We learnt just how much traders love the Aussie dollar and stocks overnight

August 22, 2014

I have the theme to the Lego Movie running through my head this morning,  Everything is awesome, or that seems to be the way that traders in stock markets want to play it given the S&P 500 made a fresh all-time high in overnight trade – its 28th for the year apparently.

Likewise Aussie dollar traders in Europe showed those of us in Asia that they haven’t given up on the battler either after the weaker than expected HSBC Flash PMI of 50.3 saw it trade down to a fresh 2 month low toward the bottom of the 92-95 range.

It’s an entirely appropriate response given the rules of trading say “Trade the range unless or until it breaks”

Simple game for simple blokes as we highlighted yesterday.

So as we entered the evening session and European traders entered the fray the weakness in Asia was washed away.

The Dow was up 61 points or 0.4% to 17,040 while the Nasdaq gained 0.1% to 4,532. The S&P 500 rose 6 points to 1,992.35 its 28th new all-time high for the year apparently.

I can’t get too excited about all the ex-poste rationalisation as to why the market keeps going higher. The key point is that the market, traders, investors, fund managers and so on just keep buying. Indeed overnight the AAII investor sentiment survey came out with 46.11% of retail investors saying they are bullish – the highest level since December 26th.

But perhaps the key to the constant inability of the market to go down, or durability of the rally, could lie in this statisitic. Even at the highest level for 2014 there are still a majority of respondents who are either neutral or bearish. It’s the perfect pre-conditions for what Dennis Gartman said is a market “melt-up“. Mybe it just doesn’t matter if investors are bragging about buying the dip.

In Europe though the bet is clearly on Mario Draghi and QE as the economy weakens. last night’s flash PMI’s were mixed, Germany (52) was a little better than expected while EU wide (52.8) was weaker than expected. But at the close of play the DAX was 0.94% higher at 9,402, the CAC kicked 1.23% higher while stocks in Milan and Madrid also rose up 2.07% and 1.30% respectively. In the UK the FTSE rose 0.33% amid disappointing retail sales (+0.1% versus +0.4% expected).

Today on the ASX it would be reasonable to expect a better day with futures for September showing the SPI 200 is up 10 points to 5613.

Watch this chart of the SPI today’s trade is crucial for the outlook.

Chinese and Hong Kong shares were hit by the weakness in the HSBC Flash PMI yesterday which at was 50.3 with all components weakening was a big miss. The Hang Seng fell 0.66% to 24,994 whiles shares in Shanghai fell 0.46% to 2,230 but well off the lows for the day. In Tokyo the flash PMI was a beat at 52.4 which along with USDJPY weakness helped the Nikkei rise 0.85% to 15,586.

On currency markets the Euro is at 1.3280 and GBP still becalmed with weak retail sales at 1.6579 and USDJPY is at 103.72 – still just below the 16 year trendline.

On commodities the sell off in iron ore continued and September futures fell 0.75 cents a tonne to $90.25. Newcastle coal rose 5 cents to $69.70 a tonne. Crude is now trading Septmber and that contract rose 5 cents to $93.90, gold fell $20 an ounce to $1,276 while silver is at $19.41 overnight. On the Ags corn rose 0.76%, wheat was 1.25% higher and soybeans 1.47%.

On the data front there is a drought of releases but that said nothing matters except what Fed Chair Janet Yellen says at Jackson Hole today. Draghi is also speaking.

 

Social

Free Daily Market Update

Live Spreads

SymbolBidAskSpread

Spread

Sign up to the latest forex news and daily FX trading setups

Get started with a FREE $50,000 demo account