August US CPI data turned out to be the driver of much of Friday’s market price action. The 0.3% rise in the core CPI series pushed annual growth up to 2.3% from 2.2%, which matched its post-recession cycle high and versus the 2.2% expected. It is worth splitting hairs here, since the 0.3% rise was an unrounded 0.2523%, so a ”very low” 0.3% as -24 thousandths of a percent lower and core CPI would have printed 0.2% and much of Friday’s price movements might not have occurred. Who says statistics are boring?.
Due to the number of members taking up my 2 year Euro 2500 rate for my Platinum Service in recent months, this will be the last month that I am offering this special price which will now rise to Euro 2750 on October 1. If anyone is still interested in this original deal which has been in situ since last January, can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 123 points on Friday and is now ahead by 187 points for September having made 1782 points in August and 1692 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2000 points.
Also released on Friday was the Preliminary University of Michigan Consumer Sentiment Index which disappointed expectations coming in unchanged at 89.8 but which failed to resonate. The upside CPI surprise was largely due to a whopping 1% jump in healthcare costs, which represent 11% of core CPI and 19% of the Fed’s preferred core PCE deflator measure of inflation.
The other big news event was in the UK. Bloomberg ”source” reports suggesting that UK Chancellor Hammond was ready to accept that Britain might have to give up membership of the EU single market in order to satisfy immigration restrictions that lay at the heart of the ”Brexit” vote, sent Sterling into a fresh tailspin – down by over two cents against the US Dollar. Hints from EU President Donald Tusk that UK PM Theresa May will invoke Article 50 to commence EU exit proceedings in January or no later than February next year, also contributed to Sterling’s travails.
The US CPI Report saw US equities drop at the open, though in the face of headwinds from Europe following the near 10% drop Deutsche Bank’s share price after Thursday night’s call from the US Department of Justice for the bank to pay $14bn to settle claims for miss-selling of mortgage backed securities. The S&P500 ended Friday night just 0.38% lower at 2139. The VIX actually ended lower on the day – 0.93 to 15.37 and down 12.2% on the week. Meanwhile the Eurostoxx50 of which Deutsche Bank is a component closed 1.3% lower.
The US Dollar was stronger across the board with Bond Yields higher as the 2 Year and 10 Year rose 3.6bps and 1bp to 0.764% and 1.70% respectively.
Alongside, we saw a small lift in the implied odds on the Fed lifting Interest Rates on Wednesday at the upcoming FOMC Meeting to 20% from 19% or to 64% in December from 59%. This might mean we get a bigger relief rally in the event of the ”no change” that I and most of the market expects. A rise in Interest Rates would be a major shock. The last time the Fed sprung a hawkish surprise was back in 1994, 22 years ago and which participated the ”great bond market massacre”.
The Mexican Peso remains the whipping boy in Emerging Markets FX, largely on the narrowing poll gap between Trump and Clinton, USD/MXD +1.37% to 19.61.
This morning on the economic front we have ECB Current Account at 9.00 am and this is followed at 10.00 am by Euro-Zone Construction Output. Finally at 3.00 pm we have the NAHB Housing Market Index.
December S&P 500
My S&P plan worked well on Friday with the market hitting my 2124 buy level shortly after the US markets opened before having a nice rally which enabled me to cover this position at my 2130 T/P level and I am now flat. Subsequently the S&P traded in a narrow but in a volatile fashion before having a nice rally into the close. This rally has continued overnight with the December Contract now trading over 2140. As most members know at this stage I will not be short the S&P ahead of the FOMC rate announcement at 7.00 pm on Wednesday and today I will use any dip lower to 2127/2133 with a 2121 stop which is just below last Friday’s low print to buy the market. It is difficult to be short the S&P when you see that the NASDAQ closing 3% higher over the past five trading sessions. The NASDAQ was helped by the strong rally in Apple shares.
EUR/USD
Following the release of US CPI on Friday the Dollar rallied with the Euro hitting my average buy level at 1.1185. I am still long and I will leave my stop unchanged at 1.1135. I just cannot see the FED hiking rates on Wednesday and therefore I would expect the US Dollar to weaken. However as I mentioned in at the end of my economic commentary above and the FED decided to raise rates then the US Dollar will rally strongly and is one of the main reasons why I always go flat into a major announcement.
December Dollar Index
As I had so many open positions at the same time on Friday I emailed my Platinum Members to cancel their sell order in the Dollar and I am still flat. Today my only interest in selling the Dollar is on a rally higher to 96.25/96.55 with a 96.85 stop.
December DAX
Sometimes you get unlucky with an unexpected announcement (Deutsche Bank) and this certainly was the case with the DAX for me as after the market traded lower to my average buy level at 10300 I was stopped out of this trade right near the low of the day at 10235 which is very frustrating as the market rallied straight after I was stopped out and I am still flat. Today I will again look to buy the market on any dip lower to 10210/10260 with a 10160 stop. My only interest in selling the DAX is on a rally higher to 10440/10490 with a 10530 tight stop.
December FTSE
My FTSE plan worked well with the market hitting my 6650 buy level before having a nice rally which enabled me to cover this position at my 6680 T/P level and I am now flat. Given the weakness in Sterling it is very difficult to be short the FTSE and today I will again look to buy the market on any dip lower to 6680/6720 with a 6645 stop which is just below last Friday’s low print.
Dow Rolling Contract
My Dow plan also worked well on Friday with the Dow hitting my 18080 buy level before having a nice rally which enabled me to cover this position at my 18140 T/P level and I am now flat. Just like the S&P above, I do not want to be short the market ahead of the FOMC Rate announcement and Yellen press conference on Wednesday. Today I will again look to buy the Dow on any dip lower to 18090/18145 with a 18040 stop which is just below last Friday’s low print.
December BUND
No change as I am still a buyer on any dip lower to 163.00/163.30 with a 162.55 stop. I will also leave my sell level unchanged at 164.60/165.00 with the same 165.50 wider stop.
Gold Rolling Contract
Gold just missed my 1305 buy level before trading higher and I am still flat. Today I will move my buy level slightly higher to 1300/1307 with a 1293 stop.
Silver Rolling Contract
My long 18.90 Silver position from last Thursday finally worked out this morning with Silver having a nice rally overnight and this rally has enabled me to cover this position at my revised 19.15 T/P level as emailed to my Platinum Members earlier this morning and I am now flat. Today I will again look to buy Silver on any dip lower to 18.70/19.00 with a 18.35 stop.
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