Yesterday evening the Italian government passed a draft budget for 2019, including a higher deficit target of 2.4 per cent to carry out its election manifesto. Some EU big-wigs have already disapproved of the idea. This will be reviewed in Brussels on Monday. Separately, Reuters reports that the European Central Bank will not help the country if either its government or its banks run into trouble. In order to be eligible for help, Italy would first have to apply for a bailout from the EU. So much for lender of last resort!
Today China and London-based HIS Markit, a publisher of bond market data, announced a tie-up to make the market more transparent. CNBC also reports that it’s the third biggest fixed income sector in the world, worth the equivalent of $12 trillion. Named the iBoxx ChinaBond Government and Policy Banks Bond Indexes, it’s quite a mouthful.
DAX 30
Scared investors taking comfort from yesterday’s bounce from 11400, the lowest level since December 2016. Cold comfort. Yesterday’s massive dragonfly doji denotes instability and was capped at the key 11720 level – as it is so far this morning. If this continues to be the case all day it is not a bullish sign. Note that momentum is nearly as bearish as late June.
SHORT TERM TRADER: Short at 11600; stop above 11885. Target 11200.
POSITION TAKER: Short at 12100; stop above 12000. New target 11200, the half-way mark of the rally that started late in 2016.
FTSE 100
The good news is that we’ve bounced and have a powerful hammer candle on the daily chart. The bad news is that bearish momentum is stronger than it’s been since February’s rout, that the rally was capped at long term (old support) at 7100, and that the cash indices which gapped lower on opening yesterday have thereby filled their gaps. A weekly close below 7000 might add to downside pressure.
SHORT TERM TRADER: Square but looking to re-sell on a weak weekly close.
POSITION TAKER: Took profit at my original 6925 target yesterday. Looking to re-sell depending on today’s close.
S&P 500
This is what happens when the cogs on a funicular railway slip. Back to where we were in July, 230 points below peak for a loss of nearly 8 per cent. Classic October scare. Trying to hold above 76.4 Fibonacci retracement support at 2750. Let’s see.
SHORT TERM TRADER: Covered my short just ahead of the 2700 target as the move was so fast. Not bad for a day’s work.
POSITION TAKER: Square.
BRITISH POUND/US DOLLAR
EU in rapprochement mode ahead of the European Union leaders’ summit in Brussels on Wednesday 17th October.
SHORT TERM TRADER: Long at 1.3075; stop below 1.3150. Target 1.3300.
POSITION TAKER: Square.
EURO/US DOLLAR
Bearish momentum all gone as the euro rallies back above the 1.1500 watershed area.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
GOLD
Bursting above trend line resistance as investors believe they can take shelter here from the stock market storm. Pity prices have corrected a mere 38 per cent of the most recent decline.
SHORT TERM TRADER: Square.
POSITION TAKER: Stopped out of my short position – at last.
