Stocks and US dollar under pressure, Aussie finds support

December 4, 2013

The boards are not a pretty site for stock bulls this morning with a sea of red across global bourses.

I’ve been short the S&P and SPI 200 from a couple of weeks back waiting for the moves we are seeing right now on the basis of two primary drivers. One was my technical set up and the other was that I thought there would be a natural focus on the slim but real possibility that the FOMC would deliver Dectaper later this month at its end of year meeting.

And so it seems that overnight there was a natural focus on the strength of the US economy, Friday’s non-farm payrolls and the FOMC in a couple of week’s. More recently just this week I have also noticed on Twitter the number of people talking about how strong December is usually for stocks suggesting that some of the November rally was pre-emptive and leaving little fuel in the tank for strength in December. We are only a few days into December so time will tell.

So at the close the Nasdaq is holding onto the 4000 level but has slipped 0.2% to 4,037. But the Dow and S&P 500 have slipped through 16,000 and 1800 respectively. The Dow is down 0.59% at 15,914 while the S&P at the close is off 0.33% to 1,795.

You can see in the chart above that in S&P 500 terms I am out of the money still but a break of 1772 will reinforce the bearish outlook.

In Europe the stock market meltdown was more acute with the FTSE off 0.96%, the DAX down 1.90%, the CAC off a huge 2.66% while in Milan and Madrid stocks fell 1.95% and 1.44% respectively.

Closer to home the SPI 200 contract on the ASX continues its free-fall losing another 34 points overnight to 5218 bid at 8.00 AEDT.

The ASX looks like it is headed under 5100 as the cascade accelerates.

Turning to Gloabl FX markets there was a big reversal for the US dollar (as counter intuitive as that is if there is going to be a Taper) helped lift the Aussie dollar off its low at 0.9043 overnight but equally both NAB and Westpac have told clients in the past few days they would be buying under 0.9050. It sits at 0.9130 this morning up 0.24% over the past 24 hours.

I bought some Aussie yesterday, both before and after the data, and the stop is below the trendline you can see on this chart which stretches back to the low in 2008. 0.9200/20 needs to break to kick it higher though.

Elsewhere  the US dollar tumbled against the Yen with USDJPY making a high of 103.37 but it is back at 102.06 this morning not far off the low of 101.97. Euro is higher, rising 0.4 % to 1.3594. GBP is up 0.27% to 1.6399.

On commodity markets the US dollars reversal didn’t lift gold at all and it sits at $1,222 oz this morning. Gold has a similar chart/trend level to the Aussie so I also bought some gold with a stop under this years low for a rally.  Silver fell 1.08% to $19.01 oz but Crude rallied 2.33% to $96.01. Copper fell 0.47% to $3.20 lb. On the Ags corn rose 1.32%, wheat was 0.62% while soybeans dropped back a little down 0.13%.

On the data front today we get the release of Australia’s 3rd quarter GDP at 11.30 AEDT. Partial data over the past few days has lead to a number of upgrades to forecasts and a number around 0.8% would be on the money for expectations.

Elsewhere it’s non-manufacturing PMI day with the HSBC China Services PMI due in our time zone before a raft of European and other services PMI’s to be released tonight. Euro area GDP and retail sales tonight will also be important in guiding expectations about what the ECB will be doing with monetary policy.

In the US tonight we see the ISM non-manufacturing PMI, new home sales, the Fed’s Beige book and crude stocks.

 

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