Markets were relatively calm until after 5.30 pm yesterday when worries again surfaced in relation to Deutsche Bank. A Bloomberg report noted 10 Hedge Funds that use the Prime Broker Services of Deutsche Bank moved part of their listed derivative holdings and hence also their collateral to other firms. In reaction, Deutsche Bank stock plunged 8.6% in US trading. Uncertainties over Deutsche Bank have developed in recent weeks given the bank is likely to be hit with a fine from the US Department of Justice – initially floated to be around $14bn but likely negotiated lower in the event of cooperation – and possibly that capital will need to be raised. One has to be careful not to dramatise, but it is fair to say Deutsche Bank will occupy attention in the near term.
Due to the number of members taking up my 2 year Euro 2500 rate for my Platinum Service this will be the last day that I am offering this special price which will now rise to Euro 2750 from tomorrow. If anyone is still interested in this deal which has been in situ since January, can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 199 points yesterday and is now ahead by 1109 points for September having made 1782 points in August and 1682 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.
Given those events where do we stand?. The risk-off tone has seen the USD/JPY move from shy of 102 back below 101. Most currency pairs were lower led by the Australian Dollar which was the worse performer out of the G10 currencies. Meanwhile the Euro was unchanged while the Swiss Franc rose 0.5%. Those currency moves are in sharp contrast to Wednesday where commodity currencies rallied following the interim OPEC agreement and the latest Presidential polls which put Clinton in a 3 point lead over Trump at 47.4 to 44.0 according to the RealClearPolitics.
US equities fell, with the S&P500 down by 0.9% driven by a 1.5% fall in financials and a 1.8% fall in health care. European equities were mixed with the DAX having closed 0.3% lower and the FTSE up 1.0% as these markets had closed before the Deutsche Bank news broke. This morning the DAX and the FTSE are opening 2.5% and 1.0% lower respectively.
Bond Yields had edged up slightly higher before the risk-off tone, but after the Deutsche Bank news, Yields fell by around 2bps to 1.56%, while German Bund Yields did rise 3bps before also reversing course when the news broke.
There has been a lot of Fed speakers recently which all seemingly point to a rate hike in December being the base case – of course conditioned on the flow of data. The Fed’s George who is an uber hawk and dissenter said ”its time” to raise rates while Fed Chair Yellen herself said the majority of the FOMC see December as likely. The exception was Governor Powell noting ”we can continue to be patient. Inflation is below our target and has been for five years. We are also in a global environment in which growth is weak and there are deflationary forces” but even he is seemingly on the December rate hike camp with his stance ”depending on the economy continuing to perform well, which is how I see it performing now”. However if the Deutsche Bank news becomes real then there is no chance of a rate hike anytime soon.
This morning on the economic front we have UK GDP, Current Account Balance, Index of Services and Total Business Investment at 9.30 am. This is followed at 10.00 am by Euro-Zone Unemployment and CPI. At 1.30 pm we have US Personal Income/Spending and the PCE Deflator. Finally we have the Chicago Purchasing Manager’s Survey and the University of Michigan Consumer Sentiment at 2.45pm and 3.00 pm respectively.
December S&P 500
Since the VIX started to be measured correctly in 1990, this year 2016 has incredibly seen the most times that this indicator has spiked more than 25% in a day with yesterday being the 24th time this year for this to happen. To show how big an event this is, in 2007 during the Global Financial Crisis we only had 16. Yesterday my S&P plan worked well and really showed what a key service that my Platinum Membership is. As I had so many buy levels across all markets which were close to nearly all getting hit at the same time, I emailed my Platinum Members 5 times yesterday with updates. The first one after the S&P hit my 2158 buy level to exit this trade at 2160 before thankfully rallying to a subsequent 2165 high print. I then said to be a aggressive buyer on any dip lower to 2137/2143 which the market obliged on the Deutsche Bank news which put me long at an average rate of 2140 before having another rally to 2154 and this move higher enabled me to cover this position at my 2152 T/P level and I am now flat. The S&P has key support at the 2124/2130 area, with the 100 Day Moving Average coming in at 2127. I will be a buyer on any dip to this area with a 2118 wider stop. Given the fact that today is Month and Quarter End, I do not want to be short the S&P at this time especially as we have key support just below current levels.
EUR/USD
In the currency pair where volatility has ceased, my Euro plan worked well with the Euro trading lower to my 1.1200 buy level before eventually rallying to a 1.1250 high print. Again as so many of my calls were at or near to get triggered I emailed my Platinum Members to exit this position for a small gain at 1.1214 and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1110/1.1150 with a 1.1080 stop.
December Dollar Index
No change as I am still a seller on any rally higher to 96.20/96.50 with a 96.80 stop.
December DAX
What can you say about the DAX. The warning signs were flagged at 3.00 pm when the DAX fell over 120 points in a straight line from the 10500 level before trading in a narrow range from 10360/10420 for over 2 hours before the Deutsche Bank news broke after the European close. This initial move lower saw me buy the DAX at the bottom of my buy range at 10390. I did not like the price action and I emailed my Platinum Members to exit this trade at 10400 before thankfully the market subsequently traded for the following 20 minutes from 10390/10415 before the news broke. I am still flat the DAX and today I am going to stay flat as I want to hang on to the excellent points made over the last 2 weeks after a difficult start to September. For those so inclined to trade the DAX the DAX has good support from 10080/10130.
December FTSE
The FTSE was strong all day until before the Deutsche Bank news broke. The subsequent move lower saw the market hit my 6835 buy level before having a small rally which enabled me to cover this position at my revised 6850 T/P level and thankfully I am now flat given the extent of the sell-off so far this morning. The next good support for the FTSE is from 6700/6740 and I will look to buy the market here with a 6665 stop. Again just like the S&P above I do not want to be short the FTSE at this time.
Dow Rolling Contract
I was lucky yesterday as after the Dow traded lower to my 18270 buy level I emailed my Platinum Members to exit this position at 18300 before the market subsequently rallied to a 18325 high print before getting crushed on the Deutsche Bank news. The price action for the stock markets this morning is very negative and as I want to try and stair step any buy orders, my only interest in buying the Dow will be on a large sell-off from here to 17880/17960 with a 17810 stop. Remember the Dow has strong support at the 17900 area which was a low print from earlier this month.
December BUND
I am still flat the Bund and today I will now raise my sell level to 166.45/166.75 with a 167.10 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1306/1313 with the same 1299 tight stop.
Silver Rolling Contract
No change as I am still long at 19.12 with the same 18.60 stop.
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