Global equity markets continued
their lovefest with the liquidity lagniappe from central bank policymakers this
week with several headline indices reaching historic or multi-month highs.
China’s Alibaba went public on the New York Stock Exchange with a US$ 68.00
price and a $92.70 opening tick, elevating Jack Ma and his cronies into
rarefied air. Alex Salmond and fellow Scottish Nationalists took their “Yes” campaign
down to the wire but the “No” campaign eked out a victory with Cameron,
Darling, Brown, and even Her Majesty lending a helping hand. Gold and Silver
established new 2014 lows, gobbling up stops along the way.
Here is what traders are watching
next week:
1. The British pound
gave traders a major head-fake in early September when it traded as low as the
US$ 1.6050 level, a short-lived reaction to a weekend poll number that proved
to be a good entry point for traders looking to pick up some cable ahead of yesterday’s
referendum. Smart technical money exited that trade around $1.6485 before it
was confirmed the “No” contingent scored 55% at the ballot. Sterling also
gained major ground against the euro, dragging the cross down to £0.7808, its
lowest level since July 2012 – but not enough to test the key £0.7783 level.
Post-referendum euphoria is subsiding, but some headline risk remains as London
unveils sweeteners to appease the losing “Yes” crowd. With nothing too exciting
on next week’s economic schedule for GBP, traders will want to see if sterling
sheds the headline risk and returns to fundamentals like interest rate
expectations and economic numbers.
Our recent videos have highlighted
this recent Scotland trade, a boon to technicians.
2. Gold and Silver continued their bout with
gravity with the former taking out big stops below US$ 1,232 and the latter
testing US$ 18.285, just above the 2013 low. In the exchange-traded market, SLV
is hovering around US$ 17.87, a key technical level where significant physical
demand has been seen. GLD so far has resisted the temptation to test the US$
113.62 level in 2014 where the physical crowd is expected to add to physical portfolio
holdings.
Our recent videos identify some key downside targets
including 1200.39 and 17.468.
3. China is slowing:
that much is known. Last weekend’s economic data – if they are credible – saw
August industrial production growth slow to +6.9% y/y from +9.0% y/y, taking
the year-to-date tally down to +8.5% y/y. August retail sales moderated to
+11.9% y/y and foreign direct investment was a big miss at -14% in August. Traders mostly care about Tuesday’s headline
HSBC September manufacturing number. August came in at 50.2 and a print below
the boom-or-bust 50.0 level will throw the commodity export crowd into a tizzy.
Our recent video highlights the
Australian dollar’s tailspin after the weaker Chinese data.
4. Global equity
prices were bid higher after the Federal Open Market Committee retained policy
language to lift liquidity-dependent share prices. The Fed’s latest projections
imply a federal funds policy rate of 1.27% in December 2015. In contrast,
however, the Fed funds futures contract for December 2015 imply a rate around
0.78%, about 50bps below Fed policymakers’ projections. Fed boss Yellen
downplayed the gap between the market and the Fed. FOMC Kremlinologists are
speculating that Yellen’s personal dot on the Fed’s “dot plot” is the fourth
from the bottom, signifying that she with the greatest sway envisions rates
around 0.875% at the end of 2015.
Traders will see if Alibaba can ignite some long-absent retail
enthusiasm for U.S. shares with the headline DJIA currently at an all-time high
of US$ 17,265.99.
Our recent video highlights
recent S&P action.
5. The trend is your friend, and global FX rates have been our best friend over the past couple of
weeks. After a dearth of volatility for the better part of six months, currency
rates are once again showing indications of life. The aforementioned sterling
(GBP) trade is an example, and there is big money being made in the Japanese
yen (JPY) and some of the euro (EUR) crosses as well. A return to ¥110 in USD/JPY would be
attention grabbing, but trendnicians
care more about 110.20 and 111.63. Traders will see if these blossoming trends
can continue next week. Crosses like EUR/CAD have been one-way trades with C$
1.3856 a big downside level.
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