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Market Outlook: China moves and data set off further jitters

Can the economy grow at 5.7 per cent this year?
September 9, 2019

Late Friday the People’s Bank of China loosened financial conditions further by cutting the ratio of reserve requirements commercial banks are obliged to hold. From today these will be 50 basis points lower than they were last Monday and some qualified banks will see their ratio drop by 100 basis points. Data published early this morning show that exports from the Chinese mainland in August fell by 1 per cent, well below analysts’ expectations, with trade to the US hit especially hard. Meanwhile imports fell by 5.6 per cent so that the trade surplus fell to $34 billion from $44 billion in July.

The Financial Times reports this morning that up to one third of so-called foreign direct investment consists of multinational firms shifting funds to minimise taxes. The study carried out by the IMF and the University of Copenhagen underscores the role competitive corporate tax arbitrage as had, and the need for tax reform.

DAX 30

This last fortnight’s bounce from 50 per cent retracement support has seen the strongest weekly close in 5 weeks and had taken the market back to where it was in March. News from Bloomberg this morning that ‘BMW & Co are losing their allure, and that’s got Germany worried’.

 

SHORT TERM TRADER: Square.

 

POSITION TAKER:  Square.

FTSE 100

This fortnight’s bounce has seen the index retrace half of August’s drop, yet like the Dax, the MACD remains bearish. Now let’s see what the script in Westminster looks like. I understand the judiciary are annoyed that they are being dragged into this endless issue. City AM reports today that the UK’s largest wealth manager, St James Place, has been forced to rush out a statement after a whistle-blower spoke to the Sunday Times outlining the lavish perks partners benefited form, ‘like something out of the Wolf of Wall Street’.

 

SHORT TERM TRADER:   Short at 7255; stop above 7350. Target 7060.

 

POSITION TAKER:  Square.

S&P 500

 

Bouncing almost too this year’s record highs despite bullish momentum being pathetic since early May. As if things weren’t silly enough, CNBC reports that JP Morgan has created an index to track the effect of Trump’s tweets on financial markets.

 

SHORT TERM TRADER: Square.

 

POSITION TAKER:   Square.

BRITISH POUND/US DOLLAR

Last week’s close just above trend line resistance wasn’t enough to turn the MACD bullish.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

EURO/US DOLLAR

Bollinger bands widening out a bit as traders give themselves more room for manoeuvre ahead of this week’s penultimate ECB rate-setting meeting for Marion Draghi; further easing is expected. The weekly dragonfly doji reflects this sentiment and denotes instability.  

 

SHORT TERM TRADER:  Long at 1.1030; stop below 1.0950. Target 1.1150.

 

POSITION TAKER:  Square.

GOLD

This market is still very overbought despite a second successive shooting star weekly candle. Note that some hedge fund managers continue to talk up their gold holdings.

                            

SHORT TERM TRADER:  Short at 1520; stop above 1560. Target 1440.

 

POSITION TAKER:  New short at 1507; stop above 1560. Target 1440.

Nicole Elliott is a long-standing member and Fellow of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.