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Competence Before Size

  
Analysis, Education
  • Traders should focus on developing their competence, establishing high-performance trading behaviors — and then, once the gains from working on these begin to bed down, size at last becomes a safe and significant P&L enhancer. The reason to increase size should be developmental, and not financial.
  • Once you increase size, you need to be able to sustain trading the larger size to get the positive returns alongside any losses, and not to get caught up in chopping and changing in a reactionary approach to your P&L swings.
  • When increasing size, it is important to move from the comfort zone into a stretch zone, not a panic zone.
  • Mentally rehearse taking losses at the larger size that you wish to move to. If you feel a bit uncomfortable that is normal, if you feel panic then the size is too much. Use this feedback to determine what size is best.

Busy week next week highlighted by rate announcements and employment reports

  
  Analysis
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RBA and RBNZ to announce rate decisions

It is busy week next week with rate announcements from the Reserve Bank of Australia and also the Reserve Bank of New Zealand. It is also employment week for both Canada and the US.  China is on holiday Monday to Thursday. Australia will be off on Monday.
Monday, October 4
  • OPEC+ meeting all day
  • Spain’s unemployment change, 3 AM ET/ 0700 GMT
Tuesday, October 5
  • Reserve Bank of Australia rate decision, 11:30 PM ET Monday/0330 GMT.  Rate expected to remain steady at 0.10%
  • US ISM services PMI for September.  Estimate 59.9 versus 61.7 last month.  10 AM ET/1400 GMT
  • ECB’s Lagarde speaks, 11 AM ET/1500 GMT
  • FOMC Quarles speaks, 1:15 PM ET/1715 GMT
Wednesday, October 6
  • RBNZ rate decision, expected 0.25% hike to 0.5% from 0.25%.  9 PM ET/0100 GMT
  • ADP nonfarm employment change, estimate 455K versus 374K last month. 8:15 AM ET/1215 GMT
  • US crude oil inventories, 10:30 AM ET
Thursday, October 7
  • US unemployment claims. Estimate 350K versus 362K last week.  8:30 AM ET/1230 GMT
  • Canada Ivey PMI. Estimate 60.3 versus 66.0 last month. 10 AM ET/1400 GMT
  • BOC Macklem schedule to speak.  12 PM ET/1600 GMT
Friday, October 8
  • RBA financial stability review, 8:30 PM ET/0030 GMT
  • Canada employment change.  Estimate 61.2K vs 90.2 last month.  8:30 AM ET/1230 GMT
  • Canada unemployment rate.  Estimate 6.9% versus 7.1% last month
  • US nonfarm payroll. Estimate 490K versus 235K last month.  8:30 AM ET/1230 GMT
  • US unemployment rate.  Estimate 5.1% versus 5.2% last month. 8:30 AM ET/1230 GMT
  • US average hourly earnings, estimate 0.4% versus 0.6% last month.  8:30 AM ET/1230 GMT

NASDAQ snaps a five day losing streak

  
Analysis, US Market
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Dow up over 700 points at the session highs

The major US indices close sharply higher on the first day of the new trading month/new trading quarter with the NASDAQ index snapping a five day losing streak.

Shares of Merck surged 8.6% on the back of a Covid drug that cuts hospitalizations by 50%. Transportation stocks like United airlines, Delta Airlines and Southwest Airlines are also higher on the back of that news. Energy was the best performing sector as oil prices move back to the upside.
  • NASDAQ up for the first time in six sessions
  • Dow S&P, NASDAQ still on track for weekly losses
  • Russell 2000 index up nearly 2%
  • All S&P sectors are higher after yesterday saw the same sectors all lower
The final numbers are showing
  • Dow industrial average rose 483.53 points or 1.43% at 34327.45
  • S&P rose 49.55 points or 1.15% at 4357.09
  • NASDAQ index rose 118.12 points or 0.82% at 14566.70
  • Russell 2000 rose 37.26 points or 1.69% at 2241.63
For the week,, the major indices all closed lower.
  • Dow Jones -3.0%
  • S&P index -3.84%
  • NASDAQ index -3.13%

European equity close: Soft start to the new month

  
Analysis, Global Indices
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Rough week for equity markets:

  • UK FTSE 100 -1.0%
  • German DAX -0.9%
  • French CAC -0.4%
  • Spain IBEX +0.2%
  • Italy MIB -0.7%
On the week:
  • UK FTSE 100 -0.3%
  • German DAX -2.3%
  • French CAC –1.8
  • Spain IBEX -0.9%
  • Italy MIB -1.3%
The good news is that European equities finished off the lows and now US stocks are beginning to run to the upside. Here’s a look at the daily DAX and it shows how we broke the summer lows earlier today before closing back above them.
German DAX

Rating agency Fitch says debt limit brinksmanship could put AAA rating at risk

  
  Analysis

Stocks react negatively

Rating agency Fitch is out saying that the debt limit brinksmanship could put US AAA rating at risk.

  • Failure of latest efforts to suspend US government debt limit indicates current stand off could be among the most protracted since 2013
  • Nevertheless it believes that US debt limit will be raised or suspended in time to avert a default event
  • If US debt limit were not raised or suspended in time, political brinksmanship and reduce the financing flexibility could increased risk of sovereign default
The headline may be contributing to a pullback in the S&P and NASDAQ indices. The S&P index is currently up only 5.29 points while the NASDAQ index has turned negative and trades down -18.54 points
Note that the base case four Fitch is still not for a default event.
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