In the five days through this Monday, the AUD had been the best performing major currency, rallying by just shy of 4% against the US Dollar. In the 48 hours since then, it has been the worst performing, losing 1.3%. Having failed to capture the 0.74 handle either side of the weekend, it now sits back with a 0.72 Handle this morning. Yesterday’s local session promised much by way of event risk but in the end delivered little in terms of market price action. The main impact came from the weaker than expected China import data and which took the shine out of Equity markets after their strong start to October.
For anybody following my New Platinum Service it made 220 points yesterday and is now ahead by 560 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
Here, the spectacle of ‘double-dip deflation’ in the UK as CPI went back to -0.1% against the flat expected, and dovish comments from incoming (and unpronounceable) BoE MPC member Gertjan Vlieghje (who suggested the neutral policy rate might not be far from its current 0.5%) saw GBP hit quite hard. The Euro also took a hit after the ZEW survey of investment professionals showed a much bigger hit to both current conditions and sentiment than expected in a survey that captures the first impact of the VW emissions scandal.
The good news was that the US NFIB Small Business Optimism survey showed a small rise against expectations for a small fall, suggesting as yet no negative impact from weaker stock markets or the evident weakness in the Manufacturing sector. The survey’s sub-reading on ‘Net compensation plans’ rose to 16% from 13% – its highest level of the year and fully consistent with an uptick in wages in coming months – though is something many have been looking for – in vain – for a long time now.
US stocks closed weaker after a volatile trading session, and after Johnson & Johnson was the first major household name to report 3rd quarter earnings. Though J&J just beat its consensus street estimate for earnings ($1.49 vs. $1.45) this was on below-expectations revenue with the drug maker saying that currency effects had shaved more than 8% of its top-line revenues.
As for yesterday’s NAB’s September business survey, we saw an improvement in business confidence as the Government leadership uncertainties were resolved (+5 from +1) while financial market volatility and emerging market concerns also moderated from the August heights. Business conditions held steady at 9. Overall, the survey suggests a good degree of resilience in what appears to be a building a non-mining recovery.
In Commodities a rally in Oil prices off Monday’s lows has quickly petered out with both NYMEX and Brent crude both off more than 1%. This looks to have pulled Bond yields back down after an earlier up-tick in yields.
Overnight the weak close for US Stock markets has filtered through to Asia where the Nikkei closed down 1.9% at 17,891. This morning on the economic front we already had the release of French CPI for September which printed a very weak -0.4% although this was expected. At 9.30 am we have UK Unemployment and this is followed at 10.00 am by Euro-Zone Industrial Production. The US will release its latest Retail Sales and PPI at 1.30 pm. At 3.00 pm we have US Business Inventories. Finally at 7.00 pm the FED will release its Beige Book which will certainly be a market mover.
December S&P 500
The S&P plan worked well yesterday as shortly after the US Markets opened the S&P traded higher to my 2014 sell level before having a nice 22 Handle sell-off that was telegraphed by the weakening McClellan Oscillator which closed at +142 yesterday having been as high as +303 last Friday which was the highest reading this year. Unfortunately I emailed all my Platinum Members to cut this position at 2010 as we had such a good trading day yesterday I wanted to protect our profits and go flat. After the close last night the S&P got hit again on the weaker than expected earnings from JP Morgan which saw a big down turn in trading profits for the Third Quarter while interesting they stated that they have got off to a slow start this month. On the back of this Report I bought the S&P at 1991. I am still long and I will leave a tight 1986 stop on this position. It is now clear that the S&P has very strong resistance from 2010/2020 and I am very surprised by how strong the market has been since the release of the NFP on October 1. Today I will look to go short on any rally higher to 2001/2007 with a 2013 stop. A break and close back below 1985 will be short term bearish opening up the possibility of a move lower to close the outstanding ‘Open Gap’ from 1941/1960 from two weeks ago.
EUR/USD
The Euro traded in a very narrow range yesterday before breaking 1.14 earlier this morning. I am still flat and today I will raise my buy level slightly to 1.1340/1.1380 with a 1.1315 stop. I still do not want to be short the Euro as to me it is only a matter of time before we trade higher to the key resistance area from 1.18/1.20 as in my opinion there is not much chance of a US Rate Hike at this this stage.
December Dollar Index
I am still flat the Dollar and today I will lower my sell level to 95.00/95.30 with a 95.60 stop.
December DAX
Thankfully we had no buy level in the DAX yesterday morning as the market got hammered on the back of the awful ZEW Survey which followed the release of the much worse than expected Chinese Trade Data. I am still flat the DAX and today I will lower my sell level to 9980/10030 with a 10060 stop. There is massive overhead resistance in the DAX from 10400/10650 and it is going to take an awful lot of good news to push the DAX above this key resistance. No Central Bank wants a strong currency, while the stronger Euro will not help the DAX at this time. The DAX is still one of the few Indices to be still positive for 2015. The price action in the DAX is telling you not to be long the market.
December FTSE
The FTSE plan worked well yesterday as shortly before lunch the market traded lower to my 6280 buy level before having a nice rally which enabled me to cover this position at my 6310 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 further dip lower to 6170/6200 with a 6145 stop. I will also lower my sell level to 6310/6340 with a 6360 stop.
Dow Rolling Contract
The Dow is struggling to trade lower and is been helped by the weaker US Dollar. As we saw from Johnson &Johnson Earnings Report yesterday, one of the main reasons why their earnings have been so poor is the weaker Dollar. Given the price action in the Dow over the past few days and the fact that the Dow has outperformed both the S&P and the NASDAQ, I covered my 17080 short position from last Friday at 17050 yesterday and I am now flat. Today I will look to buy the Dow on any further mover lower to 16920/16970 with a 16870 stop. I do not want to be short the Dow at this time especially with the Options Expiration on Friday.
December BUND
The BUND plan also worked well yesterday. Shortly after I posted the BUND rallied over my 156.50 short position to a 156.71 high before having a nice sell-off which enabled me to cover this position at my 156.15 T/P level as again outlined earlier to my Platinum Members and I am now flat. This morning the BUND is rallying on the back of the weaker Equity markets and today I will again be a small seller on any rally higher to 156.90/157.30 with a 157.50 stop. I still do not want to be long the BUND at this time.
Gold Rolling Contract
Gold is finally trading above the key resistance level from 1150/1160. Unfortunately I covered my long 1161 position at my T/P level at 1166 as outlined earlier to my Platinum Members. However with Gold breaking 1170 this morning I have decided to buy Gold again in small size at 1171. I am still long and I will leave a tight 1160 stop on this position. If Gold can maintain this break there is plenty of scope for this market to move substantially higher.
Silver Rolling Contract
No change as I am still long at 15.88 with the same 15.40 stop.
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