The last 24 hours has seen little or no action as the market awaits tomorrow’s ECB Meeting and Dragi press conference at 1.30 pm. Yesterday we saw little or no news to move markets except for the US Treasury which is now struggling to sell Treasury Bills in front of next month’s clash on Spending and the Debt Ceiling.
For anybody following my new Platinum Service it made 120points yesterday and is now ahead by 1122 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
The NZD at least has shown some movement, dropping over a cent from intra-day high to low and following a small setback in dairy prices at the latest Global Dairy Trade (GDT) auction. The GDT index was down 3.1% on two weeks ago, including a 4.6% drop in whole milk powder prices. To some surprise, the Canadian dollar sits at the top of the G10 FX leader-board, offshore markets seemingly happier at the fact that there was a decisive election outcome rather than a hung parliament, albeit the new Liberal Government under Justin Trudeau was elected on a promise to engage in more Bond-Financed Fiscal spending. That, and a simple case of ‘sell the rumour, buy the fact’ looks to be behind CAD’s gains.
Elsewhere we see the Euro a tad higher, and where a further reduction in hopes for any near term step-up in the intensity or duration of ECB QE followed news that Eurozone banks are, according to the latest ECB survey released yesterday morning, relaxing their standards for business lending. It’s also worth noting that the ECB once again reported a very large Eurozone current account surplus, for August (€17.7bn) albeit a bit down on July and consensus expectations. This serves as reminder of one factor providing support for the single currency in the current world where investment/capital flows are running relatively light and are subject to periodic bouts of flight (or ‘home bias’). The same applies to the JPY and where Japan is also now running relatively large current account surpluses.
In other market US stocks are in no-man’s land, closing down very small, while Treasury yields are on average about 5bps higher across the curve than this time yesterday. One influence on the latter has been a very strong US Housing Starts release (+6.5%) albeit Building Permits were down (- 5.0%) and the strength was led by the highly volatile multifamily sector (i.e. apartments).
On the policy maker front, Yellen, Dudley and Powell have all put in appearances but none of them made any comments on the economy or Fed policy. The Bank of England’s Ian McCafferty (who has been dissenting on the MPC in favour of higher rates) repeated his view that the Bank needs to be lifting rates now and risks being behind the curve. Sterling was unmoved. BoE Governor Mark carney meanwhile appeared before lawmakers but spoke only on regulatory matters, and has flagged up his speech later today – on how the Bank of England would handle a UK exit from the EU – as a ‘bit of a yawner’.
This morning on the economic front we have UK Public Finances at 9.30 am. We have no data of note due from the Euro Zone or the US today. This afternoon at 3.00 pm we have the Bank of Canada Rate decision. Finally at 6.00 pm we have the Bank of England’s Governor Carney speaking in Oxford.
December S&P 500
The S&P plan finally worked well yesterday on what had been frustrating previous three trading sessions as the market continued to miss my buy level before trading higher.Finally after the Chicago close last evening the S&P traded lower to my 2017 buy level with a 2016.25 low before subsequently trading higher overnight which enabled me to cover this position at my 2023 T/P level as outlined earlier to my Platinum Members and I am now flat.I am not going to chase this market higher especially as the McClellan Oscillator has weakened ever since putting its year high at +303 10 days ago. Today I will look to buy the S&P on any dip lower to 2009/2014 with a 2003 stop. However I will leave my sell level unchanged at 2038/2045 with the same 2051 stop. I still believe the market is due a decent sell-off from the 2035/2050 resistance area as this level held the market eight times this year before finally cracking on August 20th. Subsequently on August 24th the market was trading at 1830. As I mentioned yesterday the Margin Debt levels is higher now that before the Global Financial Crisis in 2007.
EUR/USD
The Euro traded higher after I posted early yesterday morning before selling off again into the close. I still feel that the ECB and Dragi will try and talk the Euro lower tomorrow at his press conference and for this reason I will leave my buy level unchanged at 1.1250/1.1280 with the same 1.1225 stop. I still do not want to be short the Euro at this time.
December Dollar Index
No change on what was an extremely quiet trading session for the Dollar. Thus I will leave my sell level unchanged at 95.30/95.60 with the same 95.80 stop. I will also be a reasonable buyer on any dip lower to 93.60/93.90 with the same 93.30 stop.
December DAX
The DAX plan worked well yesterday as the DAX had a nice sell-off at 10.00 am which enabled me to buy the market at 10080. Subsequently the DAX rallied which enabled me to cover this position at my T/P level at 10140 as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the market on any drop lower to 9990/10040 with a 9950 stop as I cannot sell the DAX trading much lower ahead of the ECB tomorrow. I do not want to be short the DAX ahead of this key meeting.
December FTSE
Unfortunately the FTSE just missed my 6360 sell level after I posted yesterday morning and I am still flat. Today I will lower my sell level slightly to 6355/6385 with a 6405 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
No change as my only interest in trading the Dow at this time is to go short on any rally higher to 17280/17330 with the same 17370 stop. The market came close to my sell level with a 17260 high today before selling off. However I will not chase this market lower especially with the FOMC next week.
December BUND
The BUND had a weak trading session yesterday with the market closing below 156. The drop after I posted was persistent with the market eventually hitting my 156.10 buy level. I am still long and given that we have big support at 155.60, I am going to lower my stop to 155.55 on this position. If I am stopped out of this trade I will be a more aggressive buyer in front of 155.20 with a 154.90 stop. Despite the negative price action yesterday I do not want to be short the BUND ahead of tomorrow’s key ECB Meeting.
Gold Rolling Contract
Gold again traded in a very narrow range yesterday. I must say given the recent break of the 1150/1160 resistance area I would have expected Gold to have rallied further. Today I will leave my buy level unchanged at 1157/1164 with the same 1152 stop. Remember a break and close below 1150 will again but the precious metal on the defensive.
Silver Rolling Contract
No change as I am still long at 15.88 with the same 15.60 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 15.30 with the same 14.80 stop.
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