Italian Prime Minister Matteo Renzi has resigned after suffering a heavy defeat in a referendum over his plans to reform the Country’s Constitution. In a late night news conference, Renzi said he took responsibility for the outcome, and said the ”No Camp” must make clear proposals. With most ballots counted, the ”No” vote leads with 60% against 40% for the ”Yes” vote. The turnout was nearly 70% in a vote that was seen as a chance to register discontent with the Prime Minister. Meanwhile US Non-Farm payrolls printed in line with expectations on Friday at 178k with revisions summing to a net -2k. The 0.1% fall in average hourly earnings (2.5% Y/Y down from 2.8%) trumped the drop in the Unemployment Rate to a new postGFC low of 4.6% (from 4.9%) to leave yields lower, the US Dollar lower and US stocks little changed on the day.
To mark my 1225th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 210 points on Friday and is now ahead by 425 points for December having made 1971 points in November and 1582 points in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this new Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
A Quarter point Fed rate hike on Dec 14th remains 100% priced, though markets did shave 4bp off their previous end-2017 pricing (now at 63.7bps). The S&P gained just 0.04% Friday and is 1% lower on the week. The Dow was -0.11% but 0.1% up on the week. The S&P energy sub-index closed +11.9% on the week following Wednesday’s OPEC deal. NASDAQ +0.09% and 2.7% down on the week while the VIX finished in New York Friday virtually unchanged at 14.12 and 1.78 higher on the week. European stocks ended lower in front of Sunday’s Italian and Austrian voting, the Eurostoxx 50 -0..52% and German Dax -0.2% but Italy’s MIB up 0.07%. No fear of ‘no’ there.
US Bond markets saw yields jag lower on the US Employment report prints, immediately recover to above pre-Payrolls level, then leak lower as the session progressed. 2s finished 5.1bps lower to be 2.2bps lower on the week at 1.098%; 10s -6.5bp and 2.bps up on the week; the 30yr ended 4.7bps lower to .062% and 5.6bps up on the week. 10yr Bunds fell by 8.8bps to 0.281% but are 4.1bps up on the week and gilts -11.7bps to 1.38% and -3.7bps on the week.
In FX, the US Dollar mirrored the Bond market, falling immediately then rallying back above pre-data levels before falling away. The DXY finished NY 0.27% lower on the day and down 0.7% on the week.
Sterling continues its post-Brexit shock recovery to be the next performing G10 currency Friday. News Friday of a London by-election victory for the anti-Brexit Liberal Democrats was one supportive factor. GBP/USD was up 1.1% to 1.2729. NZD/USD fared next best, +0.75% to 0.7141 and followed by AUD, +0.57% to 0.7457. USD/JPY lost 0.52% to Y113.51% and is now 1.2% back from its intra-week post-Trump victory high of Y114.83. The South African Rand was the best performing EM currency Friday, +2.16% to 13.80 and after S&P affirmed its BBB- foreign currency rating on South Africa while maintaining a negative outlook.
In commodities oil gained further, WTI by $0.60 to $51.68 to be +$5.62 on the week and Brent by $0.50 to $54.46 and $7.22 up on the week. Gold gained $8.20 to $1175.10. The LMEX index lost 0.57% and iron ore lost 60 cents to $77.79 and is $1.82 down on the week. Coal wasn’t much changed.
The Austrian presidential election has already been declared for the Green party candidate, so some relief here at the start of the week.
This morning on the economic front we have German, UK and Euro-Zone Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by Euro- Zone Sentix Investor Confidence and Retail Sales at 10.00 am. Finally we have US Services PMI and ISM Non Manufacturing Composite at 2.45 pm and 3.00 pm respectively.
The Fed’s Dudley, Evans and Bullard are due to speak this afternoon at different conferences.
December S&P 500
My S&P plan finally worked out with the market hitting my 2179 buy level shortly after the US markets re-opened last night before rallying strongly. This rally has enabled me to cover my long position at my 2185 T/P level and I am now flat. The reaction to the ”No” vote in the Italian Referendum again shows how the Central Banks will not allow these markets to fall no matter what or how bad the economic news is. The McClellan Oscillator improved slightly to close with a +8 print on Friday and if the MO had not closed in positive territory we would had another Hindenburg Omen. Today I will again look to buy the S&P on any dip lower to 2182/2188 with a 2177 stop. If I am taken long and subsequently stopped out of this position I will use my ”5 Handle Rule” to go long again with a stop below whatever new low is printed. I still do not want to be short the S&P at this time.
EUR/USD
As the Euro gapped below my 1.0570/1.0610 buy range at the open last night, this range was no longer applicable. If anyone did buy the Euro then this trade worked well with the Euro back trading at 1.06 this morning. It is amazing that despite all the doom and gloom towards the Euro that we still cannot break the March 23, 2015 low at 1.0462, which again emphasises the huge negative divergence versus the US Dollar Index. Today I will look to buy the Euro on any dip lower to 1.0560/1.0600 with a 1.0520 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 1.0430/1.0470 with a 1.0390 stop. Given the importance of the support below I do not want to be short the Euro at this time. Remember the DSI continues to trade in single digits.
December Dollar Index
In an updated email to my Platinum Members last night I said to keep my sell range in the Dollar Index unchanged which was fortunate as the Dollar hit my 101.55 sell level with a 101.62 high print before selling off early this morning to my 101.20 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 101.50/101.90 with a 102.30 stop. Given the fact that the Daily Sentiment Index reading for the Dollar is at 94% I do not want to be long the Dollar at this time. A break and close below 100.50 for the Dollar will be negative.
December DAX
The DAX trades on EUREX Exchange from 7.00 am to 9.00 pm from Monday to Friday. The spread betting firms make their own prices for the DAX outside normal trading hours and I do not participate as this is not a normal market. The reason I am mentioning this important fact is that the DAX traded to a 10360 low last night with these betting firms which was in my buy range outlined on Friday. If any member did this trade then it worked out very well with the market trading at 10690 as I write this commentary. I am still flat the DAX and today I will raise my buy level to 10570/10640 with a 10520 stop. Remember a break and close over the 10800/10850 now major resistance level will be bullish targeting a move higher to at least 11160.
December FTSE
My FTSE plan worked well on Friday with the market hitting my 6735 sell level. As I wanted to be flat ahead of the Italian Referendum I emailed my Platinum Members to exit this position at 6715 and I am still flat. Overnight the FTSE traded a lot lower before rallying strongly on the open this morning. Today I will look to buy the FTSE on any dip lower to 6700/6735 as the market had a nice rally again off this important support so far today.
Dow Rolling Contract
The Dow continues to trade in a narrow range within overbought conditions. This morning the Dow is rallying strongly and I will now raise my sell level to 19330/19390 with a 19460 wider stop. Given how overbought the Dow is trading coupled with the fact that the Dow nearly generated another Hindenburg Omen on Friday I do not want to be long the Dow at this time.
December BUND
The BUND rallied strongly on Friday and early this morning before getting hit hard in the last 30 minutes. I am still flat the market and today I will leave my buy level unchanged at 159.60/160.00 with the same 159.30 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 158.70/159.00 which is where the really important 5 year trend line comes in. If I am taken long at this second buy level I will have a stop at 158.40.
Gold Rolling Contract
My Gold plan worked well with Gold hitting my 1168 buy level shortly after the NFP was released on Friday. As I wanted to bank some points for Friday I emailed my Platinum Members to exit this position at 1174.50 and I am now flat. Overnight Gold traded to a 1182 high before getting hit as the equity markets rallied. With the DSI reading so low I will again look to buy Gold on any dip lower from 1151/1159 with a 1144 stop.
Silver Rolling Contract
Finally my long 16.65 Silver position was exited at my T/P level at 16.95 which was the opening price when the market re-opened in New York last night. With Silver selling off again this morning I have re-bought Silver here again at 16.60 with a 16.10 stop.
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