Trading Journal

The European Indexes consolidated near highs and investors evaluated data on labor, production and housing to measure the strength of the US economy. The US markets will be closed tomorrow for the Thanksgiving day.

Six of the top 10 industries in the SP500 rose today, with telephone and technology companies presenting the greatest gains. Energy shares were the most depreciated, falling 0.6% before the OPEC meeting tomorrow. Deutsche Telekom said that together with the French Orange is in preliminary talks with the British group BT to launch an offer on the Franco-German joint venture EE.

In order to stabilize crude oil prices, Saudi Arabia led negotiations with Venezuela, Mexico and Russia, to reach an agreement to reduce production. Although the OPEC countries are favorable to a decrease in production, the share of each member is a source of contention.

The US economy grew 3.90% in the 3rd quarter of this year, surpassing not only the estimates of economists (3.30%) as the initial forecast of the Commerce Department, the public agency responsible for the calculation of GDP. Contributing to this upward revision were private consumption (+ 2.20% vs 1.90% estimated) and investment (10.7% vs 5.50% predicted). On the negative side, exports have been revised downwards as well as public spending.

Inflation linked to GDP increased by 1:40% in the 3rd quarter. The price of real estate in 20 major US metropolitan areas increased, year on year, 4.90% in September. Consumer confidence unexpectedly fell from 94.5 seen in October to the current 88.7.

Due to the celebration of the Thanksgiving Day tomorrow and the reduced session on Friday, it is not excluded that at the end of the day some managers reduce their market exposure. While we celebrate the Day of Action Thanksgiving, OPEC will meet in Vienna and will decide if production decreases, a decision that will influence the price of oil and reflection of the equity markets. On the same day, various data will be reported in Europe. Therefore, it is not excluded that many American managers who will only return to their trading rooms on Monday take a prudent stance.

The European Indexes showed some gains today. From a macroeconomic point of view, this week will be important to to understand the current economic situation. The indicators on this week should condition the economic projections of the ECB at its December meeting, as well as their propensity to implement a sovereign bond buying program.

Oil fell to a four-year low after OPEC kept its oil production unchanged at today’s meeting, dragging down the shares of energy companies, Gulf-region stocks, and the Norwegian krone. The oil market is facing a revolution with the production of oil shale in the US. This revolution allowed the US to increase by 50% its production of oil in just two years.

Today was the Thanks Giving Holiday in the United States, and as expected, a day with less volume in the markets. Yesterday US markets closed with modest gains. The costs of American families grew 0.20% in October, offsetting the fall 0.20% observed in September. For the real estate market, sales of new homes during the month of October reached the 458,000, representing an increase of 0.70% compared to the estimation of 470,000. Compared to the previous year, the growth was 1.80%. This data reinforces the perception that the housing market has entered a new phase of expansion after the standoff in the summer of 2013. The Chicago manufacturing activity index PMI recorded a fall in November for 60.80, against the estimation of 63.00.

It has been a great Bullish Ride for the major World Indexes.
I'm grateful for the extraordinary trading week.

The forum is a great help.
Which you all a nice weekend. :-)

Next week should be heavy volume in the U.S. market to make up for it ;)

US shares rose, after the SP500 Index retreated the most in more than five weeks yesterday. This rise was influenced by the rise in the prices of biotechnology and energy companies and data on construction spending supported the confidence in the economy.

The SP 500 fell 0.7% yesterday, the biggest drop since 22 October, with weaker sales data from Black Friday.

Today’s data showed that construction spending rose more than estimated in October. The government labor report, later this week, may reveal that companies added 230,000 payrolls in November, while the unemployment rate is expected to remain at 5.8%, according to the consensus forecast by economists .

Yesterday the major stock indexes ended the session in positive territory, with the optimistic investors believing that new monetary stimulus measures will be announced on the ECB meeting, next Thursday. Leading the gains were the companies in the oil sector, recovering from six consecutive sessions of declines.

Asian markets ended positive with the Chinese market leading the gains after the improvement in the indicator of services in the country.

In macroeconomic terms the disclosure of Retail Sales in the euro area were in line with expectations and in the afternoon the attention will be turned to the ADP Employment Change, Nonfarm Productivity, Unit Labor Costs and ISM Non-Manf. Composite, Beige Book in the United States.

Auto sales in the US showed the following numbers: BMW (-2.3%), Mercedes (00:58 +%), Volkswagen (+ 3.2%), Audi (+ 22%) and Porsche (+ 18%).

Siemens Engineering signed a contract worth 1.3 billion zlotys for the construction of a power plant and heating for the largest refinery in Poland, PKN Orlen to.

Shares recovered after an initial decline after the European Central Bank, mention about considering a proposal for an assets buying program, which may include sovereign debt purchase as early as next month.

U.S. stocks rose, with equities heading for a seventh weekly gain, as better-than-estimated payrolls data bolstered the case that the economy is strong enough to withstand an increase in borrowing costs next year.

Employers in the U.S. added 321,000 jobs in November, the most since January 2012, driving wage gains and highlighting increased corporate confidence the economy will endure a weakening in global markets.

Stock market rises at the end of last week were driven by speculation on the possibility the European Central Bank (ECB) decides to adopt a comprehensive program of economic stimulus after the meeting of this institution in January.

Asian markets ended positive. Data released in China showed that exports rose 4.7% in November, well below expectations of 8.0%. Imports fell 6.7%, while economists had expected growth of 3.9%. However, revised data showed that Japan’s economy contracted for the second consecutive quarter.

The major indexes fell today mainly due to falling energy producers with Crude at 5 years lowest value.

The signs of strength given by the employment report in the US relaunched the question of the timing of the first rise in interest rates in this country, which will be the central theme of this week.

In recent months, the labor market has gained greater momentum, culminating in the creation of 321,000 jobs in November and a rise 0.40% of wages. The increase in wages, which until last month had been contained, was the latest sign of strength in the labor market.

Stocks fell, extending the week’s decline for the Standard & Poor’s 500 Index, as energy shares renewed a selloff after OPEC cut its forecast on 2015 demand for crude. Yesterday, the specter of Greece returned to haunt European investors. The Athens stock exchange fell 12% after Prime Minister Antonis Samaras have anticipated the presidential elections in February to December.

Considering the fall of yesterday and the fact that several indicators have accused a loss of upward momentum, a correction for the major indexes begins to gain expression. This scenario will be reinforced if the Dax closes below 9835 (Last week Low).

The main event today was the second auction of liquidity provision by the ECB, the so-called TLTRO (Targeted longer-term refinancing operations). These ECB’s operations are intended to stimulate the provision of credit by European banks, through the injection of liquidity in the interbank market to near 0% interest rates. The first operation took place in September, but banks only required 82 600 M. €, which was well below the 400 000 M. € which were the maximum ceiling that the ECB was willing to give. The European institutions asked the Central Bank for 129 840 M. €, aligned with the estimated value which was expected between 100 000 M. € and 170 000 M. €. A portion of the amount requested today will be applied to replace the loans requested from the ECB 3 years ago and which mature in the coming months and may not represent additional liquidity in the banking system. The outcome of today’s auction may influence the ECB’s decision on the adoption of a sovereign debt purchase program. That the request is deemed low, then the ECB will have more arguments to implement new measures of monetary stimulus, so that the balance of this institution reaches 3 000 000 M. € as intended.

Trading was marked by the reaction of European investors to economic data in China whose industrial production was below expectation. Investors are giving attention to the evolution of oil prices and the political situation in Greece.

Oil price remains under pressure hitting new lows.

The main point of Thursday's session was the loss of much of the recovery achieved during the first hours of trading. Apparently, the mentality of buying the dips would prevail and investors were taking advantage of the fall of the previous day to buy shares in the expectation of a final rally of the year, however, the last hours of trading showed a lack of conviction from buyers. The news that Democrats and Republicans could not reach an agreement in respect of public expenditure plan led many investors to sell. The deadline for agreement was ending at midnight but was finally reached. Still, the future of US indices traded low before the European opening.

The Minister of the United Arab Emirates for Petroleum, said OPEC will not change its output even if the price of crude decline to 40 USD / barrel.

The FED’s meeting on Wednesday shall only gain some relevance shortly before its completion.

After the resilience demonstrated earlier in the week, last Friday the US markets have accused some nervousness before the intensification of threats to equity markets. Many investors reduced their exposure to the market or bought puts (put options) to protect their portfolios. In face of this nervousness, Wall Street recorded the worst weekly performance in the last two and a half years.

Once Charles Darwin wrote something like this:
“It is not the strongest or the most intelligent who will survive, but those who can best manage change”
The same is true for traders: Traders that can adapt faster to the market changes are the ones that get consistent and positive results.

The meeting of the FED constitute a further step in the preparation of the financial markets to the normalization of monetary policy in the US process. Key elements of this meeting are the economic projections of the Central Bank for 2015 and the semantics of the statements that result from the meeting. From the statement, investors will try to assess what will be the timing of the first rise in interest rates as well as what will be the pace of their increases.

The rise in the stock markets was supported by Yellen’s statement (and the consequent reaction of US markets) and also the appreciation of the ruble against the dollar.

The FED introduced the concept of “patience” in its statement by stating “that could be patient regarding the beginning of the standardization process of its monetary policy.” However, the big surprise was that the Central Bank has derived the expression “for a considerable period of time” when referring to keeping interest rates at historically low levels. Additionally, when questioned by financial journalists, Janet Yellen said that the FED would not, raise interest rates at least the next two meetings. Considering that the first two meetings held in January and March, the Fed will not raise rates before April 2015.

Another positive factor that emerged from the meeting was that the Central Bank estimated that at the end of 2015, the reference rates are between 1% and 1.25%. Previously, estimates ranged between 25.1% and 1:50%. Thus, it is concluded that the FED provides that the pace of increases in interest rates will be lower than previously expected. With regard to economic projections, the Central Bank predicts that unemployment stands at 5.25% in the end of 2015 (5.50% was the previous projection) and inflation in 1:30% (compared with 1.70% previously).

In short, the outcome of yesterday’s meeting took more positive contours than investors expected. On the one hand, the timing and the pace of rising interest rates will be benevolent to the financial markets and on the other hand the statement significantly reduced the uncertainty hanging over the future of US monetary policy. These factors combined with the state sold on American indices justified the strong positive reaction of the shares on Wall Street. Considering these factors and the very positive statistical seasonality of American markets during this period of the year, it is not excluded a recovery over the next days. Indeed, the past 28 years, the period that includes the last five sessions of the year and the first two of the new year, the S & P had a positive performance 25 times with an average gain of 1.74%.

The European indexes opened up, a day after they have presented a significant increase in their valuation. Yesterday’s behavior was due to the statement of the US Federal Reserve made the day before. European markets continue to be positively influenced by American indexes but the situation in Greece and Russia as well as the evolution of oil will continue to haunt investor sentiment.

Today is expiration date for futures contracts and options on European indexes. Generally, the expiration days of futures and options are more volatile and likely to be performing erratic movements. The most critical periods are the interval between 10h50 and 11h00 (for futures and options on the Eurostoxx50) and 12h00 (for futures and options on the DAX).

“Do not fight the Fed!”. This old Wall Street aphorism advises investors not contradict the Federal Reserve. In fact the echo of the statement from the Federal Reserve was felt in yesterday’s session, with major stock indexes registering gains of more than 2%. Monetary policy has been the most important variable to influence the course of the stock markets in recent years. In addition to not having removed the words “for a considerable period of time”, the Fed reported that the interest rates should not suffer increases before mid-2015, removing the uncertainties that the market had in relation to its timing.

Leading indicators of the economy, anticipating their cycles in 6-9 months increased 0.60% in November, foreseeing a dynamic economy in the coming months.

In US markets, the session will also be influenced by the expiration date of futures and options, which should be reflected in an increase in volatility. The most critical moments are the opening and 19h00.

Japan’s Central Bank maintained its strong stimulus and presented more encouraging outlook for the country’s economy.