There is a flurry of opinions, news-flow, chatter and speculation about the Fed this week, but at the end of the day, there isn’t much that is new to report for markets. This is likely to continue as we wait for the FOMC decision on Thursday evening. US markets were also affected by the two day Jewish Holiday with a lot of traders staying away from their desks. The AUD has been an outperformer, continuing the unwinding of the extended short positioning. This may continue into the Fed meeting, in the absence of an external shock.
For anybody following my new Platinum Service it made 195 points yesterday and is now ahead by 1900 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
I still see the AUD lower over time, but likely from a higher starting point. That tends to be the way when everyone gets so very negative, as it was last week. Equity markets were soft in general, and China saw the late afternoon pattern of: decline, support in the majors, then ending the day a little weak, but off the lows. This may weigh on regional sentiment this morning. Commodity prices were weaker and Bond Yields a little lower.
Two related stories caught my eye today, in a quiet news session. One, a Bloomberg story on the drying up in liquidity in the FX market during periods of market volatility. The other, from the Bank of International Settlements (BIS) regarding the drying up of Bond market liquidity in a period of higher volatility. Both discuss the widening of bid – ask spreads (the difference in price between buying and selling) as well as the lack of available assets to transact. This is an increasing theme in markets and one which has changed. The reports put it down to (in part) a decline in proprietary trading, lower risk taking in general by intermediaries which decreases the willingness of banks to act as intermediaries, and perhaps Central Bank buying (QE) which lowers the available stock (in bonds). Time will tell if this persists, but in periods of higher volatility, market moves can be exacerbated even further by this phenomena; something to keep in mind.
In other news, Australia changed its Prime Minister yesterday, with Malcolm Turnbull taking over from Tony Abbott. This has had no implications for markets so far.
Overnight the Bank of Japan left Interest Rates unchanged at its Monthly Meeting while the Nikkei closed flat on the day.
This morning on the economic front we have UK CPI at 9.30 am. This is followed by the very important German ZEW Survey at 10.00 am. At 1.30 pm we have US Retails Sales and Empire Manufacturing. Finally on a very busy day for economic data we have US Industrial Production and Business Inventories at 2.15 pm and 3.00 pm respectively.
September S&P 500
The S&P plan worked very well yesterday as shortly after the US Markets opened the S&P traded lower to my 1948 buy level before having a nice rally which enabled me to cover this position at my 1955 T/P level as outlined earlier to my Platinum Members and I am now flat. Yesterday was the smallest trading range for the S&P over the past few weeks due mainly to the Jewish Holiday and absence of news as we await the FOMC Meeting and Yellen press conference on Thursday. Today I will again look to buy the S&P on any dip lower to 1941/1947 with a 1935 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1925 with a 1915 stop which is just below last week’s still remaining ‘open Gap’. Given the fact that we have this FOMC Meeting on Thursday and the September Contract Expiration on Friday I still do not want to be short the S&P at this time.
EUR/USD
The Euro plan also worked well yesterday as shortly after lunch the Euro traded lower to my 1.1290 buy level. Subsequently the Euro had a nice rally to 1.1330 which enabled me to cover this position at my 1.1320 T/P as emailed earlier to my Platinum Members and I am now flat. The Euro has good support at 1.1250 and today I will be a small buyer on any dip lower to 1.1235/1.1265 with a 1.1215 stop. I will also lower my sell level to 1.1370/1.1410 with a 1.1440 stop.
December Dollar Index
I am still flat the Dollar as the market traded in a narrow range yesterday. Today I will raise my buy level to 94.60/95.00 with a 94.30 stop. I still do not want to be short the Dollar at this time.
September DAX
I was very unlucky with my DAX buy level yesterday as the DAX just missed my 10080 buy level by two points before having a nice 120 point rally and I am still flat. Today I will lower my buy level slightly especially with the ZEW Survey due after I post, to 10010/10060 with a 9960 stop. I still do not want to be short the DAX at this time.
September FTSE
The FTSE traded heavy for most of yesterday’s trading session with the market eventually hitting my 6095 buy level. I am still long and today I will lower my stop to 6045 to give this position some room. Despite the negative price action I do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 16220/16280 with the same 16180 stop. Even though I believe the Dow will trade lower over the coming weeks I do not want to be short this week especially with the Contract Expiration on Friday as I am hoping the market will rally further which will give me a better level to put on a more macro short position.
December BUND
The BUND plan also worked well yesterday as shortly after lunch the BUND rallied three times to my 155.50 sell level. Subsequently the BUND had a nice sell-off which enabled me to cover this position at my 155.20 T/P level and I am now flat. I still believe the upside is limited for the BUND especially given the amount of Funds who are trapped long above the market. For this reason I will again look to go short from 155.25/155.50 with a 155.75 stop.
Gold Rolling Contract
Gold rallied after I posted yesterday morning which enabled me to cover my long 1101 position at 1107.50 as outlined earlier to my Platinum Members and I am now flat. Today I will again be a buyer on any further dip lower to 1091/1099 with a 1085 stop.
Silver Rolling Contract
No change as I am still long at 14.40 with the same 14.10 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 13.90 with a 13.50 stop.
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