European Closing Thoughts: Throwing the ball to Mr Rajoy.

Here we go, the Draghi's day is over at least in Europe.

Let's look at his speech to spot what we did not already know:

Most of Draghi's conference has broadly been reiterating points from the last meeting as expected. Let's go deep into some market sensitive points:

• Suspension of OMT during review period can occur; it reflects the fact that the ECB does not want to get dragged into the proces of judging whether a country is meeting conditionality or not.
• No comment on whether Spanish bond yields are appropriate or not.
• On Spain, significant progress has taken place, but significant challenges remain.
• Unanimous decision not to cut rates: there was no discussion on the matter.
• Re-scheduling payments on Greek bonds would qualify as monetary financing. Therefore unlikely to happen.
• ECB will actively seek IMF involvement in the programme
• OMT is not a replacement for primary market access.

What we are left with after ECB's chief conference?

Answer: If Mr Rajoy will ask to be bailed out than we will have the ECB to step in, so the ball is on Mr Rajoy feet.

Let's have a look at market reaction in Europe:

The Stoxx50 fell 0.27% to 2,485.75, the German Dax fell 0.23% to 7,305.21, in Southern Europe: Italian Ftsemib fell 0.15% to 15,511.25 and the Spanish Ibex traded 0.18% lower to 7,812.80.  It looks like the equity market is not reacting in the same way it was few weeks ago, something is changing in European investors' risk perception?

In the currency market we were expecting the major move: the common currency rose 0.77% to 1.3004$ versus the greenback. The ICE dollar index fell 0.59% to 79.45 from 79.967 in late trading the previous session. The British pound rose 0.52% to 1.6180$ from 1.6075$ after the Bank of England also kept rates and its bond-purchase plans unchanged.

During the Draghi's speech in US  Labor Department figures showed applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. Orders placed with U.S. factories fell 5.2 percent in August, the Commerce Department said. The median forecast of economists in a Bloomberg News survey called for a decline of 5.9 percent.

US macroeconomic data put US stocks in rally mode: the Dow added 88.89 points to 13,583.74, or 0.66%,with Bank of America leading gains. The S&P500 rose 0.63% to 1,460 with materials and financials leading sector gains. The tech Nasdaq rose 0.23% to 3,142.55.

September meeting minutes of the Federal Open Market committee has still to come, remember this is the meeting when the FED launched a third round of asset purchases therefore it has the power to be a game changer.

On the commodity side, Gold prices moved higher: the precious metal for December delivery jumped 0.77% to 1,793.40 an ounce on Comex. On the Oil side: Crude for November delivery rose 2.31% to 90.17$ a barrel on NYMEX, making back part of yesterday losses. Hostilities between Syria and Turkey commanded the spotlight supporting the black-gold prices.

Our trading is in “volatility on” mode, and we will stay with our model. We as traders need to adapt to the market, it's not the market that has to adapt to our needs.

We still got our short bias, but the DJ Eurostoxx50 is stuck around the 500 mark. With the FOMC minutes and the NFP tomorrow we got the sparkles that can drive the market to break out short term support/resistance, therefore stay calm tomorrow is another day.  Remember to yourself the market can do anything.

Have a great evening.

Originally posted at www.77sigmatrading.com