Markets are strange creatures and even though US non-farm payrolls on Friday night exceeded pundits expectations of 125,000 with an increase of 171,000 in October US stocks closed lower having been in the red for most of the day.
Crude oil and gold were sharply lower as the US dollar’s strength reinforced the selling pressure on them and in turn on US equities tied to energy. This put US equities just into negative territory for the week at the end of Friday’s trade.
After the week that markets had and in the run up to the Presidential election on Tuesday and with the fiscal cliff looming for the US it is hardly surprising that traders found the cloud amongst the bluish sky rather than the silver lining of the jobs report.
Reuters reported this morning that the draft communique from the G20 meeting over the weekend would highlight the risks to growth:
“Global growth remains modest and risks remain elevated, including due to possible delays in the complex implementation of recent policy announcements in Europe, a potential sharp fiscal tightening in the United States and Japan, weaker growth in some emerging markets and additional supply shocks in some commodity markets,” the draft said, according to the source.
Usually the 4th quarter of a Presidential election year can be a good solid one for stocks but with all the global headwinds and with stocks still up at quite heady territory given the economic backdrop the chances are that 2012 is one of those exceptions to the rule.
At the closing bell the S&P 500 was down 13.39 pts or 0.94% to 1414. Interestingly the recent uptrend line that the S&P broke lower through was retested and rejected in early morning trade before the push lower. The Dow dropped 139 points or 1.05% and the NASDAQ fell 1.26%. This week’s election could mess trading up a bit but once it is out of the way with fiscal cliff will come sharply into focus.
In Europe the FTSE was up 0.11%, the DAX barely changed up 0.01% while the CAC fell 0.13%.
Gold and crude both fell on Friday night buffeted by the US dollar’s strength. Gold fell $40 oz or 2.33% to $1677 and even though I am bearish longer term and my medium term system has been short for a couple of weeks it remains within the uptrend. Support is the 200 day moving average at $1662 and then trendlines at $1633 and $1620. Silver was also pressured falling 4.32%.
Crude fell 2.56% to $84.79 Bbl and I’m watching $84.42 as a key level for a deeper pullback. The Ags were all lower as well with corn down 1.53%, wheat dropped 0.46% and soybeans were off 2.02%.
In FX land it was a tale of US dollar strength and I think we are on the cusp of a strong USD pulse higher. Confirmation is needed still and for the euro perhaps a break of 1.2800 decisively might be it. GBP looks terrible on the charts, USDJPY traded at a 6 month high and the Aussie was smashed back from 1.04 again. Euro closed the week looking very ordinary.
Lets have a look at some Met4 charts from my AVATrade platform.
EUR/USD: The euro was looking very weak at the close sitting just on the 200 day moving average at 1.2830ish. The reversal off the high of 1.2950 to the low 1.2820 Friday night was quite telling and my medium term trend indicator has now turned down for the Euro. Of course the 1.2800 level remains the range bottom for now and 1.2808 has been the low so far this morning but a move below 1.2785 could signal a big turn.
AUD/USD: USD strength and a sell off in equities combined to knock it off its pedestal for a bit. The high of 1.0418 was inside the level that I identified as a break higher so no longs were instituted thankfully and the Aussie reversed to a low of 1.0330 on Friday night and it sits around 1.0338 this morning. Support is at 1.0295/98 this morning.
Data: It is a big week for Australia with the RBA meeting tomorrow and we kick off today with the AiG Performance of Services index and the TD Inflation data before ANZ Job Ads, Retail Sales and the September trade balance. In China today we have the HSBC China Services PMI and In the US tonight ISM non-manufacturing PMI.
Here is how the markets looked this morning.
Twitter: Greg McKenna . He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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