300 points and I am still flat. With 50% of the American workforce earning less than $36,000 per year, it is very hard to make a compelling story to be long stock markets coupled with the incredible fact that 46 million Americans are in receipt of food stamps. These two pieces of information tell me that it is only a matter of time before the US goes back into recession, with the catalyst coming from the Fed starting to Hike Interest Rates. However it is so hard to be short the stock markets given all the manipulation that is been played out by the Central Banks over the past 10 years. Today I will lower my sell level to 17820/17880 with a 17930 stop.
December BUND
My long 155.15 BUND position finally worked out yesterday as soon after the equity markets got hit the BUND rallied which enabled me to cover my position at my 155.50 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 154.80/155.10 with a 154.65 stop. I still do not want to be short the BUND at this time.
Gold Rolling Contract
I am still flat Gold having covered my long 1086 position from last Friday early yesterday morning at 1093. Today I will again look to buy the market on any dip lower to 1079/1086 with a 1073 stop. Gold is very oversold on a Daily and Weekly basis having fallen over $100 since the FOMC Meeting in late October.
Silver Rolling Contract
No change as I am still long at 14.75 with the same 14.35 stop.
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