Cyber crime is becoming an increasing concern as we saw again overnight when the AP Twitter feed was hacked and said that the Whitehouse had been attacked. In the blink of an eye stocks fell and wiped of around $136 billion worth of market cap as you can see in the 15 minute chart below and the very long tail candle.
This type of thing poses an interesting question for traders because anyone with prudent risk management would have been stopped out of positions in that blink of an eye. No doubt those that were will not have been happy and will be a bit filthy this morning but stops are there for a reason and as disappointing as this move will have been in stocks and other markets the move reveals the structural weakness in the market – so if the Whitehouse had really have been bombed markets would have really tanked and the stops would have been effective.
So we just chalk it up to one of those things, implore AP and other market moving twitter feeds and Twitter itself to beef up security and maybe have more complex passwords and move on – but as traders we know it is not a reason to lessen our commitment to risk management but rather the opposite.
But the other really interesting thing about the price action overnight in stocks when we relate it to the data is the structural necessity of free money and low interest rates that seems to be underpinning the market.
How else can we explain the moves in European stocks after the weak data we saw released yesterday and last night. The big miss on the Chinese manufacturing PMI printing 50.5 versus 51.4 expected was followed up by slightly better than expected PMI in France but then a fall to 47.9 from 49 in Germany before the fall in the US Markit PMI print of 52 versus 54 expected and 54.6 last. Indeed the rally was phenomenal when you take the weak data into account with the FTSE up 2%, the DAX up 2.41% the CAC up 3.58%, Milan up 2.93% wile in Madrid stocks rose 3.25%.
Entirely consistent with the data as you can see – NOT!
But therein lies the issue, the expectations that the ECB will now ease rates from their current levels around 1% is somehow seen as a positive. We’re not sure if Japan is a good case study for what is going on in Europe but after a decade or more of low rates the economy hasn’t really budged. But for now accomodative policy is all stock markets care about. Which makes it very fragile as we saw with the AP tweet last night.
In the US stocks recovered from the Twitcrash to finish higher across the board. The Dow was up 1.04%, the Nasdaq up 1.10% and the S&P was 1.06% higher. New home sales were lower than expected and the Richmond Fed manufacturing index fell to -6 from 3 last and against 7 which was market expectations. Once again proving that it is not the economy but free money that is driving the markets. After the close Apple has reported earnings which were slightly better than the sharply downgrade earnings forecasts but lower for the first time in a decade but it is raising its dividend and buying back stock. Cynical some might say – but not us!!!
Which helps explain why the Aussie Dollars fall after the Chinese data yesterday stopped short of a continuation down and through 1.02. The low was 1.0219 and at the time it looked like the sellers were gaining the upper hand but perversely the European and US data reinforces not the fact that the Aussie is a commodity currency assailed by falling commodity prices and lower growth but is a place where you can get 3%+ on your money and are paid ever day for being long relative to most if not all of the developed world.
As you can see in the 4 hour chart above the Aussie has been in a downtrend for a while now and remains below our slow moving average which comes in at 1.0266 which was support a few trading days ago. A break of this level would signal a sharper move higher toward 1.0290.
The Euro fell sharply to a low of 1.2971 overnight and it looks biased lower as we have been alluding to for a few days now. The weak data and lower rates that are clearly on the way are undermining the Euro in a way even though stocks are ignoring the economic reality.
From where we sit using our usual indicators and trading process it seems like Euro is set for a full retracement to 1.27 in the weeks ahead.
Elsewhere USDJPY is still waiting for the resistance at 100 to roll off and away and GBP is respecting the little uptrend line as you can see in the chart above- the 1.5170/20 region is very important support for GBP.
On commodity markets gold fell back a little to $1414 down 0.87% but silver was absolutely poll axed dropping 2.17% to $22.79 and the less lustrous precious metal looks like a shot duck technically now. Dr copper fell another 1.21% which should be taken as a warning against getting too bullish Aussie Dollars just yet and Corn fell 1.12%, Wheat dropped 0.75% and Soybeans rose 0.05%.
CPI in Australia today will confirm or deny the increased chances of an RBA interest rate cut that the interest rate markets have started to price in over the past week or so. tonight in Germany we get the release of IFO and then Durable goods in the US.
It is a holiday in Australia tomorrow as we remember Anzac Day and the diggers sacrifice and contribution to our nation. We’ll also watch our beloved Collingwood crush Essendon but we’ll be back on Friday