G’day Traders,

Firstly, there will be no Weekly Update today and no Daily Update on Monday with the US holiday. If that makes you a little worried then reduce your risk.

Don’t tell anyone, but I am much more concerned about the US employment data that my training at the Summit. A while back this announcement had lost its impact, but not now.

I am waiting for Tuesday’s open as many traders will be back after Summer holidays – trends can start here and I expect more volume and direction. I am expecting breakouts.

The markets are in a pretty big range and the important market to me is T-Bonds, which are at the bottom of that range. For stocks, the important thing to remember was we had a 3% rally Wednesday on the back of mixed data. The bad side of the ledger was led by some employment data showing the first drop in a long time. The market ignored it – and strongly – but they won’t ignore it tonight. Based on that 3% rally I think if the number is bad enough we could easily get a 4% fall and that would likely mean JPY rallies (so USD/JPY down) and it would be bearish for the GBP (and probably EUR, CAD and maybe AUD).

The US S&P500 +0.49, Brazil -0.39, European top 500 -0.04 and UK +0.09%, Nikkei +1.52 and ASX 0.82%… China +1.3%. Interesting thing about China is that it is well off its highs. The index is under 3000 with highs in late 07 just under 6000. The world is looking for China to lead a recovery and we are just not seeing it.

Copper was steady – so it is waiting for tonight too. Most Ag commodities were up with Cotton extremely strong – what a trend. Remember Summer is over so there could be a little lull in trends on some of these products – but there is a holiday.

ETFs – For anything to change I think 1100 has to be broken on the ES on the upside. This would make me cautious and if it holds I think that is a positive sign for the markets and I may look to be long and be short Treasuries (TBT would be a buy) assuming we get through October.

Options – I would be cautious of bullish strategies until after this announcement. It’s at 10.30pm AEST so if you are not going to be awake I would wait until Tuesday. Do you really want to enter something tonight and have it go against you and be waiting until Tuesday?

Information for Beginners – Reduce the number of Forex positions you have for tonight if you have a lot of risk on the table. This could go against some of the trends and you probably won’t know what they are, so don’t second guess.

A great time to start trading will be next Wednesday (after Tuesday’s update).

Information for Intermediate – Commodities are doing well – stick to what you are doing there, but maybe don’t enter so many trades on Ag commodities until you see some really big moves elsewhere. The risk is really in financial markets.

Information for Advanced – Ahhh – truly this is not usually a holiday I pay any attention too. I am looking for breakouts. I believe a strong move tonight may set the tone for Tuesday’s markets. If it isn’t a strong move then we will have to see sentiment come Tuesday. The immediate trade I would be watching is the T-Bonds breaking through 132. This is the market most affected by this data so it is key for Advanced Traders and will give you hints on the markets.

Scott Goold
Head of Lifestyle R&D

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A decline in spending by Endre Dobozy
If people understand the basics of how economies have seasons and that the 39-40 year generational cycle drives the economy then they can change the way they invest to suit the season and look at the world a little differently, instead of wondering if the next market rally is the start of another bull market or if today is the day that consumers are going to start spending again.

The reality is that the decline in spending isn’t just a short term blip, it would have happened without the Global Financial Crisis. However, the result has been exacerbated as its not just the baby boomers moving from spender to savers, of which there are approximately 78 million in the US alone, but instead it’s everyone cutting back on consumption, irrespective of age.

Most developed economies will face declining spending into 2022 – 2023 and then the next boom begins caused by the echo boomers entering their peak spending. The echo boom isn’t quite as big in the US and the developed world but should be much bigger in India and other emerging markets (excluding China who messed up with their one child policy).

Honestly, this information isn’t meant to be depressing, but instead allow investors to take control of their future instead of being like everyone else that sees their net worth fall and wonder what’s going on. They rely on advisors that don’t get it and just buy and hold (hope) their way into poverty.
Next week: Surviving the slowdown

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Trader Term of the Day – P/E Ratio
The PE Ratio (price/earnings) is the price of the stock divided by the company’s annual earnings.