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AUS200

PATIENCTLY WAIT FOR THE AUS200 getting to our SHORT TRAPGood morning everyone. we are waiting for the AUS200 to get into our position to short. If the trade does not form into our position, we will focus on the US market opening tonight. It is essential. We await the AUS fall below 8140-38 to enter our short position. Our stop loss should be above the all-time high 8186. (Let your stop loss be a bit lengthy to accommodate fake outs which happens most of the times in the market.) Our first target will be 8126; please note once it hits our first target, please take 50% profit from our second target, 8103.7, and  third target 8055.7
PEPPERSTONE:AUS200Short
by ActiveTraderRoom
1
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PEPPERSTONE:AUS200Long
by Thief_Trader
ASX200 - the bulls in control for now Everyone is talking about the moves in the FTSE100, but the ASX200 is having a moment - we see solid rate of change, the index is still no where near overbought, and we see 4 days of rising range expansion. Momentum is clearly to the upside, which suggests dips should well supported and shallow - hard to be short on timeframes 4hr+ and favour this higher but a move below the former breakout area of 7723 and I would be more cautious. (Thoughts from Chris Weston)
PEPPERSTONE:AUS200Long
by Pepperstone
A Traders’ Weekly Playbook: Records are there for breaking After a quiet start to the week in markets, Friday’s US session saw risk come alive. A poor US ISM manufacturing at 47.8 – notable in the new orders and employment sub-components – was married with comments from Fed members Lorie Logan and Chris Waller, in turn promoting a strong rally in US Treasuries, with additional rate cuts being priced through 2024. The result was new all-time highs in the US500, US30 and NAS100, with the US2000 eyeing a key breakout of its longer-term range high. New US equity highs backed new highs seen in the AUS200, JPN225 and EU Stoxx and GER40. Gold also got huge attention from clients, rallying 1.9% to set at a new closing high, and we’ve seen many in our alt-crypto offering (notably Bitcoin cash) ripping. We’ll see if the feel-good factor lasts, but I find it interesting that equity and risky assets rallied despite seeing poor US data – where it’s easy to argue that poor data that increases economic slowdown risk, could have prompted risk aversion. So, while we can also point to Fed chatter, it seems in this case bad economic data was good for risk, with the overriding factor being increased rate cut expectations. We’ll see if that same reaction is seen in the outcome of the US ISM services print and the various labour market readings, as these will be the key cross-asset drivers this week. Powell’s testimony to Congress will also get a look-in from traders and we know if he wants to move market pricing he can. The ECB and BoC meeting and the China NPC meeting will get good attention but will play second fiddle to the US data. The poor market internals in equity may be an amber warning sign to some, but market internals and breadth have offered no profitable signal for a while - pullbacks remain shallow and there is a hunt to go hard on risk. There is plenty to navigate this week but for now, the price action shows that the bulls are very much in control. Long equity hedged with gold exposures seems the play, and looking at the charts on the higher timeframes it feels like the path of least resistance being onwards and upwards. Good luck to all. The marquee event risks for the week ahead: The key risk events for markets this week – China NPC meeting, ECB meeting, Jay Powell’s testimony to Congress & US nonfarm payrolls. Monday Switzerland CPI (18:30 AEDT) – the market looks for CHF headline CPI to print 1.1% yoy (from 1.3%) and core CPI at 1% (from 1.2%). The CHF swaps market prices a 25bp cut at the Swiss National Bank (SNB) meeting on 21 March at 70%, so a weaker than expected CPI print should see the market push that implied to c.90%, suggesting the SNB could lead G10 central banks in the sequencing of policy easing. As a result the CHF could become a consensus short from hedge funds. Look for XAUCHF to rally hard on a weak CPI number. Tuesday   US ISM Services Index (Wednesday 02:00 AEDT) – the market looks for the services index to print 53.0 (from 53.4). Given the moves in risky assets (equity, credit) and gold post last week’s ISM manufacturing this data point could drive market volatility. A print below 51.0 would be a surprise and promote further upside in XAUUSD, with the market putting notable attention on the new orders and unemployment components of the survey. Japan (Feb) Tokyo CPI (10:30 AEDT) – the market looks for JP headline CPI to print 2.5% (from 1.6%) and CPI ex-food and energy unchanged at 3.1%. After last week’s upside surprise in the JP national CPI print, and the upside move in 2-year JGB yields to 0.19% (the highest level since May 2011), the market will watch this one closely and an upside surprise could see JPY shorts cover. BoJ Gov Ueda speaks at a fintech summit (15:00 AEDT) – after speaking last week at the G20 meeting and his comments considered dovish, we’ll see if this is the forum for a change in Ueda’s stance. ‘Super Tuesday’ – the biggest day in the primaries calendar, with some 15 states voting to nominate their choice of Presidential nominee. Given Trump’s result in South Carolina, it seems a done deal that he will get the REP nomination, so it's hard to see Super Tuesday as a market event. China 14th National People Conference – the market will learn of the government’s economic targets for 2024 and what they are aiming for GDP, inflation, unemployment, and the deficit. We should see officials target growth of “around 5%” but it is feasible they aim for more. Wednesday US JOLTS job openings (Thursday 02:00 AEDT) – the market looks for 8.89m job openings (from 9.026m) – Traders with long positions in equity and gold and USD shorts will want to see a weaker print vs consensus expectations. Australia Q4 GDP (11:30 AEDT) – the market looks for Q4 GDP of 0.3% QoQ / 1.4% YoY (from 2.1%), but expectations will be massaged as we get the partials (inventory, company profits, net exports as a percentage of GDP). Can’t see this being a mover of the AUD to any great degree, so would have limited concerns about holding AUD positions over this data point. UK Budget (23:30 AEDT / 12:30 local) – Rishi Sunak needs Jeremy Hunt to pull a rabbit out of a hat to get voter momentum into the UK election - but one questions if this budget moves the dial on voting intentions and impacts the UK bond market, and by extension the GBP? Recent media suggests the chance of a major fiscal boost from the budget has been reduced - see my colleague Michael Brown's preview here - pepperstone.com Bank of Canada meeting (Thursday 01:45 AEDT) – the BoC won’t move on policy and will almost certainly keep rates at 5%. Given the recent downside surprise in December GDP (1.1% YoY) and January CPI print (of 2.9%) we could get stronger guidance on future easing. CAD swaps price 85bp of cuts (or just over three 25bp cuts) by December, so the move in the CAD will come as traders reconcile the tone of the statement with this pricing. Thursday Fed chair Jay Powell testifies to Congress (Friday 02:00 AEDT) – Jay Powell’s testimony will garner big attention from the market, where most see Powell offering a balanced/neutral view of economic risk and policy – this is his last formal forum to speak before the 20 March Fed meeting, in which some feel some risk of a risk of a hawkish pivot. China trade data (no set time) – a hard one to react to given there is no set time for the release – the market looks for exports to increase by 3% and imports by 1.5%. A larger import number could boost currencies such as the AUD, NZD, and CLP. Japan labour cash earnings (10:30 AEDT) – while we look ahead at Japan’s spring wage negotiations, the market looks for cash earnings of 1.3%, which suggests real wages of -1.4% Mexico CPI (23:00 AEDT) – the market looks for headline CPI at 4.43% (from 4.88%) and core CPI at 4.62% (from 4.76%). Given recent economics, the prospect of a 25bp cut in the 21 March Banxico meeting looks likely, and the CPI print could reinforce that belief. Conversely, an upside surprise could see USDMXN break 16.9924 support and offer a larger downside move to 16.8000. ECB meeting (Friday 00:15 AEDT) – the ECB are not expected to ease until June, so the statement and Christine Lagarde’s speech will most likely reflect the market’s central view. The bar seems high for the ECB to open the door to an April cut at this meeting, and Lagarde’s commentary may point to a “few month months” of data before they ease. The ECB’s updated economic projections, while likely to be downgraded, will still not be poor enough to suggest increased urgency to normalize. Unless we get a big surprise from the ECB, I’d be looking to fade moves in EURUSD into a 1.0920 to 1.0760 range this week. Friday US nonfarm payrolls (Sat 00:30 AEDT) – the market looks for moderation from the blowout January report, where the consensus sits at a healthy 200k jobs created in February. The unemployment rate is expected to remain at 3.7%, with average hourly earnings growing 4.3% yoy (from 4.5%). NFPs is the marquee event risk of the week, but forging a playbook is not clear cut – One questions if a rise in the U/E rate lifts risky assets as bond yields fall (rate cut expectations increase), or whether this outcome promotes risk aversion as traders consider the negative implications on economics. The USD will hold the cleanest read on the review of the data. Canada employment report (Sat 00:30 AEDT) – the market looks for 20k jobs created and a tick up in the U/E rate to 5.8%. International Women’s Day Saturday China CPI/PPI (12:30 AEDT) – the market sees CPI increasing by 0.2%, which would mark the first positive read after four months of falling consumer prices (month-on-month). PPI is eyed -2.6%. The trader’s concern here is around whether this offers any gapping risk for China assets, or its proxies (AUD, NZD, CLP etc) – I would argue it doesn’t. US earnings – Target, Marvell Technology, Costco, Broadcom Full Fed speaker line-up for the week
PEPPERSTONE:XAUUSDLong
by Pepperstone
1
A Traders’ Weekly Playbook: After record levels comes chopOn the week we learnt that the UK and Japan are in a technical recession, although this meant little to markets and perhaps the bigger issue in Japan was the steady stream of pushback from key Japanese officials on recent JPY strength. US retail sales fell 0.80% in Jan, a sinister turn when both US CPI and PPI were far hotter than expected, putting us on notice that the US core PCE print (due on 29 Feb) could be above 0.4% MoM - which if seen a year ago would have been a trigger for the Fed to hike by 25bp. The Feb CPI print (due 12 March) will get huge attention, and while some way off is a key date for the diary. Among a barrage of ASX200 companies reporting, we also saw a poor Aussie employment report, which put great emphasis on the February employment report (due on 21 March) given economists (and the ABS) expect a solid snapback in hiring in this data series. The ASX200 eyes new ATHs, and key earnings from the likes of BHP, RIO, QAN and WOW this week could take us there. In markets, the USD gained for a sixth straight week, although a 0.2% week-on-week (Wow) gain was more of a stealth grind higher than an impulsive one-way tear. Assisting USD flows was a reduction in US swaps pricing, where we started the week with 113bp of cuts priced by December 2024, and finished with 91bp (or 3.6 cuts), which helped lift the US 2YR Treasury to 4.64% (+16bp on the week). If the market hadn’t already amassed a sizeable USD position, then one could argue the USD move would have been higher. The EURUSD weekly shows indecision to push the pair lower and a move above 1.0805 (last week's high) and should take the pair through 1.0828 (200-day MA) and onto 1.0865, which would be a level I’d be looking to fade longs on the week. While we saw the US500 0.4% lower on the week, we saw the prior week's low of 4918 (and the 5-week EMA) holding firm, with traders selling the VIX index above 15%. While US cash equity will be closed Monday for Presidents Day, I’m expecting choppy trade through to Thursday - so the intraday environment for day traders could get a little messy and it will pay to be nimble. The NAS100 was the underperformer last week but should attract good attention from clients this week with Nvidia’s number due out on Wednesday (after the cash close), and where the market eyes some punchy in reaction to the headlines, which could spill out into AI names more broadly. The Year of Dragon got off to a solid start for China equity outperformed, notably in the small-cap space (the CSI500 closed +10% WoW) and we see the CN50 index looking compelling for further upside, and I see 12,000 coming into play. While National Team flows and PBoC liquidity have supported China/HK equity, economics do matter, so put the China Prime rate decision and new home sales data on the radar to potentially influence this week. On the China proxy theme, Copper etched out a solid move on the week although we have seen selling interest into $3.80. Crude is also getting attention from traders, with price gaining 3.4% WoW and testing the 29 Jan pivot high. Moving in a bullish channel we see upper trend resistance into $80.50 – a level to put on the radar. Staying in the commodity theme, silver (XAGUSD) has found good buying interest off $22 and has closed above the double bottom neckline and the 200-day MA – upside into $24.00/50 looks possible. On the ag’s, cocoa and wheat come on the radar as short set-ups, while corn has seen a solid bear trend since October but indecision in Friday's price action, suggests traders are on notice for a small reversal this week. The marquee event risks for traders to navigate: Monday US cash equity and bonds are offline for Presidents Day – futures will be open but will close early. Tuesday China 1 & 5-year Prime Rate (12:20 AEDT) – The market sees the 5-year Prime rate lowered by 10bp to 4.1%, while the 1-yr rate is expected to remain at 3.45%. The Prime rate is the benchmark rate by which households can borrow from Commercial banks. We may see some disappointment in China's equity markets if the PBoC refrain from easing, which has been the trend of late. This time may be different, so conversely, a deeper-than-expected cut across both tenors may see traders adding to an early long position in the CN50 index. Wednesday Canada Jan CPI (00:30 AEDT) – The consensus is we see Canadian headline CPI coming in at 3.2% (from 3.4%) and core CPI unchanged at 3.6%. The CAD swaps market sees the first cut from the BoC occurring at either the June or July meeting. A core print above 3.6% should see good CAD inflows, while below 3.4% should interest CAD sellers. The GBPCAD (daily) setup is on the radar, where a closing break of 1.6950 would inspire short positions for 1.6800/1.6750. Australia Q4 Wage Price Index (11:30 AEDT) – the median estimate from economists is for Q4 wages to increase 0.9% QoQ & 4.1% YoY (from 4%). The AUD may see a small move on this data point, but it will naturally be dependent on the extent of the outcome vs expectations. A wage print above 4.3% would be a big surprise and get some attention from Aussie rates traders who see the first cut (from the RBA) at the August meeting. Nvidia Q424 earnings (after-market) – as noted in the Nvidia preview the options market prices a substantial -/+11% move on earnings. Naturally this sort of reaction – if it plays out - has the potential to cause big volatility in the NAS100 and US500 after the cash market close, so it is a clear event risk. Thursday FOMC meeting minutes (06:00 AEDT) – the January FOMC minutes should be a non-event given it predates last week’s stronger US CPI and PPI print. Any colour on an early end to QT may get some focus though. EU HCOB (flash) manufacturing & services PMI (20:00 AEDT) - the market looks for the EU manufacturing index to print at 47.0 (from 46.6) and services at 48.8 (from 48.4). If these median expectations prove to be correct, then we would see a slight improvement in the pace of decline, which is modestly EUR positive. Seems unlikely we see a sizeable reaction in the EUR unless we see services above 50.0. UK S&P (flash) global manufacturing & services PMI (20:30 AEDT) - the market looks for the UK manufacturing index to print at 47.5 (47.0) and services at 54.5 (from 54.3). So, a slight improvement is expected in both metrics. A service PMI print above 55 could see increased movement in the GBP and cement expectations the BoE will look to cut rates from August. GBPUSD needs a catalyst as it tracks a tight sideways range, while I hold a preference for GBPNOK lower, with GBPCAD shorts a potential trade I’m looking at. Friday S&P Global US Manufacturing & Services PMI (01:45 AEDT) – the market looks for manufacturing index to print at 50.5 (from 50.7) and services at 52.1 (from 52.5). Any reading above 50 shows expansion from the prior month, so if the consensus proves to be correct then both metrics will show expansion but at a slower pace. Hard to see a pronounced move in the USD or US equity unless we see a sizeable beat/miss. China New Home Prices (12:30 AEDT) – China’s new home prices have fallen every month since May 2023, so further falls seem likely in the January series. China equity may find sellers if we see the pace of decline increases from the December outcome of -0.45%. Any improvement in the pace of decline could be taken well by the CN50 and HK50 Index which are already seeing tailwinds courtesy of National Team buying. ECB 1 & 3-year CPI expectations (20:00 AEDT) – there is no consensus by which to price risk for the EUR, but consider the last estimate was 3.2% and 2.5% respectively. Any impact on the EUR will come from the extent of the revisions. June remains the likely forum for the ECB to start a cutting cycle. Biased long of EURJPY given the bullish momentum for 163. US Politics – The South Carolina REP Primary is held on Saturday – will this be the stage for Nikki Haley to formally exit the REP Nominee race? Marquee corporate earnings reports • US corporate earnings – Home Depot (Before-market 20 Feb), Walmart (Before-market 20 Feb), Nvidia (After-market 21 Feb) • ASX200 Corp earnings – COH (19 Feb), BHP (20 Feb), WOW (21 Feb), RIO (21 Feb), QAN (22 Feb), FMG (22 Feb) • HK Corp earnings – HSBC (21 Feb)
PEPPERSTONE:NAS100
by Pepperstone
RBA meeting preview – transitioning away from a tightening bias Time: Tuesday at 14:30 AEDT With the Fed, ECB and BoE now having offered their guidance on policy and all largely pushing back on the pricing of imminent cuts, it’s the RBA who steps up as a risk event for traders on Tuesday. Like the aforementioned central banks, the timing and the extent of RBA rate cuts are the subject of much debate among local market participants - all with fairly strong and dispersed views on when the first cut plays out. What is more important to drive the reaction in the AUD or AUS200 are market expectations and what is being priced. The best way to measure these expectations is through the Aus 30-day interest rate futures, and these are the first derivative by which other markets (such as the AUD) will react to. As we from the table the central view from rates traders is there is very little chance of a 25bp cut at this meeting or the March meeting. The May RBA meeting is considered to be ‘live’ and while this pricing will move dynamically with supply and demand from market participants, there is currently a 56% probability of easing here, with June almost fully priced for a cut. I sit more in the June camp myself. By December ‘24 the market is torn between two or three 25bp cuts, with 64bp of easing priced. Another factor is the pricing of the trough in the cash rate, as this offers a sense of where the collective sees a neutral setting. Here we can look at the forward rates market and see this currently set between 3.50% and 3.25% in 2 years’ time. A 3.5% floor in the cash rate would be conditional on the economy avoiding a recession, where a recessionary environment would require a more accommodative stance and the cash rate likely pulled below 2%. The reaction in the AUD While the RBA won't cut the cash rate at this meeting, the reaction in markets will come from the tone of the RBA statement and any change in the wording that gives a sense of whether there is any appetite to ease from May or June. While cumulative pricing in Aussie rates is certainly nowhere near as aggressive as what we see in the tradable US or EUR interest rate markets, if the market sees no tangible evidence the bank is prepared to cut then May rate cut pricing will be pared back and the AUD should spike higher. Positioning, specifically from fast money leverage funds (e.g. hedge funds), will also play a critical role in the extent of the move to the tone of the statement, and flow reports from investment banks suggest these players running a sizeable AUD short position, albeit not at extreme levels. Given the trend in both headline and core inflation, along with subdued growth and stalling house price momentum, the RBA will almost certainly lose its hawkish bias in the meeting statement. However, they will likely be non-committal and adopt a clear wait-and-see bias. This should loosely put a cut on the table as early as May, but it will be highly conditional on the outcome of the following data points: Wage price index (21 Feb), monthly CPI reports (28 Feb, 27 March), Q1 CPI (24 April), employment reports (15 Feb, 21 March, 18 April) and Q4 GDP (6 March). Certainly, the Q1 CPI is the marquee data point that could decide a May cut, and the RBA would want to see inflation falling below 3.5%. The RBA would also require an unemployment rate above 4% (currently 3.9%) and trending higher to ease. A big day for the AUD It's worth considering that as well as the RBA statement we get the SoMP (Statement on Monetary policy) at the same time, and there will likely be changes to the bank's economic projections – that could put the market on notice. Also, an hour later (15:30 AEDT) RBA Governor Bullock will hold a press conference – this will be important for traders to react to. Gov Bullock will be probed on the broad appetite to cut and once again the reaction in the AUD and AUS200 will be driven by nuance and her urgency to normalize relative to the rates pricing. In theory, the meeting should be a low-volatility affair, with the bank moving to a more neutral setting and welcoming the moves lower in inflation but refraining from saying their work is done. It is still an obvious risk though for AUD exposures, so do consider position sizing over the event and consider where you see the skew in risk. As we move into the meeting AUDUSD is tracking a range of 0.6625 to 0.6550 – a break of this range could be quite powerful. Sentiment towards global risk assets is a contributing factor but as I say, around the meeting how the RBA are seeing things relative to market pricing will likely be the driving factor.
by Pepperstone
The RBA to join the rate cut party in May?Aus Q4 CPI came in at 4.1% yoy, with the trimmed mean measure at 4.2% yoy – both were nicely below the economist's median forecast, and importantly below the RBA’s own forecasts of 4.5% for both metrics. We also saw the more timely monthly (December) CPI print coming in at 3.4%; a 90bp improvement – and just 40bp away from the 2-3% target band. Next week’s RBA meeting looms large, and the tone of the statement should reflect a bank seeing inflation moving towards target, yet they will make it clear this is no time for victory laps and more needs to be done. The RBA will be enthused by the fact core inflation is below the RBA’s cash rate – subsequently, we have a positive real cash rate for the first time since 2016 - this is a small but welcomed victory for Bullock and co. With both core and headline CPI nicely below the November Statement on Monetary Policy forecasts, we question the possibility of tweaks to their projections for June and December 2024 CPI. These currently sit at 4% by June and 3.5% by December, so any revisions to these estimates could result in some solid movement in interest rate futures and by extension the AUD and AUS200. Aussie economic data has generally come in below market consensus expectations of late, so the pricing of expected RBA policy – through interest rate futures - has been part-validated in today’s CPI print. Looking at Aussie interest rate futures, the market prices no chance of a 25bp cut in either the February or March RBA meeting, and if anything, the RBA statements at these meetings need to lay the groundwork for cuts – although the tone of the guidance will be data-dependent. While much of the disinflation has been driven by tradables, a 25bp cut in May is a real possibility and the market prices this at 50% - so essentially a coin toss. We see two 25bp cuts priced by year-end. Eyes on Gov Bullock Gov Bullock speaks next Friday (09:30 AEDT) and while she speaks after the RBA meeting statement and SoMP (both on Tuesday 14:30 AEDT) her testimony will be scrutinized and will move interest rate pricing, and by extension the AUD. I think we’ll have a fair idea of the timeline for potential policy easing from here. Gov Bullock has a straightforward job – time rate cuts perfectly. Obviously, that’s easy to say but tough to do in principle but if we focus on the capital markets, we see little risk of an implied policy mistake and we see the ASX200 at all-time highs, with bank equity and consumer-sensitive stocks in rude health. AUD 1-month implied volatility resides at 12-month lows, while the Aussie housing market shows few concerns. I guess this is an issue with setting policy on quarterly core inflation -it is a slow-moving beast and clearly a lagging indicator the fact it is still 120bp from target feels like a hawkish Bullock may keep the peddle to the metal for now. The market will put more weight on the monthly CPI reads. I also consider the frequency of central bank speeches, and this is where the RBA, the ECB and the Fed differ in a big way – In Australia, we simply don’t have the plethora of central bankers that speak almost every day, and it's often a long time between drinks for the RBA speeches. This is quite refreshing, but in times like this it can be useful to know how each member stands, giving almost real-time commentary on policy. Anyhow, the markets speak out – the door is ajar for a cut in May but easing will be gradual relative to the Fed, ECB, and other G10 CBs. We also see the floor in the RBA cash rate priced at 3.5%, so loosely four 25bp cuts are priced to a ‘terminal’ level. The RBA won't try and keep pace with the Fed, they will work on their own merit and focus on their set of economics – either way, the trajectory for CPI suggests we will join the rate cut party and a ‘soft landing’ seems to be the more probable outcome, at least judging by the message from the markets.
PEPPERSTONE:AUS200Long
by Pepperstone
AUS200 – 7632.8 in our sightsWhile the AUS200 revisits the all-time highs set in Aug 2021, the index absorbs a positive mix of sentiment towards global risk, as well as local factors, and many question if this time around we see the illustrious bullish break the bulls are positioned for. While global macro issues remain paramount, one catalyst to look towards is ASX200 1H24 earnings, with Amcor kicking the season into gear (6 Feb) and JBH (due 12 Feb) one that CFD traders will be keen to focus on. CSL (13 Feb) and CBA (14 Feb) report shortly after and both could influence sentiment with their outlooks. The Aussie banks are driving the market from an index points perspective, with materials also finding form. Importantly, we see the ASX200 bank index is flying high at present and until we see the bullish tape in the banks give way, index volatility will remain subdued, and traders will be skewed to buy weakness in the Aussie equity index.
PEPPERSTONE:AUS200Long
by Pepperstone
Is the ASX 200 about to roll over?Looking at the weekly chart, bulls may have something to worry about. The market is yet to even test 7500 let alone break above it, and each time it has tried (and failed) to do so, the ASX has fallen by double digits in percentage terms. A bearish engulfing candle formed in the first week of the year after once again faltering at those cycle highs. And if we're to see even just a 10% drop from the 2024 high it could, the index will find itself back beneath 7000. But if bears really get their way for another -16% drop, the ASX will be back around 6400. What could make that happen? Well, markets have been aggressively pricing in 5 - 7 Fed cuts this year which may not arrive. And if the wheels fall off the global economy to justify said cuts, that could also be bad for the stock market. So bulls may want to ask themselves if they want to be along at these levels, where the market is yet to every trade above it. As we could be in for a deeper pullback at the very least.
CITYINDEX:AUSTRALIA200CFDShort
by CityIndex
A Traders’ Weekly Playbook; Buying risk when its darkestA Traders’ Playbook; Buying risk when its darkest Equities continue to find few friends and reviewing so many of the daily and weekly set-ups in our core equity indices, standing in front of the move and countering seems a low probability outcome at this juncture. The China CN50 and AUS200 look particularly weak, while EU equity markets are in steep decline, with price breaking level after level. In the US, the NAS100 sits on a huge support zone seen between 14,560 and 14,430, with the US500 eyeing the 4 Oct swing low at 4200 – if these levels are broken this week and SPX 20-day realised volatility rises further, then market chatter will centre on the S&P500 pushing towards 4000. The contrarians have started to look at sentiment and throw out a range of charts, including deteriorating market breadth and the number of stocks (in an index) below the 20-, 50- or 200-day moving average, that have an RSI below 30, or resides at 4-week lows. On current standings we’re not yet near a point of maximum bearishness. The CNN Fear and Greed can do a good job capturing the mood across markets and this says a similar message. The time for contrarianism is approaching – and who doesn’t love a tradeable V-bottom – but it isn’t now. Maybe corporate earnings can have a more positive effect and stabilise sentiment. With 47% of the S&P 500 market cap reporting this week, this is the week it could happen, and guidance and outlooks from CEOs can play a more important role. The macro matters though, and we continue to focus on geopolitical headlines, moves in the US 10- and 30-year Treasury, volatility, and energy markets. With bonds offering no defence in the portfolio, traders continue to manage drawdown risk through volatility, gold, and the CHF as the preeminent hedges. The USD hasn’t performed as well as some had hoped through this period of equity drawdown and rise in long-end bond yields. One factor is that we’re seeing a rise in EU and Chinese growth momentum, so the rest of the world is looking less bad. We also regress and understand that the CHF acts more like gold in times of geopolitical tensions, and after a 7.8% rally between July and October (in the DXY), consolidation in the USD index was always a possibility. Keep an eye on USDCNH and USDJPY as a guide, and the fact we see both pairs in a sideways consolidation is keeping broad G10 FX volatility subdued and a factor keeping the USD from moving freely on a broad FX basis. As many try and pick a turn in equity markets, a bounce in risk this week can't be ruled out, and we need to be open-minded to all possibilities – its fighting an evolving momentum though and many will prefer to initiative (or add) shorts into any rallies, rather than fight it. Buying risk when it's darkest and sentiment is rock bottom is a well-adopted market philosophy but I’m not sure we’re there just yet. Marquee data points for next week: • EU manufacturing/services PMI (24 Oct 19:00) – the market consensus is we see the diffusion index print 43.6 (from 43.4 in September) and the services index at 48.6 (from 48.7) • UK manufacturing/services PMI (24 Oct 19:30) -– the market consensus is we see the diffusion index print 44.6 (from 44.3 in September) and services at 49.3 (unchanged 49.3). A better services print could see a big reaction in GBP given how short the market has got. • Australia Q3 CPI (25 Oct 11:30 AEDT) – the consensus sees headline CPI at 5.3% yoy (from 6%) / core CPI at 5.0% yoy (5.9%). The Aussie interest rates markets price a hike on 7 Nov at 34% - so, if we get a CPI print above 5.4%, we could see the market pricing a hike at the November RBA meeting at or above 50%. AUDNZD has been the best expression for AUD bulls but is coming into a supply zone around 1.0850. • US S&P manufacturing/services PMI (25 Oct 00:45 AEDT) – a data point the market could completely ignore or could be the trigger for a sizeable reaction – the consensus is we see manufacturing at 49.9 (from 49.8) and services at 49.9 (50.1). • BoC meeting Canada (26 Oct 01:00 AEDT) – the swaps market ascribes very little chance of a hike at this meeting, and only 6bp of hikes through to March 2024 – if the tone of the statement suggests a greater risk of hikes in the future, then the CAD should rally. • ECB meeting (26 Oct 23:15 AEDT) – the ECB won’t hike at this meeting, so the focus falls on their guidance on the economic outlook and hurdle for hikes in the future. There will also be a focus on the bank’s plans to increase QT, and even look at the timeline on sales from APP and PEPP bond purchase program – if this is brought forward from Jan 2025 the market would see this EUR positive. • US Core PCE inflation (27 Oct 23:30 AEDT) – US headline PCE inflation is eyed at 3.4% (from 3.5%) and core 3.7% (3.9%) – it would have to be a big number to put a hike at the Dec FOMC meeting on the table – a November hike is not up for debate and the market sees a hold as a full-gone conclusion. • Chile central bank meeting (27 Oct 08:00 AEDT) – The market looks for a 50bp rate cut, but there are risks for 75bp – can USDCLP print new cycle highs? Central bank speakers: Fed speakers – Powell (26 Oct 07:35 AEDT – unlikely to offer any new market intel). Waller (27 Oct 00:00 AEDT) and Barr BoE speakers – Cuncliffe (27 Oct 03:45) RBA speakers – Gov Bullock (24 Oct 19:00 AEDT) & Bullock and Kent both appearing at the Senate testimony (26 Oct 09:00 AEDT) Marquee US earnings and the implied move on the day of earnings (derived from options pricing) – on the week we see 43% of the S&P500 market cap reporting. Marquee names include - Alphabet (4.8%), Microsoft (4.1%), IBM (2.7%), Meta (8.6%), Amazon (6.4%), Intel (6.6%), Exxon (2.4%)
PEPPERSTONE:NAS100Short
by Pepperstone
Most difficult trading environment since 2011I've been trading since 2003. And if you're a position (swing trader , medium term) trader, you'll know there comes a time where the markets flow in a difficult range... There are two types of markets when it comes to strategies. Favourable and Unfavourable. Right now, I don't mean to speak for everyone else, but I believe the markets are in an unfavourable territory for medium term traders. Initially, I was blaming the JSE ALSI 40 (South African) index. I blamed the Load Shedding (cutting of electricity) Incompetency of the government providing sufficient water and services I blamed us being downgraded to grey (which has pushed out Foreign direct investments). I blamed the low liquidity and volume and the blame game kept going on... But then I realised something even more problematic. This horrible market environment has not only been for the JSE ALSI 40... It's been for the ASX (Australia), CAC40 (France), DAX (Germany) and even UK 100 (FTSE 100)... And I'm sure there are a lot more stock markets that have had this tight and ongoing range... So, what market environment are we in at the moment. It's not going up so it's not the Mark-up phase It's not going down so it's not the Mark-down phase We can either call it Accumulation or Distribution, but it's been moving in a sideways range for obver a year. So clearly we are in a larger market environment, which is known as the capitulation stage. The volumes are low worldwide, the prices are erratic and volatile. Many traders and investors are holding tight onto their money and not even dabbling into these markets at the moment. How long will this last? Well in 2011, it lasted two years. And right now, we are not seeing any strong signs of change yet... So what do we do? Well I don't have the holy grail nor some incredible points. But I can share what I'm doing during these timultuous times... 1. I've reduced my risk to 0.5% to 1% per trade (Instead of 2%). 2. I'm always hedging with Longs and Shorts 3. I'm trading other markets (Forex, Indices and intraday trades). 4. The drawdown isn't bad so I haven't halted trading 5. I've come to terms that this is the new normal for the next year or too. Expect disppointment and you'll never be disappointed. You learn a thing from Marvel Movies now and then... What are you doing and can you relate to these difficult trading conditions right now? What are your thoughts on the matter?
JSE:J200Long
by Timonrosso