Roight, so markets are going the way I have been expecting although my short USDJPY position is yet to start really moving. Overall however the seismic shift I have been sensing was coming in markets is starting to happen.
Whether its a transition from low volatility to high volatility or just the result of a build up of complacency the reality is that for the moment all the good news is priced in and the proximity of the end of the Fed’s QE and the enduring strength of the US economy has focussed minds on risk not reward.
That is a shift in itself.
As a result it’s been a bad night if you are long stocks with some large falls around the globe. Some say its the big death cross in the Russell 2000 earlier this week, others that Apple’s woes just filtered out through the market and others that geo-poitical risk has risen after Russia passed a law to seize foreign company assets.
Whatever the cause the fact the Dow fell 264 points or 1.53%, the Nasdaq dropped 1.94% and the S&P lost a huge 32 points for a close at 1,966 down 1.62% says the selling was broad based.
My expectation is for a move ttttt1,919 on the S&P 500 and I have a growing sense that we’ll see prices under 1800.
Indeed, the fact that there were some large moves in bonds says that this was an asset allocation move as much as anything as we approach quarter end. In the US the 10′s were down 7 points to 2.5% for a 2.56% capital gain, along with solid falls in german 10′s which closed at 0.93% and UK Gilts at 2.45%.
Traders will be wondering if this is a buying opportunity or the start of something bigger – time will tell but I am still 100% cash in my Super and not rushing to buy.
On the data front overnight there wasn’t a lot of impact of the big fall in durable goods (-18.2%) because of the Boeing impact the month before but once the volatile components were abstracted the print of 0.7% is pretty solid and reinforces the US recovery. Likewise the jobless claims below 300,000 is a good sign.
In Europe the FTSE dipped 0.99% to 6,640, the DAX dropped 1.57% to 9,510 and in Paris the CAC was 1.33% lower. In Milan stocks dropped 1.35% while Spanish stocks were 0.68% lower.
Locally the SPI 200 futures are looking terrible as they test the uptrend line from the rally which began in 2011 and which is very close to breaking. Of course we always respect trendlines unless and until they break. But a move below this would be horrific for local trader sentiment if that’s possible after the December futures tanked 53 points last night to 5319 bid.
On currency markets the Aussie was helped lower by some verbal intervention from RBNZ Governor wheeler yesterday and it is below 88 cents at 0.8790 this morning and only just over a cent above the lows of 2014. The euro is at 1.2751, Sterling at 1.6314 and USDJPY looks like it is getting set up to move sharply lower and is at 108.72.
On commodities iron ore was poll axed with Dec futures down $1.88 to $77.67 just 12 cents off the low for this run. December coal fell 15 cents to $66.10 a tonne.
- Elsewhere on commodity markets gold is becalmed at $1,222 an ounce and silver is at $17.48. Crude is $92.45 a barrel and copper is still at $3.03. On the Ags wheat dropped 1.25%, corn lost 0.91% and soybeans fell 1.3%.
On the data front today Japanese CPI is out and the third read of US GDP tonight will be important.
Otherwise enjoy your weekend and Go Swans
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
Whether its a transition from low volatility to high volatility or just the result of a build up of complacency the reality is that for the moment all the good news is priced in and the proximity of the end of the Fed’s QE and the enduring strength of the US economy has focussed minds on risk not reward.
That is a shift in itself.
As a result it’s been a bad night if you are long stocks with some large falls around the globe. Some say its the big death cross in the Russell 2000 earlier this week, others that Apple’s woes just filtered out through the market and others that geo-poitical risk has risen after Russia passed a law to seize foreign company assets.
Whatever the cause the fact the Dow fell 264 points or 1.53%, the Nasdaq dropped 1.94% and the S&P lost a huge 32 points for a close at 1,966 down 1.62% says the selling was broad based.
My expectation is for a move ttttt1,919 on the S&P 500 and I have a growing sense that we’ll see prices under 1800.
Indeed, the fact that there were some large moves in bonds says that this was an asset allocation move as much as anything as we approach quarter end. In the US the 10′s were down 7 points to 2.5% for a 2.56% capital gain, along with solid falls in german 10′s which closed at 0.93% and UK Gilts at 2.45%.
Traders will be wondering if this is a buying opportunity or the start of something bigger – time will tell but I am still 100% cash in my Super and not rushing to buy.
On the data front overnight there wasn’t a lot of impact of the big fall in durable goods (-18.2%) because of the Boeing impact the month before but once the volatile components were abstracted the print of 0.7% is pretty solid and reinforces the US recovery. Likewise the jobless claims below 300,000 is a good sign.
In Europe the FTSE dipped 0.99% to 6,640, the DAX dropped 1.57% to 9,510 and in Paris the CAC was 1.33% lower. In Milan stocks dropped 1.35% while Spanish stocks were 0.68% lower.
Locally the SPI 200 futures are looking terrible as they test the uptrend line from the rally which began in 2011 and which is very close to breaking. Of course we always respect trendlines unless and until they break. But a move below this would be horrific for local trader sentiment if that’s possible after the December futures tanked 53 points last night to 5319 bid.
On currency markets the Aussie was helped lower by some verbal intervention from RBNZ Governor wheeler yesterday and it is below 88 cents at 0.8790 this morning and only just over a cent above the lows of 2014. The euro is at 1.2751, Sterling at 1.6314 and USDJPY looks like it is getting set up to move sharply lower and is at 108.72.
On commodities iron ore was poll axed with Dec futures down $1.88 to $77.67 just 12 cents off the low for this run. December coal fell 15 cents to $66.10 a tonne.
- Elsewhere on commodity markets gold is becalmed at $1,222 an ounce and silver is at $17.48. Crude is $92.45 a barrel and copper is still at $3.03. On the Ags wheat dropped 1.25%, corn lost 0.91% and soybeans fell 1.3%.
On the data front today Japanese CPI is out and the third read of US GDP tonight will be important.
Otherwise enjoy your weekend and Go Swans
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the forex trading account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.sary.
Recommended Content
Editors’ Picks
AUD/USD retargets the 0.6600 barrier and above
AUD/USD extended its positive streak for the sixth session in a row at the beginning of the week, managing to retest the transitory 100-day SMA near 0.6580 on the back of the solid performance of the commodity complex.
EUR/USD keeps the bullish bias above 1.0700
EUR/USD rapidly set aside Friday’s decline and regained strong upside traction in response to the marked retracement in the Greenback following the still-unconfirmed FX intervention by the Japanese MoF.
Gold advances for a third consecutive day
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Bitcoin price dips to $62K range despite growing international BTC validation via spot ETFs
Bitcoin (BTC) price closed down for four weeks in a row, based on the weekly chart, and could be on track for another red candle this week. The last time it did this was in the middle of the bear market when it fell by 42% within a span of nine weeks.
Japan intervention: Will it work?
Dear Japan Intervenes in the Yen for the first time since November 2022 Will it work? Have we seen a top in USDJPY? Let's go through the charts.