Headlines suggesting the ECB is near consensus on the need to taper its QE programme triggered a selloff in core Bond Yields and a mini rally in the Euro. 10y Bunds ended the day 4bps higher at -0.058%, 10y UK Gilts climbed 4.6bps to 0.777% and 10y UST are currently trading at 1.686% after trading at 1.637% prior to the headlines hitting the screens. The Euro jumped from 1.1138 to 1.1239 on the news and now it has settled just under 1.12. Reading through the article it seems the market has overreacted to the headlines, discussion on how to go about ending the programme doesn’t necessarily mean it is about to happen. The story also notes officials did not exclude the asset purchase program could still be extended. We would also note that the ECB extended its buying programme from EUR60bn to EUR80bn in April and given the anaemic growth in the Euro-Zone and subdued inflation, tapering the programme at this stage wouldn’t make any sense.
To mark my 1200th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested you can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 65 points yesterday and is now ahead by 133 points for October having made 1142 points in September and 1782 points in August. The previous three months saw gains of 1682, 2550 and 1532 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Sterling came under pressure at the London open making a new post Brexit low with better than expected data doing little to stem the fall. UK September construction PMI rebounded to 52.3 from 49.2, a six month high. So although the economy appears to be travelling at a better than expected pace, concern over a hard “Brexit” as PM May purses a policy driven by immigration and at the possible expense of access to Europe’s Single Market is weighing on the currency. Cable is currently trading at 1.2734, after trading to an overnight low of 1.2720.
All that said when looking at the G10 leader board, The Japanese Yen sits at the bottom of the pack, down 1.16%. After trading through its 50DMA of ¥101.74, USDJPY appears to have some technical room to trade higher, boosted as well by broad USD strength on the back of better than expected data of late. NZD is another big underperformer, down 0.93% following a soft dairy auction overnight (first fall in GDT prices since July). The AUD is also a bit softer (-0.74%), currently trading at 0.7625 and after trading to an overnight low 0.7608. Yesterday, the RBA stood pat as expected and overall the statement left me comfortable with my view that the RBA is on hold for the remainder of 2016 although a low Q3 CPI print (due for release on 26 October) could still bring a November cut back into play.
European equities managed to end the day in positive territory with the ECB article published after the close while US indices have struggled to perform amid an increase in expectations of a Fed hike in December. Gold shares have also come under pressure with the shiny metal breaking through key support level at $1304.
The Fed’s Lacker (non-voter, hawk ) was on the wires noting that the Fed should head off a likely pickup in inflation with pre-emptive rate rises. He reckons Fed funds should be about 1.5%.
This morning on the economic front we have German, Euro-Zone and UK Services/Composite PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by the Bloomberg Consumer Comfort Index at 2.45 pm. Finally at 3.00 pm we have US Construction Spending and ISM Manufacturing.
December S&P 500
Yesterday was an extremely volatile trading session for US stocks with a lot of two way volatility. Despite both the FTSE and DAX rallying strongly the US market failed to hold on to its morning gains before getting hit shortly after the US markets opened with the S&P hitting my 2148 buy level before thankfully having a quick rally to 2156 which enabled me to cover this position at my 2154 T/P level and I am now flat. As I mentioned over the past few days the S&P has very strong support from 2125/2132 which is where the 100 Day Moving Average comes in. If the market can break and close below 2120 we could well see an acceleration lower to the downside as witnessed yesterday in the huge down moves for both Gold and Silver. Today I will still look to buy the S&P on any dip lower to 2125/2131 with a 2119 stop. As we are approaching such key support, I do not want to be short the S&P at this time. However a break and close below 2120 will see me change my stance.
EUR/USD
There is doubt that these markets are very tricky to trade as shortly after I posted yesterday the Euro traded lower to my 1.1155 buy level. As I was already long both Gold and Silver and short the Dollar I emailed my Platinum Members to cut their long Euro position at 1.1170. I certainly did not see the Dollar weakening especially when both Gold and Silver were so weak as this normally results in a stronger Dollar. The Dollar subsequently rallied back above 1.1230 and I am still flat on the ECB report that they will taper back on QE. Today I will again look to buy the Euro on any dip lower to 1.1130/1.1170 with a 1.1095 stop.
December Dollar Index
After the Dollar traded higher to my 96.25 sell level, I also emailed my Platinum Member s to exit this position at 96.10 and I am still flat. Today I will again look to sell the Dollar on any rally higher to 96.50/96.80 with a 97.20 stop.
December DAX
Incredibly the DAX would not weaken yesterday despite the sell-off in the US stock market. I am still flat the DAX and today I will still be a small buyer on any dip lower to 10370/10430 with a 10325 stop. The price action continues to tell me not to be short the DAX at this time.
December FTSE
The FTSE rallied strongly after I posted yesterday morning with the market closing at new all-time highs, mainly due to the weakness in Sterling. Remember when you have a weak currency you have a strong stock market as the Country with the weak currency is at a more competitive advantage. However when the US stock markets started to sell-off the FTSE got hit after the close with the market eventually hitting my 6695 buy level before having a small rally. Subsequently as I wanted to be flat overnight I emailed my Platinum Members to cut this position at 7010 and I am now flat. Today I will again look to buy the market on any dip lower to 6935/6965 with a 6895 stop. Despite the FTSE closing overbought I do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan worked well as shortly after the Dow hit my 18200 buy level the market rallied 90 points which enabled me to cover this position at my 18265 T/P level and I am now flat. The key level to watch for the Dow is from 17950/18020 and today my only interest in this market is to be a buyer in this range with a 17890 stop. Just like the other major Indices I do not want to be short at this time especially ahead of such key support.
December Bund
The Bund traded lower to my 164.90 buy level late in yesterday’s trading session. I am still long and I will leave my stop unchanged at 164.45. Below here the key level to watch for the Bund is at 164.10. I will now use any rally higher to 165.10 to T/P on this long position especially after the ECB news as mentioned in my commentary above.
Gold Rolling Contract
Gold got slammed for $45 yesterday and in the process had its worst trading session in early three years. As I was already long Silver I waited to buy Gold at the bottom of my buy level at 1293 before getting stopped out of this position very quickly at 1285. Subsequently I re-bought Gold at 1270 with a 1263 stop. I will now use any rally higher to 1277 to cut this position and go flat as I want to see what the new Daily Sentiment Reading is for the precious metal.
Silver Rolling Contract
Thankfully I had a tight stop on my long 18.80 Silver position which was quickly filled at 18.35 shortly after I posted yesterday morning. Given the fact that Silver fell more or less in a straight line for a 5% decline especially after the key 18.20 major support level was broken I re-bought Silver again at 17.85. I am still long and I will leave a 17.40 tight stop on this trade.
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