Not a massive 24 hours for price action on the currency markets, but what we did see was signs of a little further strength in the USD. Dennis Lockhart, Atlanta Fed President and voter in 2016 (not this year) suggested the Fed’s delay from tightening at the Sept meeting was mostly influenced by market volatility. However, “as things settle down” and with the US economy ready for policy normalisation, he will be ready for the first hike on the path to a more “normal interest rate environment”. He is still expecting this by year-end, noting that the September FOMC was a “close call”. Lockhart said that October is “live” (he reminded that the Fed could do a press conference then, even though none is formally scheduled) and that a thin market at year-end is not an obstacle to a December move. US data on existing home sales undershot expectations but as expected had no market reaction.
For anybody following my new Platinum Service it made 120 points yesterday and is now ahead by 2435 points for September. The previous three months saw gains of 2195, 1810 and 3045 points respectively.
In contrast, and no doubt with one eye on the single currency, ECB Chief Economist Peter Praet admitted he was a “little bit worried” about the recent spike in market volatility but reiterated that if the ECB’s objectives were at risk they will do “what is necessary”, ready to “forcefully act” if their inflation mandate was seen as at risk. Both more fuel under the fire fuelling the USD. With a somewhat firmer USD, the AUD has been caught in the crossfire, the AUD trading toward the lower levels of earlier last week at 0.7130 this morning. Spot iron ore fell 0.68% ($57.30/t) while copper was up 0.29%; oil rose, Brent up 2.55%.
BoC Governor Stephen Poloz has also been speaking last night with some balanced views on the Canadian economy, noting that the Canadian dollar is mitigating the oil shock damage. The Canadian dollar has been weaker overnight, notwithstanding a push back up in global Oil prices.
BoE Governor Mark Carney has also been speaking, but on Financial Market reform. Deputy Governor Cunliffe did a press interview saying that the next move for the BoE is up but hosing that down by noting disinflationary pressures from abroad and seeing no signs of building price pressure, noting rate increases to be limited and gradual. The GBP is little changed.
This morning on the economic front we already had the release of the China Leading Index which printed 1.0% for August versus 0.9% expected, while France’s Finance Minister has already been on the wires saying that China’s recent stock market fall is not a threat to the Global economy. At 8.30 am the ECB’s Nuoy is speaking and she is the Chair of the ECB’s Supervisory Council, so the market might well be looking for a renewed push from her on the need for uniform prudential supervision across Euro economies. This comes in the light of recent comments that Germany is looking to strengthen its own legislation to go its own way, the German Finance Ministry barely giving lip services to ECB claims for cross border prudential alignment and authority, according to wire reports.
At 11.00 am we have UK CBI Trends Total Orders. This is followed by US FHFA House Price Index at 2.00 pm. Finally at 3.00 pm we have Euro-Zone Consumer Confidence and the Richmond Fed Manufacturing Index.
December S&P 500
The S&P plan worked very well yesterday as the market as expected closed some of last Thursday’s ‘Open Gap’ from 1967/1975 by hitting a high of 1969.50 which enabled me to go short at 1964 before the market had a nice 18 Handle sell-off which enabled me to T/P at 1957 on this position as outlined earlier to my Platinum Members and I am now flat. Given the fact that we still did not close the whole ‘Gap’, today I will again look to go short on any move higher to 1971/1977 with a 1982 stop. The S&P should have strong resistance at the 1980 level and I would expect the market having difficulty in breaking and closing over this now key pivot point. Given the risks involved I do not want to be long the S&P at this time unless the market decides to close the large ‘open Gap’ from two weeks ago at 1909/1923 where I will be a buyer from 1910/1916 with a 1905 stop.
Thankfully I am only trading the Euro in small size as this market is very difficult to get an edge in at this time given the cross currents running between Europe and the US. Yesterday saw the Euro again trade lower as the market followed through on the downside on the back of last Friday’s Key Day Reversal. Unfortunately my Euro plan did not work well yesterday as after buying the Euro in small size at 1.1255 I was very quickly stopped out of this position at 1.1215 again emphasizing how important it is to have stops in the market. I am still flat the Euro and today I will again try to buy the market on any further dip lower to 1.1095/1.1135 with a tight 1.1075 stop. Despite the negative price action I do not want to be short the Euro at this time.
December Dollar Index
Shortly after I posted yesterday morning I was stopped out of my 95.15 short position for a small loss at 95.45. Subsequently the Dollar rallied hard to my second sell level at 96.00. I am still short and I will leave my stop the same at a tight 96.30 on this position.
Just as I posted yesterday morning the DAX was getting hit hard to the down side but unfortunately the market stopped three points shy of my 9780 buy level before going on to have a 230 point rally which is extremely frustrating and I am still flat. The price action after the initial sell-off in the DAX was very impressive and was probably helped by the weaker EUR/USD. Today I will move my buy level higher to 9830/9890 with a 9780 stop. I still do not want to be short the DAX at this time.
The FTSE continues to trade the weakest of the major Indices which is a warning for the next leg down in World stock markets as the FTSE had been the leader to the downside all year. Yesterday the FTSE again just missed my 6150 sell level shortly after I posted and I am still flat. Today I will lower my sell level to 6120/6150 with a 6180 stop. My only interest in buying the FTSE is on a dip lower to 5980/6020 with a 5955 stop.
Dow Rolling Contract
The Dow plan worked well yesterday as shortly after I posted the Dow rallied to my 16525 sell level before having a nice sell-off which enabled me to cover this position at 16495. Subsequently the Dow rallied again to my second sell level as indicated to my Platinum Members at 16560 before again selling off to my 16495 T/P level and I am now flat. Last week was a Key Week Reversal to the downside for both the S&P and the Dow which in itself is an extremely rare event. There is no doubt these markets are heading lower but the problem with Bear Markets is the rallies can be sharp and violent as they try to stop out most traders out of their short positions. Today I will again try to go short on any rally higher to 16560/16620 with a 16680 stop. I still do not want to be long the Dow at this time as in my opinion it is only a matter of time before we retest the August 24 lows at 15250.
No change as I am still a small seller on any further rally to 155.50/155.80 with a 156.05 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1122/1130 with the same 1115 stop.
Silver Rolling Contract
No change as I am still long at 15.10 with the same 14.80 stop.