Stocks rally but the commodity bloc languishes

Quick Recap

Nasdaq Composite Monthly (investing.com)

It’s remarkable the way that stock markets can just keep on keeping on. Look at the NASDAQ for instance. 15 years, a sub prime crisis, a weak economy and the prospect of fed rate hikes very soon and it’s back at 15,000.

The Dow and S&P 500 are also higher with fresh alltime highs overnight. You can fight it as irrational and go broke, or you can remember the lesson of Trading 101.

That is, trade the market in front of you. No Rhetoric, or at least no rhetoric impacting your trading decisions, just trade what you see.

Having said that though – stops close is a good protection strategy in the US and here in Australia for ASX traders who have been riding the tiger higher.

On the data front overnight the signs of an improving global economy – albeit mildly – were seen in the HSBC and Markit manufacturing PMI’s. China was stronger yesterday at 50.7 and overnight Italy (51.9) and Germany (51.1) also beat expectations. France (47.6) and EU-wide (51.0) just missed expectations while in the US the Markit manufacturing PMI printed 55.1 (versus 54.3) but ISM manufacturing at 52.9 missed. Clearly however the US economy is still doing relatively better than Europe. Having said that though personal and construction spending both missed to the downside.

The funny thing about the positive sentiment in stocks is there was no commodity bloc rally. Perhaps that’s because US rates tanked last night with the 10′s up 10 points to 2.09%. Part of that could have been a Michael Casey article in the WSJ reminding traders that the fed is readying for a rate hike.

On the day

Today we have the RBA at 2.30pm. But before that we get building permits in Austalia. Offshore Swiss GDP will be interesting for forex traders as will German retail sales. Canadian GDP is out along with the Redbook index and ISM New York index in the US.

And here’s the overnight Scoreboard (10 am AEDT):

• Dow Jones: up 0.86%, 156 points to 18,289
• Nasdaq: up 0.9%, 44 points to 5,008
• S&P: up 0.59%, 13 points to 2,117
• ASX SPI 200 (Futures June): up 4 points to 5,941
• FTSE:  down 0.08% to 6,941
• AUDUSD: 0.7765
• EURUSD: 1.1182
• Crude: $49.82
• Gold: $1,206.56

CHART OF THE DAY:

AUDUSD – RBA the Key: 

The market expects the RBA to cut. That means a trading opportunity for those who think they won’t. But while in many ways this is a punt I favour buying before the announcement this afternoon at 2.30 with a stop at 0.7727.

Should that level break there could be 100 point fall however.

Recap from Yesterday – Gold: High in our resistance zone around $1223 rejected. This reinforces this level as crucial for more topside.