Hi folks,
Welcome to Super Thursday. I hope you didn’t have anything dodgy for tea last night cos today you can’t afford to go missing for long. This was always destined to be a massive day, featuring the double-header of European interest rates and US employment numbers. But seismic moves across financial markets over the past few days will add to the excitement on the mother of all trading days.

So What’s All The Fuss About, Why Is This Such A Big Day?
Generally, the first Thursday of the month sees the European and UK central banks announce any changes in interest rates. And there’s generally a collective yawn when nothing happens. But this time Aries must have passed through Uranus and got it on with Taurus because the ECB is all set to move rates. This happens about as often as Chelsea win the Premiership so it’s a moment to be treasured. The Bank of England granted them centre stage by moving their decision to next week, but the US gatecrashed the party. The US Non-Farm Payroll numbers were brought forward a day so that America could spend Independence Day munching McTurkey burgers and drinking imitation beer.

And as if that wasn’t enough check out yesterday’s markets: The Dow fell below even last January’s lows and is now officially in a bear market, the FTSE closed below January’s closing low, and oil hit a new high (yawn, yawn). The weak Dollar is seeing Sterling threaten the $2 level and the Euro poised to challenge the previous high of $1.60.

Running Order
OK, just so’s you know when to time your coffee breaks for, here’s the low down on what to expect, with the consensus forecasts as a guide:

08.30 Sweden will kick off with its interest decision (Rates up 0.25% to 4.50%)
09.00 EU Services PMI (49.5)
09.30 UK Services PMI (49.5), Bank of England Quarterly Survey on Credit Conditions (should be fun)
10.00 EU Retail Sales (0.6% mm, -0.7% yy)
12.45 European Central Bank announces interest rate decision (Rates up 0.25% to 4.25%)
13.30 US Non-Farm Payrolls (-60,000. Unemployment rate 5.4%) / ECB Press Conference
15.00 US Non-Manufacturing ISM (51.0)

Also, in the UK HBOS are due to release their House Price Index over the next few days; if they’ve got any sense of humour they’ll do it today. The forecast there is for a monthly fall of 1%, giving an annual fall of 5.9%. Phew, is there any tennis on?

As you can see there’s plenty either side of the main attraction to keep us interested. But what are the key bets?

US Equities
The Dow fell by 10% in June! On Tuesday it registered a fall of 21% from last October’s peak (a fall of 20% is s’posed to mark the start of a bear market). The wider S&P 500 index ended a frantic Tuesday just above the 1250 support line. But check out a really scary chart here that Investors Daily Edge produced.

See the two coloured lines in the top right-hand corner, the blue crossing down through the red? That’s the 10-month moving average dropping below the 20-month equivalent. Now take a deep breath and scan left, across to the last time this happened; over the next two years the S&P fell 600 points!!! Hey, I’m always happy to acknowledge that there’s no God-given right for it to happen again. But it’s food for thought.

Just to introduce a bit of balance, both US indexes are technically oversold, using the RSI (Relative Strength Indicator). Now that’s not reason enough to go out and buy the market, but it’s an amber warning light to think twice before selling it. Using a similar measure, over 350 of the S&P 500 stocks are flashing up ‘oversold’ signals. Part of the key lies in who’s been doing all the selling; hedge funds shorting the market are more likely to be squeezed back in. But if a lot of the selling was by long-term funds then their strategic move could stay in place for months; a squeeze will only happen if enough traders need to compete to buy shares.

The Dollar
The ol’ greenback has really been stuffed over the past few weeks. Although the Trade Weighted Index only shows a drop of 2%, Sterling has gained 2.7% and the Euro nearly 4% against the Dollar since mid-June. Sterling tested the water above $2, but the temperature wasn’t right so it’s now lingering just above $1.99, waiting for another shot at the target. The $2 level ought to be a major resistance and, depending on lunchtime’s news I might look at shorting GBPUSD in the high $1.99s, with a stop loss the other side of $2.

The Euro’s chances look slightly better after breaking and holding above resistance in the $1.5840-1.5850 area. The right news later on could see it test the previous high at $1.60. The tricky bit is that Payrolls are done and dusted by 1.31, whereas Trichet will be spouting forth for a further quarter an hour or so. I won’t be dealing during that period.

Commodities
“Today oil hit a new record high,” I write in my trade diary every day. I wish I’d backed it with money, rather than just opinion, a few times this year. Just when the market looked nervous, with plenty of two-way trading, the OPEC president dished out the Viagra for another rock-solid rise. His vision of a $170 oil price this summer convinced enough traders that the black stuff was still worth buying at $140. It was today’s new high above $144 that contributed towards the panic in equity markets. Every time I write about oil I refuse to call the turn, and I ‘ain’t changing now.

Gold’s been a bit different; since March it’s registered as a sell on many an analyst’s chart. But over the past week or so all the worries of the world (inflation, geo-politics, dodgy equity markets and a falling Dollar) have seen gold return to favour with a rise of over $50. Like several other markets it’s up against strong resistance lines, but a clear break would get traders talking about the $1000 level again.

What Can We Expect For Lunch?
If we don’t see a rise in European rates I’ll choke on my tuna. Monsieur Trichet has laid his cards on the table in plenty of time, and he’s made no attempt to move them. The European Central Bank’s job description is to maintain price stability with inflation at 2% or less. On Monday the latest release showed inflation at 4 (yes that’s FOUR) percent. And that’s why Monsieur Trichet will ignore Carla Bruni’s husband, and all the others who haven’t read the Bank’s mandate, and raise rates.

What will be far more interesting is the press conference at 1.30. I wonder if Monsieur Trichet will spend an extra couple of minutes adjusting his seat, just to allow release of the US numbers before he speaks. The canny Frenchman enjoys his monthly game of cat and mouse with the world’s assorted hacks. Will he remind journalists that he only previously mentioned one rate rise? Or will he go for the jugular and slip in the key ‘vigilance’ word?

Meanwhile, across on the other channel the event with a less predictable outcome is the US employment numbers. These are a bit crazy as the jobs number and the unemployment rate come from different sources, and often contradict each other. If you’ve got a few spare minutes click on Roll up, Roll Up, For The Payrolls Roulette for an explanation of how the numbers work. Yesterday’s ADP employment number was much weaker than expected; this number used to be taken as an early clue to the payrolls, but these days it’s about as useful as Russell Grant at predicting the result.

One of the key things to look for when the numbers come out is the revisions to previous months. Often they’re massive and dwarf the monthly figure. Also, check out the change in Manufacturing Payrolls (-30,000 expected) and Average hourly Earnings (0.3% mm, 3.4% yy).

How Am I Going To Trade It?
The plan is that I’m not going to trade; well, not immediately. Recent moves leave several markets (equities, forex, gold, oil) open to big swings in either, or both, directions. I’m expecting a sharp move in one direction to be swiftly reversed, scorching traders who jumped in on the news. The trouble is, too often I do jump in to trade the news and today there’s no-one around to restrain me.

I can easily see moves of a couple hundred points in either direction in equities and the main Dollar-related currencies. I fancy a reversal of recent moves ahead of the US holiday, but I’m not backing that particular horse until I see it running.

Hey, one way or another it’ll be a big day today. Good Luck