The last 24 hours have resulted in further concern for the global economy after poor data were released in Germany, Europe, the UK and the US. In Europe the German ZEW Survey fell from 25.4 to 3.2 in October and is now at its lowest level since June 2010. The expectations component also fell from 6.9 to -3.6,its first negative reading since November 2012. The German Economy is loosing traction very quickly and there is a real prospect that it could contract again in Q3 after the 0.2% fall in Q2. Indeed the German Government revised down its growth forecasts and now expects 1.2% growth this year versus 1.8% in April and 1.3% growth in 2015 from 2.0%.
Other data in Europe saw industrial Production fall 1.8% in October while the annual pace of Inflation in Sweden and Spain remains negative. The Euro fell from 1.2700 to 1.2640 after the data while the German Bund Yield fell 6bps to just 0.84% which is a new record low. UK Inflation was also soft with a flat outcome in September and the annual pace slowing to a 5-year low of 1.2% from 1.5%. With Bank of England Rate hike expectations being wound back Sterling fell from 1.6050 to 1.5950 versus the US Dollar.
In the US,the NFIB Small Business Optimism Index fell to 95.3 in September from 96.1 in August with the labour market and capex components lower. The US 30-Year Bond Yield fell 6bps to 2.96%,the first time it has been below 35 since 2013.
Despite the poor economic data,Euro-Zone equity markets managed a small gain while the S&P closed up 0.2% helped by Citigroup’s earnings. Oil prices plunged again with WTI down 4.4% to 81.97. It is not that long ago that Oil was trading at 110.
This morning on the economic front we have German CPI The UK will release its latest Unemployment data and Average Earnings at 9.30. At 1.30 we have US Retails Sales,PPI and Empire Manufacturing, followed by Business Inventories at 3pm. This evening at 7pm ECB President Dragi and Nuoy are due to speak on the economy in Frankfurt while at the same time the Fed will release its Beige Book.
December S&P 500
The S&P had another wild trading session yesterday but interestingly the market rallied in the last minutes of trading instead of getting hit which had been the norm of the previous 3 days. Internally despite the market closing flat the McClellan Oscillator improved to close at -140 from -214 on Monday helped by the Russell 2000 which has closed higher the last two days.The S&P had been down 10of the previous 12 trading days until yesterday”s small and again the market has held the key 1865/1870 support zone.
After I posted yesterday morning the S&P was trading at my 1871 buy level and after a nice rally I was able to cover this position at 1883 before and I am now flat. I am encouraged by how well the S&P keeps bouncing from the 1865 support level and today I will again be a small buyer from 1870/1875 with the same 1863 stop. A break nd close below 1865 will be very bearish. Given how oversold the market is I do not want to be short the S&P at this time especially with the October Nominal Expiration on Friday.
Euro/USD
By the time I posted yesterday the Euro was trading at my 1.2650 buy level. I am still long and I will leave my stop the same at 1.2625 as I look for the Euro to trade higher to the 1.2690/1.2720 resistance level where I will look to cover my position. Given how oversold and underloved that the Euro is I do not want to be short the market at this time.
US Dollar Index
My long 85.30 Dollar position worked well yesterday as after I posted the Dollar traded higher which enable me to cover this position at 85.70 and I am now flat. Today I will again be a buyer on any dip to 85.10/85.40 with a 84.90 stop.
December DAX
The Dax plan worked very well yesterday as just as I posted the German Zew was released which enabled me to buy the Dax at 8710. Subsequently the Dax had a nice rally which enabled me to cover this position at 8770 and I am now flat. The Dax has now held the 8690/8720 support level for the last two days, however a break and close below 8670 will be very bearish and opens up the possibility of a move lower to 8300. The Dax will have strong resistance at the March 14 low of 8907 and today I will still be a small seller on any further rally to 8880/8910 with a 8940 stop.
December FTSE
The Ftse has been trading the stronger of the major Indices which is no surprise given the drubbing it received since the Scottish Referendum resulting in the market been extremely oversold. Today I will raise my buy level to 6270/6300 with a 6245 stop. I still do not want to be short the Ftse at this time.
Dow Rolling Contract
Just like the S&P above the Dow also had a wild trading session yesterday.Just as I posted the Dow was trading at my 16330 buy level with a 16300 low before having a nice 100 point rally which enabled me to cover this position at 16410 and I am now flat. The Dow is extremely oversold and trading at the bottom of its Bollinger Band but I am encouraged by the nice rally In the McClellan Oscillator yesterday and for this reason I will again be a small buyer from 16280/16310 with a 16220 stop. I will still be a seller on any rally back to 16540/16590 with a 16640 stop.
December BUND
The Bund plan did not work out well yesterday as the Bund had a huge rally on the very weak German Zew release. I went short at 150.60 and I was very quickly stopped out of this position at 150.90 and I am now flat. There is no doubt that the weakness of the German Bond Yields is telling you that economically Germany is in a mess and this is certainly be borne out by the recent economic data. Today I will again be a small seller on any further rally to 151.40/151.70 with a 151.95 stop.
Gold Rolling Contract
I am glad that I covered my long Gold and Silver positions over the past two days as both markets are struggling to break near term resistance. I am going to stay flat Gold unless we trade lower to 1195/1203 where I will be a small buyer with a 1185 stop.
Silver Rolling Contract
No change as I am still a small buyer from 16.80/17.10 with the same 16.45 stop which is just below the recent 16.65 low made two weeks ago.
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