Back to our day jobs, with a reprieve on being political or equity analysts, we can return to the Global Economy. Markets also chose to ignore the after-party cleaning up in Greece, to focus on central bank speak – both actual and what is to come. That left equity markets modestly higher yesterday, Bond Yields lower, Oil prices higher and a modestly lower US Dollar. GBP outperformed and AUD was higher. The US data was surprisingly soft yesterday, with Retail Sales dropping unexpectedly, as did the NFIB small business optimism survey.
For anybody following my New Platinum Service it made 150 points yesterday after a 48 point gain on Monday and is now up over 950 points for July. Last Month it made 3045 points.
Excuses given are the drop in equities and the rise in gasoline prices, but more evidence is needed for a trend. It did depress yields though. More focus on Yellen later today. The UK information was more interesting, in that BoE Governor Carney, yet again, chose to remind markets that Interest Rate hikes are closer than they think. GBP focussed on that part of the speech, rather than the bit which said that the hiking cycle would be limited, gradual and that the peak would be far lower than historical levels. The lower than expected CPI print was also taken in its stride. Core inflation now sits at 0.8%yoy, from 0.9%yoy.
The news from Europe was, unsurprisingly, negative: the weight of all the negative news and uncertainty did not help the ZEW sentiment survey. It fell to 42.7 from 53.7. The German’s were not quite as concerned, with the German ZEW actually rising: 63.9 (60E, 62.9P). European industrial production was quite soft. Just note that there are still events unfolding in Greece and across the Euro area, as the agreement has to be voted on by Greece (today) and the various governments. That may generate some news flow. Australia’s NAB business survey was released yesterday and proved to be a support for the AUD. Business conditions rose to +11, from 7 and confidence also rose.
This morning on the economic front we have UK Unemployment and Average Earnings at 9.30 am. This is followed at 2.15 pm by US Industrial Production. The key event is Fed Chair Yellen’s semi-annual testimony to the US legislature (formerly known as the Humphrey Hawkins). Given she spoke last Friday and noted that the Fed were looking to raise interest rates this year (which could be delayed or accelerated depending on the data), despite the fact that parts of the labour market were not improving as hoped and that they had yet to achieve their inflation goals. A change from this theme is not expected, but any deviation would move the US Dollar. A more positive outlook would be the greater market mover (and a lower probability). The Fed’s Williams and George also speak later this evening. Finally at 7.00 pm the Fed will release its Beige Book.
September S&P 500
After the fireworks of the previous three weeks markets traded in a very narrow range as we await the Greek vote on whether to accept the terms and conditions from her EU partners. Shortly before the close the S&P traded higher to my 2103 sell level. I am still short and I will leave my stop the same at 2109 on this position. Remember we still have a huge ‘Open Gap’ below the market from last Friday’s close at 2070 to yesterday afternoon US day low at 2086 and if we get any negative vibes out of Greece this ‘Open Gap’ could get at least partially filled. Today I will raise my buy level slightly to 2073/2078 with a 2067 stop.
EUR/USD
The Euro just missed my 1.0950 buy level with a 1.0965 low shortly after the European Markets opened yesterday morning before trading as high as 1.1085 on the much weaker US Retail Sales Numbers, only to traded back down to 1.10 ahead of the New York close and I am still flat. There is no doubt in my opinion that the World Economies are slowing and that it is only a matter of time before the US Dollar starts to weaken again. Today I will raise my buy level slightly to 1.0940/1.0970 with a 1.0910 stop. I still do not want to be short the Euro at this time.
September Dollar Index
My short 96.90 Dollar position from Monday worked out well yesterday as shortly after lunch the Dollar sold off which enabled me to cover this position at 96.50 as outlined earlier to my Platinum Members and I am now flat. Today I will again look to go short on any rally higher to 97.10/97.40 with a 97.70 stop.
September DAX
The DAX plan also worked very well as just before the New`York close the DAX rallied to my 11550 sell level.As I am already short both the S&P and the Dow in small size I decided to cover this position at 11510 and I am now flat. Today I will again be a small seller on any further rally to 11610/11670 with a 11720 stop. I still do not want to be long the DAX at this time as the risk reward has now shifted to the downside in the event that Greece votes not to accept the EU package.
September FTSE
I am still flat the FTSE and today I will also raise my sell level slightly to 6740/6770 with a 6795 stop. Given how weak the FTSE is trading in comparison to the other major markets I still do not want to be long the market at this time.
Dow Rolling Contract
Just like the S&P above the Dow also traded in a very narrow range yesterday with the market eventually hitting my 18065 sell level shortly before the close. I am still short and I will leave my stop the same at 18120. If I am stopped out of this position I will be a more aggressive seller in front of 18160 with an 18210 stop.
September BUND
The BUND plan worked very well yesterday as shortly after the market opened the BUND traded higher to my 151.60 sell level before having a nice sell-off before lunch which enabled me to cover this position at 151.00 as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small seller on any further rally to 151.90/152.30 with a 152.55 stop. With so many Hedge and Pension Funds trapped long above the market I do not want to long the BUND at this time.
Gold Rolling Contract
No change as I am still a small buyer on any dip to 1138/1146 with the same 1129 stop.
Silver Rolling Contract
I am still flat Silver which continues to trade in a narrow range. Given how weak the price action in Silver yesterday I am going to lower my buy level slightly to 14.70/15.10 with a 14.40 stop which is just below the 2015 low of 14.49 which was made last January.
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