The IMF was hogging the news headlines yesterday, though markets have long since given up seeing much information value in the now customary 6-monthly downward revisions to its Global and country-specific growth forecasts. For the record Global Growth is now put at 3.1% in 2015 from 3.5% back in April. To no surprise either, the IMF sees a slight acceleration from 2016. Where I might give the IMF a little credit is in its forecast for the Australian economy. These have been lowered by just 0.1% to 2.4% for 20915 – now bringing them into line with earlier RBA forecasts. In contrast, the Fund has slashed Canada’s growth forecast by a full 0.5% to just 1% for this year.
For anybody following my new Platinum Service it made 95 points yesterday and is now ahead by 60 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
Hard economic news of note includes a blow-out in the US August trade deficit, to $48.3bn from $41.8bn and though not unexpected it does have US analysts reaching for the crayons to downgrade Q3 GDP forecasts. Surprisingly though, the Atlanta Fed’s ‘GDP Now’ forecast for Q3 growth was lifted last night to 1.1% from 0.9%, citing strong vehicle sales and what it still sees a as positive net export contribution to growth. Their number nevertheless sits well below current consensus estimates. We also had an unexpected slump in German factory goods orders (-1.8%) seen symptomatic of weak global demand conditions and not – as yet – impact from the VW emissions scandal.
Market wise, in currencies we have seen a further (positive) reversal for many of the most beaten-up currencies of recent weeks, topped by Indonesia, Russia and Brazil, with NOK, SEK and AUD the best performing G10 currencies. AUD has added over half a cent to its post-RBA APAC session gains, and is about flat versus NZD despite another good (9.9%) lift in dairy prices at last night’s GDT auction. US Stocks closed lower after five consecutive up-days, while Treasury yields are (slightly) lower in a bull flattening session.
The AUD rallied out of the RBA announcement yesterday, in part since the statement accompanying the ‘no change’ announcement offered little by way of encouragement to prevailing pricing that went in to the RBA priced for more than 40bps of easing in the coming 12 months. The text of the Statement had very few changes, suggesting the Bank has not changed its view of the economy significantly. It would likely require a significant evolution of the outlook to see the RBA moving rates, which remains consistent with my view that rates will remain unchanged at 2% for an extended period. The statement arguably reflected greater confidence in a continuing moderate expansion of Australian growth (removal of the descriptor “most of” the available information suggests the moderate expansion continues.
Last night after the US Markets closed San Francisco Fed President John Williams spoke at a conference in which he stated that he still sees at least one Rate hike by the end of 2015 and that the NFP last Friday despite the data coming in a lot less than expected still marks progress in the Labour market. He said that he does not see signs that Global Growth has slowed. Finally he said that when the Fed raises Interest Rates that it should not be a case that nobody is expecting it.
Overnight the Bank of Japan left Interest Rates unchanged with the Nikkei closing higher by 0.75% to 18,300. The BoJ Governor Kuroda has just finished his press conference in which he stated that he expects the Japanese Government to take more steps to ensure strong economic growth for Japan.
This morning on the economic front we already had the release of German Industrial Production which came in well below the expected +0.2% to print -1.2%. The recent economic releases from Germany have been very poor but so far the DAX is ignoring this. The only other economic data of note on either side of the Atlantic is UK Industrial Production at 9.30 am.
December S&P 500
Unfortunately the S&P twice missed my 1960 buy level by ½ Handles yesterday and I am still flat. The price action is telling me that there is a good chance this S&P will test the post September FOMC high at 2012 before we see a more meaningful sell-off ensue. Today I will raise my buy level to 1961/1967 with a tight 1957 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 1942/1948 with a 1937 stop. I do not want to be short the S&P at this time especially after last Friday’s huge Key Day Reversal.
EUR/USD
Much to my annoyance ECB President Dragi never mentioned the Euro-Zone Economy or the Euro Currency in his speech last evening in Frankfurt. The much weaker than expect US Trade Data led to the US Dollar getting sold off across the board and I am still flat. It is amazing that the Euro has not moved since last April as we still trading with a 1.12 Handle. Today I will raise my buy level to 1.1160/1.1200 with a 1.1130 stop. I still do not want to be short the Euro at this time.
December Dollar Index
Today I will lower my sell level to 96.25/96.55 with a tight 96.80 stop.
December DAX
The DAX plan worked very well yesterday as shortly before lunch the DAX traded higher to my 9890 sell level before having a nice sell-off to 9812 which enabled me to cover this position at my 9830 T/P level as outlined earlier to my Platinum Members and I am now flat. The DAX has now risen by 6% since its post NFP sell-off last Friday afternoon with the market challenging the 10,000 key level again as I write this commentary. All shorts have just been obliterated over the past few days as one resistance level after another is taken out. This rally is incredible when you see how weak the underlying German Economy is as shown by recent data. Today I will be a small seller on any further rally to 10080/10130 with a 10160 stop. I still do not want to be long the DAX at this time.
December FTSE
The FTSE plan also worked well yesterday as the market was trading in my buy zone at 6225 by the time that I posted. I went long here and after a subsequent rally I covered this position at my 6260 T/P level and I am now flat. The FTSE subsequently traded heavy all day not helped by another 8% fall in Glencore after its recent five day rally. Today I will again look to buy the FTSE on any dip lower to 6250/6280 with a 6225 stop. I still do not want to be short the FTSE at this time until we sell a sell extreme.
Dow Rolling Contract
I am still flat the Dow which continues to rally strongly off its post 16010 NFP low last Friday afternoon. I am going to stay flat unless we trade higher to my 16980/17040 sell level with a 17080 stop.
December BUND
I am still flat the BUND which has continued to sell-off from its post NFP high at 157.65. The BUND has support at the 155.40/155.70 area and today I will be a small buyer in this region with a 155.25 stop. Given the recent move lower I do not want to be short the BUND at this time.
Gold Rolling Contract
The big question is whether Gold is going to finally break its key near term resistance at 1150/1160 which the market is testing as I write this commentary this morning. I am still flat Gold and to me it is only a matter of time before this key resistance area is broken. For this reason I will raise my buy level to 1130/1140 with a 1124 stop.
Silver Rolling Contract
Silver has traded better than Gold over the past few weeks with the market finally breaking 16.00 yesterday afternoon. As you know I really like Silver as I believe this market is undervalued after its huge sell-off from $50 in May 2011. For this reason I have bought Silver this morning here at 15.88. I will leave a 15.40 stop on this position.
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