There is no doubt we are seeing a change in trend for asset markets over the past 48 hours with the market unwinding some of the move we have seen over the past fortnight. With no real new news, European and U.S markets took the lead from Asia where the softer than expected Chinese data was the main contributing factor for the negative tone in the region. Yesterday China’s exports fell 10% yoy (in USD terms) while imports were down 1.9% yoy and the market has interpreted the numbers as a sign of weak global demand triggering a bit for safe haven assets and a selloff in risk assets.
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 37 points yesterday and is now ahead by 614 points for October having made 1142 points in September. The previous three months saw gains of 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Time will tell whether the softer tone over the past 24 hours is just a small correction or a sign that a bigger change is coming. In that regard I would note that history tells us that the recent positive correlation between the US Dollar, equities, Bonds and commodities typically doesn’t last long, so this is something we should keep an eye on.
Looking at currencies in more detail, the US Dollar is softer across the board on the back of a pullback in expectations of a Fed hike in December with the OIS market current showing a probability 76% compared to 81% two days ago. JPY is one of the top performers, showing its preeminent safe haven attributes, but NOK and CAD have also performed supported by the steadiness in oil prices. Meanwhile, the AUD has been the G10 underperformer gaining just 0.2% against the US Dollar reflecting its close ties with China’s economy.
10 year US Treasury yields have not recovered since their decline post the FOMC minutes and are currently trading at 1.74%, practically unchanged from New York’s closing levels, and 2 year UST are a little bit lower, consistent with the moves seen in the OIS market.
On a more positive note, Jobless Claims were unchanged at 246K, below the 253k expected and the lowest reading since November 1973 (adjusted for population growth). The numbers imply that further improvements in labour market conditions should be in the offing; however caution is also warranted given that jobless figures can be volatile over short periods of time.
In other news the Fed’s Harker was speaking and said we should see one rate hike by year end.
This morning on the economic front we have UK Construction and the Bank of England’s Credit Conditions and Bank Liabilities Survey at 9.30 am, followed by the Euro-Zone Trade Balance at 10.00 am. This is followed at 1.30 pm by US Retail Sales, PPI and Business Inventories. Finally we have the University of Michigan Consumer Sentiment Index.
This afternoon both the Fed Chair Janet Yellen and Fed Member Rosengren will speak at the Boston Fed Conference. First up is Rosengren at 1.30 pm followed by Yellen at 5.00 pm, who will probably try and soothe market tensions after such a volatile week.
December S&P 500
Shortly after I posted early this morning the stock markets were hit by the weaker than expected Chinese Export data and by the time you got to read my commentary the S&P was thankfully trading at the bottom of my buy range at 2117. As I have mentioned over the past few days we are seeing a change in direction in all asset markets and given my nervousness plus the fact that so many of my positions had hit I emailed my Platinum Members to exit this long position at 2120 and I am still flat. Unfortunately for those who stayed long the S&P subsequently made a new low at 2108 before having another ‘’Hail Mary’ rally back to 2132 before a late sell-off into the close. This is the sixth time the S&P has met support at the 2114/2120 level over the past two months. In meeting these support lines the market is signalling their importance. As I have already said this week, a break and close below 2114 is a ‘’Sell Signal’’. I have no doubt the Fed bought this market aggressively here as they can read charts like the rest of us and will do everything in their power to prevent and sort of mini crash ahead of the US Elections on November 8. Meanwhile despite the sell-off the Daily Sentiment Index reading is neutral at 45%, which opens up the possibility for a large move lower. Today I will again look to buy the S&P on any dip lower to 2112/2119 with a 2107 stop. I would expect that if I am taken long we will get a rally ahead of Yellen’s speech at 5.00 pm. Given the fact that she is speaking my only interest in selling the S&P is still on a rally higher to 2139/2145 with a 2150 stop.
EUR/USD
The Euro missed my 1.0970 buy level with a 1.0984 low and I am still flat. As the Euro is oversold on all the technical signals that I follow, I am looking for a move higher to correct these conditions. Today I will now move my buy level higher to 1.0980/1.1020 with a 1.0945 stop.
December Dollar Index
So far I have been lucky with my short 97.50 Dollar position as the high so far is 98.10 which is my stop and had not broken this level as yet. I will leave my T/P level unchanged at 97.40 on this position. If I manage to cover this position I will again look to sell the Dollar on any rally higher to 97.85/98.15 with a 98.50 stop.
December DAX
Thankfully the DAX was also trading at the bottom of my buy range when the Eurex Futures Market opened putting me long at 10370. The market made a low at 10335 before having a nice 100 point rally. As I was long so many Indices I covered this long position too early at 10380 and I am still flat. Today I will again look to buy the DAX on any dip lower to 10290/10350 with a 10240 stop. One note of caution for the DAX is the fact that Deutsche Bank shares fell 3% yesterday and is definitely one share to keep an eye on.
December FTSE
The good news was the FTSE was trading at the bottom of my buy range at 6930 by the time you got to read my commentary. The bad news was I was stopped out of this right at the low of the day at 6895 and I am still flat which is very frustrating when you see the subsequent rally in the market. Today I will again look to buy the FTSE on any dip lower to 6890/6920 with a 6865 tight stop.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 18010 buy level with a 17953 low print before having a huge 180 point rally off this low print. Again as I was long so many Indices I cover my long Dow position at a revised 18042 T/P level and I am now flat. Yesterday was the 10th time that this support level at 18000 has been tested, six times when it was resistance from early June to early July and four times when it became support in mid-September. Today I will again look to buy the Dow on any dip lower to 17960/18020 with a 17910 stop. Given the fact that Yellen is speaking later I do not want to be short the Dow at this time.
December BUND
I am still flat the Bund and today I will raise my buy level slightly to 163.00/163.30 with the same 162.55 stop which is just below the 162.60 September low print.
Gold Rolling Contract
I am still flat Gold and today I will raise my buy level to 1243/1251 with a 1235 stop. Given how oversold and under loved Gold is at this time, I am expecting a decent Gold rally sooner rather than later.
Silver Rolling Contract
No change as I am still long at 17.85 with the same breakeven T/P level. Again if I mange to T/P on this position I will again look to buy the market on any subsequent dip lower to 17.40/17.70 with the same 16.95 stop.
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