Much of yesterday and the past 24 hours were characterised by relatively quiet moves, with bursts of activity. Events have caused localised sharp moves in markets, but the broader drift has been consistent with a move towards pricing for a Fed hike: slightly lower equities, higher Bond Yields, a modest pick-up in commodity prices and a stronger US Dollar. The AUD outperformed. The abysmal NZ dairy auction recorded the 10th consecutive decline in dairy prices, (-9.3%) leaving them down 47% since March. That doesn’t bode well for the farmer’s pay-outs from Fonterra and leaves sentiment in the NZD poor. It isn’t new news though, just adds to the disappointment. Given this, it wasn’t until some Fed speak that the NZ currency (and everything else) reacted.
My New Platinum Service generated 90 points yesterday. The last two months the new service returned 1810 points for July and 3045 points for June.
The Fed’s Lockhart, generally known to be a centrist voter, was fairy specific in saying to the WSJ that he needs to see a ‘significant deterioration” in the data in order NOT to vote to raise rates in September. That forms a change from the market believing that the Fed needs to see better data to support a hike this year. So it appears at least one voter is on track to hike at the next meeting and needs to see reasons why not, instead of why in order to do so. It also comes on the back of the Fed’s Bullard on Friday who was supportive of raising rates.
With the market not fully priced for September, these comments generated a step up in the US Dollar modestly across the board and a rise in yields. The RBA’s change in language on the currency was one of the most interesting parts of the statement yesterday, with the Bank foregoing the “further (AUD) depreciation is likely and necessary,” in favour of the currency is “adjusting to the significant decline in key Commodity prices.” This reflects the July sell-off in the currency; but given the extended short positioning in the market, it was not surprising to see the AUD sharply higher post the Statement.
This morning on the economic front we have Euro-Zone and UK Services/Composite PMI at 9.00 am and 9.30 am. This is followed at 10.00 am by Euro-Zone Retail Sales. At 1.15 pm we have US ADP Employment and change and this release will be closely watched by the markets for any clues to this Friday’s Non-Farm Payrolls. The US Trade Balance will be released at 1.30 pm. Finally we have the US Services PMI and the ISM Non-Manufacturing Composite at 2.45 pm and 3.00 pm respectively.
September S&P 500
The S&P plan worked very well yesterday as shortly after the US markets opened the S&P rallied to my 2095 sell level before having a nice sell-off which enabled me to cover this position at 2089 as outlined earlier to my Platinum Members and I am now flat. I do not like the way this market is trading with all the main US Indices trading heavily. For nearly eight months this market has gone nowhere with the S&P and Dow having trouble in trying break key levels. There is now doubt the S&P has major resistance at the 2100/2120 level and unless this level is broken soon then I believe we will eventually take out the major support at 2035/2040. Today I will again be a sell on any rally higher to 2092/2097 with a 2101 stop which is just above yesterday’s high. I still do not want to be long the S&P at this time.
EUR/USD
The afternoon comments from the Fed’s Lockhart certainly sent the Euro lower with the market eventually hitting my 1.0895 buy level. I am still long and today I will leave my stop the same at 1.0850. If I am stopped out of this position I will be a more aggressive buyer in front of 1.0800 with a 1.0760 stop. Despite the negative price action in the Euro I still do not want to be short the market at this time.
September Dollar Index
Lockhart’s comments yesterday again saw the Dollar test the key 98.00/98.20 resistance level. Eventually the Dollar hit my 98.10 sell level. I am still short and I will leave my stop the same at 98.50.
September DAX
The DAX is proving very difficult to be short this time as the lower Euro is having a positive effect on the DAX. I am still short at 11420 and today I will use any dip to 11440 to stand aside and take another look at this market tomorrow. I will still leave my stop the same at a tight 11480.
September FTSE
The FTSE plan also worked well yesterday as shortly after the European Markets opened the FTSE traded higher to my 6660 sell level before having a quick sell-off which enabled me to cover this position at 6630 as again outlined to my Platinum Members and I am now flat. Today I will again use any rally to 6680/6720 to go short with a tight 6735 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow continues to be the weakest of the major US Indices with the stronger Dollar having a major impact on earnings in the Dow stocks. Please do not underestimate the effect of the series of confirmed Hindenburg Omen’s registered on the clock and I have no doubt that unless this market recovers over the next few weeks then we are heading for some serious downside come September/October timeframe. I am still flat the Dow and today I will lower my sell level slightly to 17610/17670 with a 17720 stop. Given how oversold the Dow is I do not want to chase this market lower from here preferring to sell rallies instead.
September BUND
Shortly after the BUND opened yesterday it ran into a brick wall of resistance at the 155.00/155.20 area. I am still flat the BUND and today I will lower my sell level to 154.80/155.20 with a 155.50 stop.
Gold Rolling Contract
Gold is still unable to mount any sort of meaningful bounce despite been oversold. I am still flat Gold and today I will raise my buy level slightly to 1071/1079 with a 1063 stop.
Silver Rolling Contract
Shortly after I posted yesterday Silver traded lower to my 14.45 buy level. I am still long and today I will raise my stop on this position to 14.10.
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