With just over a month to go until the Sep 18 FOMC meeting announcement, Fed speakers remain right under the spotlight. Yesterday we heard from two, Denis Lockhart, Atlanta Fed President and voter and Stanley Fischer, no 2 at the Fed each with their own perspective. No surprise that Lockhart followed up last week’s pro-September lift-off comments with more of the same. While he said there is no “foreordained date for lift-off” and that it would be dictated by incoming data, he said the point of rate lift-off is “close” and that he’s “very disposed” to September.
For anybody following my new Platinum Service it made 270 points yesterday and is now ahead by 600 points for August. The previous two months showed a gain of 1810 and 3045 points respectively. If anybody is interested in this new service, please email me on bryan@tradernoble.com for details.
Meanwhile, interviewed on Bloomberg TV, Stanley Fischer, Vice-Chair of the Fed was more circumspect. He recognised that the economy has nearly reached full employment (the labour market is nearing its sweet spot), but that temporary factors are holding down inflation – low energy and commodity prices together with the strong Dollar – and still a concern. They are near to full employment, but with very low inflation. The problem is not with the employment part in the (Fed’s) mandate, that’s doing fine, it’s with the inflation part, Fischer said. And so stand the two comments next to each other and that’s pretty much how the market is pricing the odds of Sep lift-off, 50/50. For the Treasury market yesterday, there was a modest front end rally after Fischer’s comments, only to give back some of those gains as Lockhart’s comments hit the wires.
The US Dollar lost some traction through the course of the day, irrespective of the Fischer/Lockhart views, with O-il currencies making up some ground as Oil bounced at the start of the week, Brent crude up $1.63/bbl to $50.24, benefiting the likes of the CAD (+1.18%), the NOK (+0.77%) and the RUB (+2.27%). Euro (+0.80%) and sterling (+0.75%) also recovered some ground, with the AUD regaining a 74 handle after testing through the day down toward 0.7350.
Spot Iron Ore prices were down 0.67% yesterday to $56.40/t for cif Qingdao 62% fines, but Dalian futures rose 1.22% and Chinese steel rebar futures also rose, +0.88%. Base metals rose strongly, Copper up 2.63% and Nickel by 3.24%, adding some underlying support for the Aussie ahead of the NAB Survey today. Yesterday’s economic data was inconsequential: the US composite Labour Market Conditions Index showing further incremental improvement in July and the EC Sentix Investor Confidence Survey steady in August. Nothing to see there.
Markets are opening softer this morning after the Chinese Central Bank ( PBoC) announced that a 1.9% devaluation of the Yuan which is the biggest move in over 20 years. The PBoC said it was a one- time announcement and it would strengthen the market’s ability to determine the Reference Rate. The PBoC also said that a strong Yuan is putting pressure on exports and cited a high effective exchange rate as a factor behind the devaluation.
This morning on the economic front we have the German and Euro-Zone ZEW Survey which are both due to be released at 10.00 am. This is followed at 11.00 am by the US NFIB Small Business Optimism. At 1.30 pm we have US Non-Farm Productivity and Unit Labour Costs. Finally at 3.00 pm we have Wholesale Inventories.
September S&P 500
It took a while but my S&P plan finally worked out yesterday with the S&P having a nice drop overnight on the Yuan Devaluation which has enabled me to cover my 2095 short position taken late yesterday at 2090 and I am now flat. The large 30 Handle move in the S&P has left another ‘Open Gap’ from last Friday’s close at 2072 to yesterday’s open at 2085 and I would expect this ‘Open Gap’ to be filled over the coming days. There is no doubt the 1000 point drop that we have witnessed in the Dow over the past two months has certainly got the media’s attention and after 7 straight down trading sessions the market was due a large bounce. Today I will look to buy the S&P on any further dip to 2080/2085 with a 2076 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2072 with a 2067 stop. Given the large down move this morning I do not want to be short the S&P at this time.
EUR/USD
I was very unlucky with my Euro call yesterday as the market just missed my 1.0920 buy level by 5 points before going on to have a nice 115 point rally to 1.1040 and I am still flat. The Euro is opening weaker this morning on the back of the weaker Yuan and today I will again look to buy the market on any further dip to 1.0920/1.0960 with a 1.0895 stop. I still do not want to be short the Euro at this time.
September Dollar Index
My Dollar plan worked well yesterday as the Dollar had a nice rally before lunch which enabled me to go short at my 98.00 sell level before having a nice rally. Unfortunately I covered this position too early at 97.70 and I am now flat. Today I will again look to go short on any rally higher to 98.00/98.30 with a 98.60 stop.
September DAX
Finally I got some luck with my DAX call yesterday as just as I posted the DAX started to get hard to the downside which enabled me to my buy the market near the bottom of my buy range at 11470. The market subsequently made a low at 11420 before going on to have a 200 point rally which enabled me to cover this long position at 11550 as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small buyer on any dip lower to 11430/11490 with an 11390 stop.
September FTSE
Unfortunately by the time I posted yesterday the FTSE was already trading through my buy level and stop and I am still flat. Despite the FTSE having a weak trading session yesterday I will still be a small buyer on any dip lower to 6620/6650 with a 6610 stop which is just below yesterday’s low print.
Dow Rolling Contract
The Dow plan also worked well yesterday as shortly after I posted the Dow traded lower to my 17370 buy level before going on to have a nice 250 point rally which was expected after the seven straight down trading sessions over the past 10 days. Unfortunately I covered my long position way too early at 17430 and I am still flat. I do not believe the Yuan devaluation overnight is a problem for the US stock markets and I would expect these markets to close their ‘down gaps’ when the US Markets open later. Today I will look to buy the Dow on any move lower to 17450/17510 with a tight 11420 stop. Despite the number of confirmed Hindenburg Omen’s registered on the clock I do not want to be short the Dow at this time.
September BUND
The BUND just missed my 153.75 buy level by 10 points yesterday before opening higher this morning and I am still flat. Today I will move my buy level higher to 153.65/153.95 with a tight 153.45 stop.
Gold Rolling Contract
Unfortunately Gold just missed my 1088 buy level by $2 before having a nice $20 rally and I am still flat. It is incredible to think that Mining Stocks are down nearly 90% from their 2011 high and is one of the reasons why I believe that Gold is at or very near a long-term bottom. Today I will raise my buy level to 1089/1096 with a 1084 stop.
Silver Rolling Contract
My long 14.90 Silver position taken yesterday morning worked very well as Silver had a nice rally which enabled me to cover this position at 15.40 as outlined earlier to my Platinum Members and I am now flat. With Silver opening lower this morning I have decided to buy this market here at 15.17. I will leave a 14.80 stop on this position.
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