Though there isn’t too much to say about yesterday’s markets as apart from the brief flurry in trading following the release earlier in the morning of the Chinese data, it was a very subdued 24 hours of trading as we await the key ECB Rate announcement on possible enhanced QE on Thursday.
For anybody following my new Platinum Service it made 20 points yesterday and is now ahead by 1002 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
US stocks recovered in the last two hours of trading, having been weaker during the European afternoon/New York morning. Here, a 7% fall in Morgan Stanley’s stock after the investment bank missed both its earnings and revenue estimate was compounded by falls in the basic materials sector off the back off fresh falls in commodity prices led by Oil. WTI crude is off $1.18 and Brent -$1.75, alongside which copper and aluminium are both 1.5% lower and Iron ore – $1.38 or 2.5%.
Yesterday’s US data in the form of the NAHB Housing Market Index (strong) gave a small lift to US Treasury Yields and lifted the US Dollar. The narrow DXY dollar index is about 0.5% higher while 10 year Treasury yields, having rallied from 2.02% to 2.05% after the data, have since traded back to 2.03%, little changed on the day. While markets yesterday appeared to take China’s 6.9% Q3 GDP print at face value and largely ignored the September activity readings, this was not the case following the opening of the European Markets as the further slowdown in Industrial Output and Fixed Asset Investment – both of which came in weaker than expected – look to have resonated much more. I had thought yesterday that these should be the more influential numbers; even if the strength of retail; sales and indications form the National Bureau of Statistics that broader service sector growth had accelerated in Q3 meant that the 6.9% GDP prints wasn’t completely unbelievable. Last night, one China economist that I follow lowered his overall growth forecast for 2015 to 6.9% from 7.1% previously, and 2016 to 6.7% from 6.9%.
Weaker Commodity prices look to have had a hand in pulling AUD/USD back down to where it was just in front of the China data at around 0.7250, having traded briefly back on a 0.73 handle during the European afternoon. The NZD has also eased back, off 0.3% so far this week, while the Canadian Dollar has underperformed both (-0.9%) as we await the result of Monday’s Canadian general election and where an indecisive outcome (hung parliament) was looking like the most likely outcome based on pre-plebiscite opinion polls. Plus of course the latest drop in Oil prices.
A final thing to note overnight is that the yield on US Treasury Bills maturing on November 12 has risen from 0.0325% to 0.0625%. These are the first Treasury Bills maturing after the latest estimates for when the US Treasury will exhaust the use of special accounting measures that is keeping the Government operating within the current debt ceiling.
Wall Street Journalist Hilsenrath was quoted overnight that the Debt Ceiling Debate is another reason the Fed will wait before hiking interest rates.
This morning on the economic front we have the Euro-Zone Current Account at 9.00. This is followed at 10.00 am by Bank of England Governor and MPC Member Bailey speaking at the Treasury Committee and these speeches will be worth watching. At 10.45 am BoE Member McCafferty will speak on Monetary Policy at a conference in London. Finally at 1.30 pm we have US Housing Starts and Building Permits. This afternoon Fed Chair Janet Yellen is speaking along with Dudley and Powell at a market conference in New York. These comments will be closely watched by the markets ahead of next week’s FOMC Meeting.
December S&P 500
The S&P just missed my 2013 buy level with a 2014.50 low before rallying strongly into the close and I am still flat. It is obvious that the market is thinking if we get through October without another down draft for the stock market then we are plain sailing from November to April. However with the Debt Ceiling raising its head again we could be in for a rocky few weeks. Interestingly the margin debt levels are now much higher than they were before the 2007 crash. Today I will raise my buy level to 2011/2017 with a 2006 stop. I will also raise my sell level slightly to 2039/2045 with a 2051 stop. I still believe the market will have difficulty in breaking the huge resistance at 2035/2050 area without a meaningful decline first.
EUR/USD
The Euro plan worked well as shortly after 10.00 am the Euro traded lower to my 1.1310 buy level. Subsequently I emailed all my Platinum Members to exit their position at 1.1330 as there is a fair chance the Euro is going to try and trade lower ahead of the ECB and Dragi press conference on Thursday. However whatever low the Euro manages post the Dragi press conference, we could see a nice rally into the next main event namely the FOMC Meeting next Wednesday as I believe there is no chance of a Fed Rate rise. Remember no Central Bank wants a strong currency at this time. Today I will lower my buy level to 1.1250/1.1280 with a 1.1225 stop.
December Dollar Index
No change as I am still a seller on any rally higher to 95.30/95.60 with a 95.80 stop. I will also be an aggressive buyer on any dip over the next few days to 93.60/93.90 with a 93.30 stop. Remember we need to break and close below 92.62 to see the Dollar accelerate to the downside.
December DAX
Both my buy and sell levels came close to getting executed after I posted yesterday and I am still flat. Today I will raise my buy level slightly to 10030/10080 with a 9980 stop. I will also raise my sell level slightly to 10270/10320 with a 10350 stop.
December FTSE
The FTSE had a bad trading session yesterday after the Mining Stocks came under pressure after last week’s gains. Thankfully I had no buy level in place and I am still flat. Today I will lower my sell level to 6360/6390 with a 6420 stop. I still do not want to be long the FTSE at this stage.
Dow Rolling Contract
Yesterday afternoon the Dow rallied but unfortunately just missed my 17250 sell level before selling off and I am still flat. Today I will raise my sell level slightly to 17280/17330 with a 17370 stop. I really believe the 17250/17350 area should act a strong resistance as this is the 62% of the whole move down from mid-Summer. Given how much the market has rallied since the Payroll data on October 2nd I do not want to be long the Dow at this time.
December BUND
No change as I am still a buyer on any dip lower to 156.00/156.30 with the same 155.70 stop. Remember if the market spikes higher over the coming days/weeks I will be a very aggressive seller from 158.70.159.20 with a 159.50 stop.
Gold Rolling Contract
I am still flat Gold since we twice took profit at the 1185 level last week. Today I will continue to look to buy the market on any dip lower to 1157/1164 with a 1152 stop. The 1150/1160 should be good support for Gold, but a break and close below 1150 could be very bearish.
Silver Rolling Contract
No change as I am still long at 15.95 from last week with the same 15.60 stop. If I am stopped out of this position I will be a more aggressive buyer on any further dip to 15.30 with a 14.80 stop.
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