Needless to say, the widely anticipated 25 basis point cut to the Fed Funds target rate (now standing at between 2 and 2.25 per cent) wasn’t enough for President Trump; I think many were thinking along his lines when, as a trading room dealer would describe the reaction as: ‘’buy the rumour, sell the fact’’. Fed chairman Powell called the move a ‘’midcycle adjustment’’. Today the MPC meets at Threadneedle Street and they’re bound to keep the Bank Rate at 0.75 per cent; they also publish their Quarterly Inflation Report. Don’t breathe a sigh of relief just yet because tomorrow, Friday 2nd August, the US publishes its July employment statistics.
Continued demonstrations in Hong Kong, several hundred last night clashed with police, about 44 of whom are facing serious charges. Now Bloomberg reports that the White House is monitoring the situation on the border with the mainland. China accuses the US of egging on the protestors – whose initial target was proposed extradition, then called for Hong Kong’s chief executive Carrie Lam to resign, and now they’re focusing on Communist Party interference with the island’s autonomy. The news agency claims that an anonymous US official briefed the media that there was a sudden ‘’congregation’’ of Chinese forces at the border with Hong Kong.
DAX 30
Yesterday’s dragonfly doji settled below the neckline of an irregular head & shoulders top, and on trend line support taken from this year’s low. It denotes instability and has turned the MACD more clearly bearish. The top-heavy look of this daily chart is not mirrored in the monthly one.
SHORT TERM TRADER: Short at 12360 and 12100; stop above 12500. First target 12000, then 11800.
POSITION TAKER: Will go short on a close below 12100 tomorrow.
FTSE 100
Furious with the market and with myself as this week’s price action is looking increasingly like a false break above 7600 and a spike high. The monthly candle is looking like a shooting star today.
SHORT TERM TRADER: Will re-sell on a close below 7600 tomorrow.
POSITION TAKER: New short at 7570 based on the monthly candle; stop above 7730. Target 7000.
S&P 500
Momentum’s turned marginally bearish and yesterday’s sell-off suggests an interim high has been found. Price action this month is another, far smaller, broadening top at the top of the big one that’s been building since early 2018. This fractal patterning adds weight to our view that US equities are in a slow process of topping. July’s monthly candle is the tiniest of shooting star style dojis – not healthy.
SHORT TERM TRADER: Will sell on a close below 2960.
POSITION TAKER: Will sell on a close below 2960 tomorrow.
BRITISH POUND/US DOLLAR
Still oversold as it holds the 1.2100 level by the skin of its teeth - the lowest price since March 2017. This, however, is not a key chart level so plenty of slippage should be factored in.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
EURO/US DOLLAR
Yesterday’s drop is, I’m afraid, rather bad news for an already oversold euro. It puts it at its weakest since May 2017 and the lowest monthly close since April 20177. It also continues the slowly descending series of small monthly candles that has dominated since early 2018.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
GOLD
Another market that looks as though it’s seen a false break above 1440 this month.
SHORT TERM TRADER: Will probably re-sell on tomorrow’s close.
POSITION TAKER: Square.
