Morning Meeting: Uncertainty reigns Supreme

Good Morning.

Friday's closing bell in Europe left us with a large number of un-answered questions.  Assets divergence led us to doubt the equity initial move after the NFP numbers were released, our intuition was confirmed once the market left the road to north to turn south. Europe tried to hold onto its gains but after the European cash close futures fell under the US futures weights.

Asian markets this morning followed the US move, with Hong Kong's Hang Seng Index 0.43% lower to 22,012.36, Japan's Nikkei Stock Average down 0.54% to 9,002.35 and the Shanghai Composite Index 0.52% lower to 2,106.00 erasing gains after the HSBC Services purchasing managers' index dropped to 53.5 in October from 54.3 a month earlier.

Today's word is: political risk, with US President Barack Obama and Republican challenger Mitt Romney neck and neck on opinion polls in the final 48 hours before Tuesday's vote, with the Chinese congress starting on November 8 which will conclude with a generational leadership change and Greece set to vote another package this week, which could lead to another political crisis in the country, investors turn to the US dollar perceived during market turmoil as the safe assets to hold.

As a matter of fact the US dollar gained versus major pairs although during today's asian session the greenback steadied versus the Euro at 1.2831$ and fell slightly versus the Japanese Yen to 80.39Y or 0.05%, near more than 6 month high of 80.68Y scaled on Friday.

The US currency move supported the recovery in dollar denominated commodities such as Gold, which recovered form Friday's 2 percent plunge to a 2 month low of $1,673.94 an ounce, and Oil (WTI), which rose 0.28% to 85.10$ a barrel.

At this point we need to closely follow the currency market to solve the assets' divergence puzzle, volatility is expected to pick up in this week therefore we need to work out a game plan able to take the new volatility regime into account.

“You need to adjust your strategy to the battlefield”.

Have a great day.

Originally posted at www.77sigmatrading.com