A segue to today’s note is that the US Dollar has risen for the third successive day. The FT has a piece this morning titled ‘Dollar’s ascent enters autopilot mode’ in which it features a flag-laden graphic showing that with the exception of the Yen, the US Dollar is higher year-to-date against every major currency (led by a 6.85% rise against the South African rand). Purists (and fans of WCRS on Bloomberg) will note that the NOK is also up on the year, something of a curio given its oil producer status, but doubtless reflective of the fact the State Oil Fund is busily selling offshore assets to help plug budget holes at home. A familiar theme elsewhere among major oil producers, but which has not prevented their currencies from weakening or seen their dollar pegs held – so far.
To mark my 1000th issue of tradernoble Daily Market Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/5 updated emails throughout the trading session. This offer is open to existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it lost 170 points yesterday but is still ahead by 1600 points for January. Since I started this Platinum Service last June it has generated almost 17,000 to date.
After risk-rallies engendered by a combination of yesterday’s fourth successive steady PBoC CNY fix and better than expected China December trade data, the turnaround from early New York trade is blamed entirely on latest EIA oil inventory data. This shows Crude Oil Inventories rising by a higher than expected 234k barrels last week and supplies at Cushing, Oklahoma (the delivery point for WTI crude) climbing to an all-time high of 64 million barrels. Though the EIA also has US fuel demand falling 2.5% last week, we’d note that Chinese crude petroleum imports jumped to a record 33.2mn barrels in December, 9% up on a year ago. I am not rushing to join the growing chorus of folks claiming that lower oil prices are a function of falling demand as well as rising supply.
The EIA news has served to refresh downward pressure on oil prices and where Brent crude today has flirted with sub- $30 levels just as WTI crude did yesterday. Both currently sit just above $30, but the news has nevertheless brought about a sharp reversal in the European morning global equity rally. In contrast to the late day rallies we saw into the New York closes on Monday and Tuesday, The US Indices got hammered all day having opened strongly with both the Dow and S&P closing down 2.2% and 2.5% respectively to register significant Key Day Reversals.
This has refreshed the bid for US treasuries, with the 10yr yield down a further 3bps to 2.07% after being as low as 2.04% earlier. In currencies, the Canadian dollar is the biggest loser (-0.7%) not just within G10 but all actively traded currencies. AUD/USD is 0.4% lower on Tuesday’s NY close, currently at 0.6960 (the early week low was 0.6925).
The Fed’s Beige Book released an hour ago shows the majority of Fed districts describing their economy as enjoying ‘moderate’ growth, with still-subdued wages a fairly common feature across all districts. In Fed-speak, Charles Evans said he’d have preferred not to have raised rates in December (even though he went along with the majority). Meanwhile Boston Fed president Eric Rosengren – now a voter – says he doesn’t expect oil at $10 but admits it’s possible, and says he ‘hopes’ the Fed doesn’t have to use negative rates like the ECB. I think we can safely rule out a January Fed rate rise.
This morning on the economic front we already had the release of German Wholesale Prices which came in weak at -0.8% versus -0.2% last month. At 9.00 am we have German GDP. At the same time we have the ECB Minutes from its December 3rd Meeting which had a huge effect on both the Euro and the German DAX. This is followed at 12.00 pm by the Bank of England Monetary Policy Meeting and it will be interesting to hear their take on the recent slide in Sterling. Next we have US Initial Jobless Claims at 1.30 pm. Finally at 2.45 pm we have the Bloomberg Consumer Comfort Index. This afternoon the Fed’s Bullard is speaking at an Economic Conference in Memphis.
March S&P 500
Yesterday registered one of the largest Key Day Reversal for the S&P in its history with the market having traded as high as 1946 before lunch only to hold its gains briefly after the US Markets opened but once the Oil Inventories were released the S&P got hit hard especially in the last three hours of trading when the S&P accelerated to a 1878 low print. The volatility since last August is just incredible if you are on the right side but very costly if you are caught wrong like I was yesterday. The three criteria that I look for to put in a meaningful bottom in the US Stock Market are
1 The S&P is trading at the bottom of its Bollinger Band on a Daily Chart
2 The Williams Index is at or near -100
3 The McClellan Oscillator has a negative reading of at least -250.
This morning all three are in play with the MO finally closing with a negative reading of -282. It is no co-incidence that when the MO was released at 4.00 am the S&P started to rally. The same thing happened on the morning of December 15 which led to an 80 Handle rally before the market fell apart again. I am posting my commentary late this morning as I want to have a feel for the market before sending out my commentary. The S&P having traded as high as 1898 is now 14 Handles lower. I also mentioned earlier this week that I expect the S&P to bottom in front of 1860 and I still believe this to be the case especially with the MO finally coming to the table. Today I will look to buy the S&P in small size from 1865/1875 with an 1855 stop. I have to use wider stops given the volatility and if I am stopped out of this position I will use my 5 Handle Rule again to go long again with a stop below whatever new low is printed. For the record I bought the S&P yesterday at an average rate of 1925 before getting stopped out of this trade at 1916. Subsequently my 5 Handle Rule did not kick in until 1891 after we had hit a low at 1885.75. The market then rallied to a 1904 high print which enabled me to T/P on this position at 1901.
EUR/USD
I am still flat the Euro which is finally starting to move higher. As I have mentioned countless times in my opinion the US is in or close to a recession despite the strong labour market and that the Dollar has to sell-off as there is no chance of the Fed hiking Interest Rates in this environment. This morning given the fact that the Euro is breaking key resistance at 1.09 I have decided to buy the Euro here at 1.0905 with a tight 1.0870 stop. Remember the Euro has resistance at 1.1050 and key resistance at 1.1180. A break and close over 1.1180 opens up the possibility of a move higher to 1.15/1.18.
March Dollar Index
I am still flat the Dollar and today I will lower my sell level to 99.00/99.40 with a 99.70 stop.
March DAX
Wow the DAX had its second significant Key Day Reversal in a week form the same 10100 now major resistance level. The DAX having traded as high as 10180 after I posted yesterday morning is now trading nearly 500 points lower which is just incredible. My DAX plan did not work out yesterday as shortly after the market traded lower to my 9980 buy level I was stopped out of this position at 9920 and I am now flat. Today my only interest in buying the DAX is on a further drop lower to 9550/9620 with a 9495 stop but only in small size as I prefer to buy the US Markets especially with the Dollar starting to weaken again.
March FTSE
My FTSE plan did not work out either yesterday as shortly after dinner the market traded lower to my 5865 buy level before stopping me out of this position at 5815. I prefer to be long the FTSE rather than the DAX especially with Sterling a lot cheaper than it was a month ago, plus this market is not as volatile. For these reasons I have bought the FTSE here again this morning at 5780 with a 5740 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 5710 with a 5670 stop.
Dow Rolling Contract
As I was already long the other Indices above I waited to buy the Dow until the bottom of my buy range at 16380 but unfortunately no sooner had I bought the Dow but I was stopped out of this position for a small loss at 16320 and I am now flat. Yesterday was another great example of how important it is to have stops in the market. Given my positive views for the US market as outlined above I will look to buy the Dow on any further dip lower to 16010/16100 with a 15940 stop.
March BUND
The BUND traded higher to my 159.95 sell level. I am still short and today I will lower my stop on this position to 160.30.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1065/1075 with a 1059 stop.
Silver Rolling Contract
I am still long Silver at 14.19 which thankfully is back trading above 14 again. I will leave my stop the same at 13.65.
Recent Comments