Yesterday has not been a good day for risk assets with European and the US equity indices recording their worst day since the November US election. The Dow has lost over 225 points at one point before rallying to close down 122 points and back below the 20K mark at 19,971(-0.62%) , the S&P 500 closed down -0.60% and while all sectors are in the red, sectors such as Energy, Industrials, Materials and Financial, which have been the outperformers since Donald Trump election victory, are at the bottom of the overnight pile, down between 1% and 2%. Meanwhile all European indices closed the day in negative territory with the Euro Stocks 600 down 1.05%, its worst day since the start of November last year.
To mark my 1250th 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 had its first negative day for 2017 by losing 58 points but is still ahead by 1602 points for January having made 1351 points in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 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.
Earlier this morning the Bank of Japan in its first Monetary Policy Meeting of 2017, left policy unchanged. They have extended their QE programme by one year while in their forecasts have left CPI also unchanged at 1.5% for this year which was the same as their last meeting in November. Following the meeting we had a press conference with Bank of Japan Governor Kuroda who said it was too early to discuss the end of QE and that negative Interest Rates was still appropriate. The Nikkei did not like the no upward revision to inflation and closed down 1.70% at 19,071.
Price action in currencies has been fairly muted with JPY and GBP the two exceptions. The USD is little changed against most currencies (BBDXY -0.02%), but it has lost over 1% against the Yen. Yesterday during our Asia session, USD/JPY was contained within a ¥114.29-¥114.92 range but as US equities took a dive yesterday afternoon, USD/JPY followed the move lower and is currently trading at ¥113.50. Meanwhile Sterling is at the bottom of the pile down 0.65%. The currency pair is currently trading at 1.2480 with technical suggesting it still has room to trade lower. This is a 200 point fall in Cable since late last week.
Looking at core global yields, 10y UST are little change at 2.48% and 2y UST are also essentially unchanged at 1.20%. The December PC deflator, the Fed’s preferred inflation measure, was released yesterday afternnon with the core measure printing at 1.7% and in line with expectations, slowly but surely inflation pressures are rising in the US with core measure recording a fourth straight 0.1% monthly rise. Meanwhile in Europe, German Bunds ended the day +1.2bps at 0.445%. Germany’s yoy headline inflation climbed to 1.9% in December, just below the 2% expected by consensus. Still, the figures will no doubt give ammunition to German policy makers to pressure the ECB to wind down its QE programme.
The Equity markets are opening lower this morning after US President Trump sacked the Attorney General Sally Yates, after she questioned the legality of his Immigration ban. It looks like every morning we are going to awake to some surprise news from Trump. He is own in power for 10 days and it already feels like six months.
This morning on the economic front we already had the release of German Retail Sales. This came in very weak at -0.9% versus +0.6% expected. At 9.30 am we have UK Mortgage Approvals and this is followed at 10.00 am by Euro-Zone CPI and the Unemployment Rate. At the same time the US will release its latest Employment Cost Index. Next we have Canadian GDP at 1.30 pm. Finally we have US Chicago Purchasing Manager Index and the Consumer Confidence at 2.45 pm and 3.00 pm respectively.
March S&P 500
The S&P had its worst trading day since the Trump Election victory on the back of the latest policy implementation from the US President. Unfortunately my S&P plan did not work out yesterday as my stop was too tight and after buying the S&P at an average rate of 2273 I was stopped out of this trade near the low of the day at 2265. Subsequently I emailed my Platinum Members to use my ”Five Handle Rule” which was executed at 2267.75. As I had to go out last night I covered this position at 2270 before the market rallied to a 2276 high ahead of the close and I am now flat. With Trump again in the news overnight with his sacking of the Attorney General the S&P is selling off again this morning. However with today being the last trading day of the month where traditionally new monies are put in to the stock market it is difficult to be short today. The S&P has support at 2260 and very strong support at the December 30th low at 2227.75. It will take a break and close below the latter low for the market to turn at least temporarily bearish. My own view is that February could well be a weak month for stocks before the market re-groups to new highs some where in my 2300/2334 long term target before finally rolling over to the downside in a meaningful way. Today I will be a small buyer on any dip lower to 2259/2265 with a 2253 stop. I will also lower my sell level to 2287/2293 with a 2299 stop.
EUR/USD
Unfortunately the Euro missed my 1.0615 buy level with a 1.0620 low print before the Euro rallied 100 points and I am still flat. Today I will go ahead and raise my buy level to 1.0620/1.0655 with a 1.0585 tight stop. I still do not want to be short the Euro at this time.
March Dollar Index
Today is a crucial trading session for the Dollar Index as a close below the December low at 99.51 will be a Downside Key Month Reversal. The Dollar bulls will do everything they can to prevent this from happening as a break and close below this level will be extremely bearish. Remember we have already had a Downside Key Day and Key Week Reversal so far in January. Yesterday after I posted my long 100.25 Dollar position hit my 100.50 T/P level and I am now flat. Today I will again look to buy the Dollar on any dip lower to 99.30/99.70 with a 98.95 stop. Given how oversold the Dollar is trading I do not want to be short the market at this time especially as we have strong support in my buy level above.
March DAX
With so many of my calls from yesterday hitting at the same time including the DAX which I bought at an average rate of 11680, I emailed my Platinum Members to reduce their risk and I covered this position for a small gain at 11695 before the market rallied to a subsequent high at 11715 and I am now flat. The break back below the July, 2015 high at 11810 is mildly bearish but understandable given the huge rally over the previous four weeks. Today I will again look to buy the DAX on any further dip lower to 11580/11640 with a 11530 stop. Given the fact that it is month-end I do not want to be short the market at this time.
March FTSE
The renewed weakness in Sterling is helping the FTSE to hold in relative to the other major Indices. Yesterday I was again unlucky with the FTSE missing my 7035 buy level by one point before rallying strongly into the close and I am still flat. Today I will raise my buy level slightly to 7015/7045 with a 6985 tight stop. Just like the DAX above I do not want to be short the FTSE at this time.
Dow Rolling Contract
My Dow plan also did not work well with the market hitting my 19950 buy level before stopping me out of this position near the low of the day at 19895 and I am now flat. Just like the S&P above, my stop in the Dow was too tight especially with the market rallying back above my initial buy level late in the New York session. The sell-off in the Dow saw the McClellan Oscillator again closing in negative territory with a -61 print. There is no doubt that traders are scared to buy this market given the lofty valuations and are also scared to sell the market given the massive 9.5% rally since Trump’s election victory. The volume for trading in the US stock market for January was as a result at multi-year lows. Today I will again look to buy the Dow on any dip lower to 19810/19870 with a 19750 stop. Despite the negative price action I still do not want to be short the Dow at this time.
March BUND
My long 161.40 Bund position worked well with the market trading to a 162.20 high yesterday morning. Unfortunately in keeping with my theme of banking points when available I covered this position too early at 161.55 and I am still flat. This morning the Bund is selling off and today I will again look to buy the market on any further dip lower to 160.85/161.15 with a 160.55 stop.
Gold Rolling Contract
I am still flat Gold and today I will raise my buy level slightly to 1175/1183 with a 1168 stop.
Silver Rolling Contract
No change as I am still long from last Friday at 17.10 with the same 16.75 stop. I still expect Silver to rally back to 19.00 but it needs to break and close over 17.40 for this to start to happen.
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