Yesterday all eyes were on the Minutes of the last ECB Meeting in September and as expected there was no mention of tapering. The Central Bank reiterated its willingness and ability to ease further, if needed, while concerns over the lack of an uplift in core inflation was also evident. Reaction to the Minutes was fairly muted, but better than expected US Jobless Claims supported the recent theme of higher core Global Bond Yields (as mentioned at length in yesterday’s commentary) and a stronger US Dollar. Then headlines from an MNI interview with Vice President Constancio that the Governing Council ‘’has not discussed anything about the timetable of QE’’, triggered a small rally in Bond Yields and helped equity markets pair back early losses.
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 they can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 77 points yesterday and is now ahead by 216 points for October having made 1132 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.
In the end, however, reaction to Constancio’s comments proved to be short lived. Core Bond Yields continued their ascendancy and after trading in and out of positive territory European and US equities ended the day slightly lower to unchanged. Just like in the Inception Movie, the idea of QE tapering has already been planted in investor’s minds and a denial by the ECB is unlikely to reverse this thinking. ECB President Dragi speaks in Washington on Sunday and it will be interesting to see what he has to say.
As for currencies, Sterling remains the whipping boy against a backdrop of broad US Dollar strength. Indeed over the past 24 hours all G10 currencies have underperformed the US Dollar. Sterling is now trading with a 1.26 Handle for the first time since mid 1985 with ongoing concern and headline news on the consequence from a hard Brexit the main catalyst. The Japanese Yen weakness is another ongoing theme with USD/JPY back above 104 for the first time since early September. Higher US Bond Yields and short covering being the main drivers for Yen weakness.
As noted above, US Treasury Yields have continued to drift higher and in addition to solid US economic data, the ongoing ascendancy in oil prices has also been a contributing factor. WTI is now trading above $50 for the first time since late June and the move appears to be supported by news that Hurricane Matthew continues to strengthen as it approaches Florida and was due to make land overnight as a Category 4 which if happens will cause major damage.
This morning on the economic front we have German Industrial Production at 8.00 am. This is followed by UK Industrial Production and the Trade Balance. At 1.30 pm we have the US NFP data and the consensus is for a 172K print, up from 152K in August. With December now pricing in a 75% chance of a rate hike, compared to the high 50’s last week, we are probably more likely to get a bigger reaction from a soft print while a solid number would help vindicate the recent spike in Fed hiking expectations. Meanwhile Average Earnings are expected to rise by 0.3%. Finally we have Wholesale Inventories and Consumer Credit at 3.00 pm and 8.00 pm respectively.
Fed speaking wise today is very busy with Fischer, Mester, George and Brainard speaking at 3.30 pm 5.45 pm, 8.00 pm and 9.00 pm respectively.
December S&P 500
Despite the S&P having a nice rally off its 2143.25 low print on comments from Constancio that the ECB have not talked about tapering I am very suspicious of the US equity market. With both the FTSE and DAX rallying strongly over the past few trading sessions, the S&P appears sluggish. My fear is if we get a weak NFP number today then we could see an acceleration to the downside. I am still flat the S&P and as normal I will stay flat until the NFP is released. If the S&P subsequently sells off I will still look to buy the market on any dip lower to 2130/2136 with a 2124 stop. If I am taken long and I am stopped out of this position or manage to cover any long position for a T/P, either way I will be an aggressive buyer on any further dip lower to 2110/2116 with a 2105 stop. Despite my concerns about this market I still do not want to be short the S&P at this time.
EUR/USD
The Euro finally traded lower to my 1.1158 buy level. I am still long with the same 1.1095 stop. However I will use any rally this morning to exit this trade ahead of the NFP release at 1.30 pm Subsequently, if the Euro again sells off on this data I will be a buyer from 1.1080/1.1110 with a 1.1045 stop. I still do not want to be short the Euro at this time as I mentioned above, if we get a weak Payroll number then the Dollar should weaken a fair amount.
December Dollar Index
The Dollar rallied to my 96.65 sell level yesterday afternoon, but as I was already long Silver and the Euro I emailed my Platinum Members to exit this position for a small gain at 96.53 and I am now flat. The Dollar has very strong resistance at 97.20 and today I will again look to sell the Dollar on any post NFP rally to 97.20/97.50 with a 97.75 tight stop.
December DAX
No change as just like the S&P above I do not trust the DAX at these levels especially as we still have the problems with Deutsche Bank. Today I will leave my buy level unchanged at 10380/10440 with a 10325 stop.
December FTSE
Unfortunately the FTSE just missed my 6960 buy level with a 6962 low print before the market had a nice rally back above 7000, mainly due to the continued weakness in Sterling. Today I will lraise my buy level slightly to 6950/6980 with the same 6920 stop. The main reason that I am raising this buy level is on the back of what looks like a ”Fat Finger” trade in Cable which fell from 1.26 to 1.19 in just three minutes before trying to rally again as I post this commentary. This looks very like what went on with the Swiss Franc in January 2015.
Dow Rolling Contract
Frustratingly the Dow just missed my 18150 buy level with a 18159 low print before having a nice 140 point rally on the ECB tapering news. I am still flat and today I will leave my buy level unchanged at 18090/18150 with the same 18040 stop. Again over the coming days if the Dow trades lower to 17890/17950 I will be an aggressive buyer in this area with a 17840 stop.
December BUND
My Bund plan worked well with the market having a nice rally to 164.87 on the ECB Minutes which enabled me to go short at my 164.80 price level before the market got hit hard as speculated at length in my Bund commentary yesterday. With the NFP data due today I covered my Bund position at 164.45 and I am now flat. Today I will again look to sell the Bund on any rally higher to 164.70/165.00 with the same 165.40 stop.
Gold Rolling Contract
Yet again we saw some more selling in Gold with the market testing the key $1250 support level. After Gold traded lower to my average buy level at 1254 I emailed my Platinum Members to exit this position at 1257 as I wanted to be flat ahead of today’s NFP data plus the fact that I was already long both the Euro and Silver. Gold is now trading outside the bottom of its Daily Bollinger Band and Williams Index plus the DSI reading as mentioned yesterday is less that 10% bulls, which means the next move should be higher to correct these anomalies. Today I will again look to buy Gold on any dip lower to 1238/1246 with a 1231 stop.
Silver Rolling Contract
No change as I am still long Silver at 17.85 with the same 16.95 stop.
Recent Comments