 Good afternoon and welcome to CMC Markets on Friday the 2nd of November and this month's non-farm payrolls webinar with me, Michael Houston. Before I get started I have to put up the traditional disclaimer. I'm hoping everyone can see and hear me loud, well not necessarily see me but see my screen and hear me loud and clear. We got a lot to get through given the volatility that we've seen in the market since the last time I did one of these, certainly been in an eventful month and if you haven't got whiplash from all the market moves that we've seen over the course of the past month or so then well done to you because it's certainly been one of those months where it's been particularly difficult to really glean where the base might be in. But we do appear, I think we do appear to be finding some evidence that maybe there is a short term base in the market and I think within that context I think it's good to look at the S&P 500 because ultimately as we look ahead to the payrolls numbers which are due out in around about 15 minutes I think the big question is not only has the dollar uptrend that we've seen take place over the course of the past few weeks has it come to an end and if so does it then precipitate a potential rebound in stock markets because certainly what I've seen over the past couple of days would appear to suggest that maybe we could well be on the cusp of a bit of a reversal in the dollar index and why do I say that well look at this chart here now those of you who are regular listeners to my webinars will know I'm very big on candlestick charts and reversal patterns and potential reversal patterns and indications of a potential turnaround in sentiment and what we got earlier this week here was a very big down move in the dollar not only did we take out the lows of Monday and Tuesday but we took out the lows of Thursday and Friday of last week as well and here we are today on the Friday pretty much back at levels we were at the beginning of the previous week so that suggests to me the market is very much one way in terms of dollar longs and we've certainly seen that reflected in the way the Chinese one has reacted over the course of the past couple of days as well we've seen a big decline in that which suggests to me that ultimately risk aversion or the risk aversion that we've seen over the course of the past few weeks maybe starting to stabilize and investors are starting to become a little bit more confident that we've seen a short-term base in the equity market it's very important I think for me when I look at these markets to try and look at the correlation between the two so we've been seen a big sell-off in the dollar what we haven't seen and this does make me a little bit concerned is that we haven't seen a softening in US yields and this is where my theory could come unstuck and obviously that's something that I do need to be very aware of that being said we haven't gone back to the highs that we saw at the beginning of October and that's a really big level for me those of you who tuned in in October will know that I I indicated that the 325 area was a very big level for US Treasury yields and why is that because it's the 200 month moving average that's a huge barrier in terms of technical indicators we haven't been above or close to above the 200 month moving average on the 10-year Treasury since 1989 that's a long time ago so it's unlikely that we're going to push through it on the first month on the first bounce so in the short to medium term I would suggest that there's a decent top in and around where we currently are with respect to US yields which would then obviously beg the question does that mean that we can potentially going to see further upside in the US dollar and certainly given the given a sharp decline that we saw yesterday I'm minded to think that maybe we've seen a short-term peak in the US dollar as well so what does that mean going forward well it would suggest that it means in terms of the data that it's going to take a massive beat for us to really push higher in terms of rate US rate hike expectations because at the moment I don't think there's any doubt that we're going to get a Federal Reserve rate rise in December that's not up for debate what's up for debate currently is whether or not we get three Fed rate rises in 2019 or four and it's open to question as to whether or not it we even get three because certainly I think if you look at the data the data does support another rate rise and certainly if you look at the ISM numbers on manufacturing earlier this week it still remained fairly decent a fairly decent number but it did display a little bit of softness in the new orders number as well as the employment component now there was an awful lot of optimism at the beginning of last month that the September payrolls number would be a strong number in the region of around about 200,000 in the same way that the ADP payrolls report was in any event we came in at 134 this number here we also saw a little bit of softness in wages which dropped from 2.9 to 2.8 percent and as such that prompted a little bit of dollar weakness but not a massive amount of dollar weakness because ultimately after that subsequently to that we then pushed higher despite the fact that wages were at the lower end of expectations and the payrolls number was poor but there were hurricane effects in terms of the payrolls numbers so what I'm going to be watching for today ladies and gentlemen is an upward revision to the September number do we get one of them because certainly the September ISM numbers were particularly strong and that's why I think there was such a disappointment around the 134k number that we saw in September the employment components for ISM for September showed fairly strong employment growth and fairly strong economic activity yet that wasn't reflected in the payrolls numbers so be very aware that we could see in either a rebound in the October payrolls numbers where we've got an estimate of 190 to 200 that could come in higher given the strong ADP number or we could see another poor reading or we could see an upward revision to September and the number pretty much in line with consensus for October at the moment it's a little bit of a lottery when it comes to economic consensus and I generally don't tend to set a great deal of store by it what I do set a great deal of store by is whether or not the market beats the consensus because that generally tends to precipitate a significant market reaction so the number I'm looking at is this one here is the average earnings number here which is going to be the 3% level 3% level if we if we get an increase to 3.1% in wages on an annualized basis that will be the best number this decade it'll be the highest number since 2009 and will obviously prompt a significant rebound in the dollar but what a what a you know this needs to be tempered in the context of what does it mean for what the Fed does in 2019 and for that I'm not 100% certain because I think and there's an awful lot already priced into next year already in US Treasury yields and there's an awful lot already priced in with respect to the US dollar as well so the key level that I'm looking for on the S&P 500 for this number is the 200 day moving average we've rebounded quite strongly off this trend line support here from the 2016 lows that acted quite nicely as a decent area of support on the move down this being a weekly chart we've seen a decent rebound so we've pretty much reversed all of last week's losses which in itself could be fairly a decent bullish indicator on the other hand if we're not able to push through this level here and my resistance level for the S&P is 2765 2770 I would be surprised to get a number that pushes us back through there this week that could happen we certainly posted a bullish daily reversal here which would appear to suggest that we're on course for the fourth successive daily close higher daily close on US markets this week and as such could see us push higher so what I did earlier those of you who are watching is I put some Fibonacci retracement levels on this particular chart so between the 200 day moving average and here 50% retracement I think there's going to be a decent barrier between 65 and 70 on the S&P 500 which would suggest that ultimately the upside is likely to remain limited simply because an awful lot of this rally is predicated on Donald Trump's assertion that he does want to trade deal with China now whether or not that's true after the midterms is another matter some of those cynics out there might think that he's only saying that to get the stock market up just before the voters come out on Tuesday next week and that could well be behind his thinking but that would also preclude the fact that he said that last night and we've already bounced three days in a row prior to him saying that so we were already on the cusp of a rebound he's just given it a little bit of a helping hand if we look at the FTSE 100 we've also running into a decent area of resistance just above 30 days highs around about 7,200 if we look at these series of lows through here any move higher is likely to run into resistance there so keep an eye on that and also with respect to the DAX looking at a significant area of resistance just above this 11,700 area on this move higher here so we've got a decent rebound we've seen a bit of short covering this week the big question is whether we get any more let's quickly look at euro dollar a bullish reversal on euro dollar would appear to suggest that we could get see further gains there but once again there's a significant area of resistance through these lows here which currently come in around about one 14 65 70 so we might find some selling interest on any dollar weakness around about one 14 65 70 looking at cable very very quickly seen a significant pull back on there but running into resistance through there before I finish up I better do dollar CAD because it's a Canadian jobs report as well and what we've seen on dollar CAD has been quite significant I've highlighted it here with a little green circle we've seen a bearish reversal on dollar CAD which would appear to suggest that we could be on the cusp of dollar weakness in Canada's strength but we are approaching a trend line support from the lows that we saw at the beginning of October which I've drawn in here so keep an eye on the Canadian jobs report expecting a fairly a fairly modest gain of 20,000 new jobs on the Canadian jobs report well I've got 10 on here and I've got 20 on my Bloomberg so it really depends on who uses your benchmark but 63,000 on the previous number which was a fairly decent number we've come off the back of a rate rise from the Bank of Canada but if we look at the Canadian jobs numbers of those 63,000 most of them when you part-time jobs which might suggest that the Canadian economy is also approaching full employment and as such could see an uptick in wage pressure and further can a Canadian dollar strength so we'll finish up before the numbers because we've got one minute and 45 seconds with dollar yen because the dollar yen is usually a decent arbiter of dollar strength or weakness and at the moment we are finding some decent support at significantly higher levels we bounced off Orochimoku cloud here even though we broke below the trend line here we found support around the cloud and I tend to use the cloud when I'm using dolly yen because generally it tends to be fairly reliable and certainly in the context of this move higher it is but it does appear to be showing signs of a little bit of exhaustion in the short to medium term so certainly looking at today's high it's 113.10 for me what I want to see on a strong dollar number and move through 113.20 to really kick on and push higher and at the moment it doesn't appear to be it appears to be struggling to gain gain strength given it hasn't been able to take out the highs here and here which is around about 113.20 113.30 so what am I looking for well in terms of wages I think wages will drive this if we don't hit expectations of 3.1% then I think the dollar weakness that we've seen over the course of the past couple of days could well become exacerbated if we see a 3.2 we will probably see a spike in the US dollar a push higher but I don't think that we'll see a retest of the highs that we saw of earlier this week I think the dollar up move is done in the short term and we're probably going to consolidate around these sorts of levels into the weekend simply because it's been a very choppy week and that's what I would do so 11.2 Canadian jobs report 3.1 average earnings as expected 250,000 new jobs on the US payrolls unemployment unchanged the revision to the September number was a slight downward revision so we've had a significant rebound in US payrolls which is not unexpected given the week number that we saw in September so by and large it's still a fairly decent number if you average it over a two month period it still comes in at around about that to that 200,000 level it's certainly not out of the ballpark in terms of the overall the overall consensus and if we look at dollar yen it's generally positive but again I don't really think it's got the momentum to take out the highs that we've seen earlier today we may get a retest of those highs but in the overall scheme of things in terms of the reversal that we've seen in the dollar over the course of the past few days I don't think it's strong enough the numbers are strong enough to really signal a turnaround in that certainly positive in terms of equity markets most definitely so the US economy is still performing fairly well and as such we'll probably see a little bit of a tick higher in US Treasury yields if I just look at my Bloomberg terminal you can see that there we've ticked higher from around about 316 to 317 so certainly keeps the keeps the rate rise bandwagon rolling on but certainly in the context of the overall numbers by and large they're a pretty decent set of numbers but they're certainly not blowing the doors off in terms of what the market was expecting when averaged over a two month period so if we look at we go back and look at dollar CAD and the effect that those Canadian jobs numbers have had on the Canadian dollar we can see that it's been slightly weaker but again nothing to really change the overall tone of the overall direction of the market and the fact that we're probably going to likely see a further dollar weakness over the course of the next week or so if we look at the Chinese Remnambi we can see that born out here we weren't able to take out the previous highs of a couple of years ago last year around about 698 so we could potentially got a little bit of a double double resistance up there it's not a double top a double top happens when the tops are very close together you've got double resistance up there you've seen a significant reversal back and it looks like we're probably going to retest the lows on the lows that we saw at the end of August assuming of course that the trade rhetoric continues to get dialed back by the US administration and I would suggest that the rhetoric will remain fairly, fairly mild this side of next week's midterms so anyone has any questions while I'm talking please feel free to fire them over quite happy to look at the market that you have a particular interest in that I haven't covered already but certainly in terms of what to expect over the course of the next week or so I think what one one one of the key takeaways that I have taken note of this week has been the decline in oil prices and that's likely to act as a little bit of a deflationary drag or an inflationary drag on prices over the course of the next two or three months we've come off quite significantly over the course of the past month and at the moment unlike equity markets we don't appear to be showing any indications of a rebound we've also broken below the 200 day moving average I've been asked to look at silver so I'll look at that in a minute and I've been asked to look at Aussie dollar and cable well both Aussie and cable they're quite significant because we've got quite big week for both next week but in terms of the oil price I'll just finish off that the fact that we've broken below the 200 day moving average is likely to be significant in that we could well see a retest of the 70 dollars a barrel level and for all the talk of a hundred dollar oil and everything else I think it's significant that we've heard that the Trump administration has given waivers to eight countries for within respect of Iranian sanctions which suggests to me that the president is worried about high gasoline prices and how they're going to affect his base and I think that's probably why you've seen WTI prices come off probably more than Brent prices over the course of the past couple of days if we can have a quick look at WTI we can see that we've broken the long-term trend line here and we're trading below the levels that we saw in the middle of the summer and trading back at levels last seen in April more significantly we did see a couple of weeks ago a significant significant bearish reversal at the beginning of October which would suggest that we are in line for a little bit more weakness in oil prices going forward so let's move to silver a little bit too rich for my blood I have to say but that does appear to be in a bit of a range and we're in the top of that range at the moment there's a big big resistance around about the level where we are now if I draw in horizontal line here I'm very big on these sorts of levels support and resistance levels because generally they're a good rule of thumb for selling interest and buying interest and certainly in the context of the range that we've seen over the course of the past few weeks anywhere above 1480 has been a decent area to go short and anywhere down near around about 1425 has been a decent area to go long now you could argue that we've basically traded the entire day's range or the entire month's range in the space of a day yesterday but it doesn't change the fact that we haven't broken out of it and until such times as we do I think you have to be a little bit careful about being overly bullish or bearish one way or the other so looking at silver prices I still think that's in a range likely to continue to remain so over the course of the next few days if we do get a break above 15 then the likelihood is we'll probably get an awful lot of stop-loss buying going through there taking us back up to the levels that we saw in the middle of the summer looking at the Aussie dollar we've got an RBA rate meeting next week we've broken out of the downtrend that we've been in for quite some time since the beginning of this year which and that is likely to be significant certainly in terms of the overall of potential of an overall move higher what I would like to do with this is look at a weekly chart to see whether or not there's any evidence of a bullish reversal and it's not conclusive by any stretch of the imagination but I think if we can close anywhere above 7250 then I think there's a decent possibility that we can move higher this daily candle here does worry me slightly because if we look at that and compare it to the daily candle that we saw in September here the last time we posted one of these we then proceeded to decline back down again so I think for me the daily close here is going to be very important and also the fact that we have the RBA next week the Reserve Bank of Australia who will be meeting to set rates and I think it's unlikely that we will see any change to monetary policy there fears of a slowdown in China are still very much front and center likely to remain so we've got Chinese trade numbers next week and as a result I think that an awful lot of attention will be paid on whether or not those Chinese export numbers in particular show a hit from the tariffs that came into effect at the end of September on the 200 billion dollars worth of extra Chinese goods which the tariff was levied at 10 percent so Aussie dollar I think I'd really want to see us hold above this 72 level to really get an indication as to whether or not we can go any higher I'm not convinced by the fact that we've seen a strong move higher and we haven't been able to sustain the gains that we've seen thus far for me that's very very important we need to sustain this move above 72 to move higher towards 73 but that's a very good question if the election in the midterm doesn't go in Trump's favor how will the dollar react for me I think it's likely to be bearish for the dollar and why do I say that the reason I say that is because it's going to be make it very very difficult for President Trump to follow through on the promise that he made about further tax cuts to the middle class because if he if the republicans don't control both houses it makes it that much more difficult to push legislation through legislation that he wants to push through and that for me is important because the democrats won't waste an opportunity to basically give President Trump a bit of a bloody nose he's very polarizing they don't like him I mean most of the people on his own side don't like him so the the the democrats probably can't stand him so they won't waste an opportunity to make his life difficult and I think if it doesn't go in his favor I think it'll be much less it'll be much more difficult for the president to follow through on a fiscally expansive economic policy and that in itself could actually temper expectations about fed rate rises in 2019 at the moment the fed's working on the policy of the fact that the tax cuts brought in at the beginning of this year are likely to continue to push the US economy higher in terms of GDP but that is likely to be fairly temporary and ultimately the effects of that will start to roll off as we head into the end of q4 and the beginning of q1 if he maintains the status quo it means that he's likely to continue to try and fiscally expand his the the the tax policy and implement further reforms with respect to tax cuts so for me I think if the midterms go against him it could potentially be dollar negative whether it's stock market negative of course is another matter entirely but in terms of the dollar I think it will be I think it'll be potentially dollar negative so hopefully that answers your question in terms of the cable because we haven't done that yet and I will do that now getting a bit of a rebound in the dollar it's not unexpected given the fact that those numbers were fairly decent we will probably see a little bit of a fallback 130 20 for me is quite a big level and I think given where we were at the beginning of the week given where we are now we could well struggle to get back through that that particular high there or today's highs around about 130 40 that's where the 100 day moving average is we've also got the 50 day moving average that's likely to act as a bit of a barrier and even if we do get through that we've also got trend line resistance coming in from this year's highs coming in just above that so I would suggest the potential further upside in the pound is fairly limited from where we are at the moment and it's quite likely we'll probably drift back down to around about 129 70 129 60 as we head in as we head towards the end of the day going to finish up I think we've gold seen a little bit of a softening in the gold price and again finding in a little bit of a resistance around this week's highs I think we'll struggle to push much above this week's highs given that equity markets have been on a decent run this week we could see a little bit of a slip a slip back to around about the the 1225 area over the course of the next couple of days at the moment it's not really benefiting from it's really benefited from a slightly weaker dollar over the course of the past couple of days but in terms of safe haven it's not really done anything that significant does anyone else have any other questions you want to ask me I'll quickly look at the Nikkei 225 on the daily chart and again like the S&P 500 it's running in to the 200 day moving average so one of the things that I'd like to take away from the events of the past few months is if we look at the monthly charts on all of these all of these all of these charts if I just quickly select the right option of course we've posted a significant bearish reversal on the monthly charts what's significant though is obviously we haven't taken out the 20,400 level but certainly I think the fact that we've failed to take out the previous highs and we've posted such a strong reversal would appear to suggest to me certainly on a monthly basis that we will struggle to retest those highs in the short to medium term it's a similar sort of story on the S&P if we look at the monthly chart it looks pretty ugly and unless there's a significant turnaround in risk sentiment then for me I think it's very it's a struggle to make the case for a retest of the highs given the fact that we've taken out the lows of the last three months in the space of a single month it's going to make investors very nervous about going aggressively long into the end of the year that's not to say that we might not get a rebound into Thanksgiving and potentially into Christmas but there's a significant number of barriers in our way before we can even contemplate a retest or a move above the 2800 level and the peaks that we saw in the middle of October there so this is one of the key levels that I'm going to be talking about with respect to the S&P before I get particularly excited about a retest of the highs on a technical basis we've done an awful lot of damage in the past month or so so while we could get a retest of 2770 or 2800 it's really going to take a significant shift for me to get excited about a retest of the highs at the moment I'm not expecting to see that so something else to keep an eye out for next week Fed meeting is on Thursday not really expecting to see too many surprises by that they're probably going to keep their rate path intact and try and keep the markets guessing but certainly I think keep a very close eye on next week's services ISM ladies and gentlemen and have a look at in particular at the employment components as well as the headline numbers are we starting to see a drop-off there are we always starting to see evidence of wage inflation we've certainly seen a decent wages number today but what we want to what we want to be able to do is to continue to see that in subsequent months and obviously I'll revisit that when I hold this webinar a month from now on the 7th of December when we cover the November employment report but unless anyone else has any other questions for me this month please feel free to listen to this back on YouTube when I post it up later today otherwise I'd just like to thank you what do I see on the Dow stronger pullback than the S&P right okay let's have a look at the Dow I'm being asked have a quick look at the Dow it's a similar sort of story the only difference is we are already back above the 200 day moving average but if we look at the 50 day moving average we can see that it's acted as resistance and support in equal measure over the course of the past few months so for me this peak here at around about 25,860 and the high here so we could see a pullback in the Dow but again it's a similar sort of story if we look at this move here and that move there 50 percent again 25,870 significant level actually that's the 61.8 if I zoom that out I'll make that a little bit bigger then I can actually see the numbers a lot more clearly there we go so we're above the 50 percent on the Dow but the problem with the Dow Richard I hope you don't mind me saying this is that it's not a particularly good arbiter of where the S&P is going to go because it's so market cap heavy that it tends to overshoot to the downside and overshoot to the upside what it didn't do however is break my trend line from the lows this year one thing that is significant and might prompt a little bit of a rebound is the small cap index which has also had a nice rebound and could well post a bearish reversal on the weekly chart but even then we could well see a retest of the 200 day moving average and the 50 and what's significant about this particular chart here is that we could well be starting to see the beginnings of a death cross where the 50 day moving average crosses below the 200 day moving average and they're both starting to turn lower so we could get a rebound back to here around about 1650 but we're going to need to see a significant move above 1600 which are these peaks here to really take away the negative momentum that's really been with us since the beginning of September for the US small cap index now I mean I think you're asking me about the Chinese one and the seven level I think the reason people fixate on the seven level is simply because it's just above the previous all-time lows or all-time highs for the dollar and it's a round number so if we break above seven then it'll be a new all-time high sixty ninety nine will be an all-time high for the dollar against the one or an all-time low for the one and as such on a technical basis that could mean that the one could weaken significantly an awful lot more and I think that more than anything I think the seven number and even of itself isn't significant it's the fact that it would be a change of big figure it would be a round number and as such could signal that the Chinese are particularly worried about a much deeper slowdown than they originally were and it could also mean that they're using their currency to mitigate the prospect of higher tariffs from the US so there's a number of reasons as to why markets are fixating on seven it's a symptom not a cause hopefully that makes sense okay so ladies gents I'd like to thank you all for tuning in thank you for your company today I'll try and post this on YouTube within the next couple of hours but until next month thanks very much for listening and I hope you all have a great weekend