There was indeed more noise than signal in Friday’s US labour market data. In particular in the 33k fall in employment (more than 200k below recent trends) and a reported jump in average hourly earnings of 0.5% than pulled the annual rate of change up to 2.9% from an (upwards revised) 2.7% in August. The explanation here was that those unable to work because of the hurricanes (and not getting paid) would be mostly lower-paid and casual workers, biasing up the average earnings of those who were at work (or got paid even if they weren’t). When the individual state data is published on October 20th, we’ll have more clarity on the employment situation, but in the meantime the BLS on Friday claimed that there were no obvious distortion to the unemployment rate calculations, which fell by 0.2% to 4.2% and to its lowest level since December 2000.
To mark my 1425th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 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 38 points on Friday and is now ahead by 172 points for October, having made 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
Post-payrolls, FOMC members Kaplan and Boston suggested they are open minded or in wait-and-see mode re a December hike. NY Fed President Dudley said it’s still appropriate to gradually remove accommodation, while James Bullard remains implacable opposed; he’s getting more concerned the Fed may make a policy mistake.
In other news, US Republican Senator Bob Corker, hit back at Trump’s critique of Corker as a ‘negative voice’ by saying that the White House has become an “adult day centre”(responding to apparent lack of support from Trump for beleaguered Secretary of State Rex Tiller son). Why this is important is that Corker is a deficit hawk, already critical of suggestions that the planned elimination of deductions in the ‘big six’ tax plan could be watered down. The Senate commands just a 52-48 majority of Republicans, and if Corker’s vote cannot be counted on, the tax plan is in more trouble than it otherwise might be.
Meanwhile the Australian Dollar made its lowest level since July 14 on Friday (0.7733) before a small pull back. RBA Board member Ian Harper is his WSJ interview on Friday, was s lamenting slow wage growth/household income which he said “if it lost momentum, might be the basis for some sort of policy action”. He also noted that the level of the Australian Dollar also remains an inhibitor to growth even after recent falls “You wouldn’t want to be jumping the gun and tightening too quickly” Harper said. AUD is particularly vulnerable to any break of the 0.7690/00 area this week. China data and their return to global commodity markets after a week holiday, and local business and consumer confidence reading this week area all important, at a time when speculative position on the AUD remains close to 2013 highs.
By the end of this week we might know a few important things we don’t know today and which are probably more important for markets in the shorter term than they will be in the long run. One is who will be President Trump’s pick to be next Fed chair, assuming that Janet Yellen is not to be offered a second term, something the predictit.org betting agency currently suggests is no better than a 13% chance. As of Friday night, the same organisation had Jerome Powell ahead of Kevin Warsh by 35% to 30% – a significant shift from earlier in the week when Warsh was a good ten percentage points ahead of Powell. If I had to bet, I would bet on Powell.
This morning on the Economic Front we already had the release of German Industrial Production which came in much stronger than expected with a 2.6% print versus 0.9% expected. Finally we have the Euro-Zone Sentix Investor Confidence as most US Markets are closed for the Columbus Day Holiday. However the US stock markets are open with normal trading hours.
December S&P 500
It took a while but finally my average short 2546.50 position worked well with the market trading to a 2542 post NFP low and this small sell-off enabled me to cover my short position at my revised 2543.50 T/P level and I am now flat. The level of volatility continues to fall with the VIX again closing on Friday with a ‘’9’’ Handle following Thursdays 4.6% fall to 9.19, surpassing its all-time low of 9.31 set in December 1993. It is incredible that the last few weeks of trading is mirroring a lot of the price action ahead of the 1987 crash. With markets and sentiment so complacent on top of volume which is now at multi year lows, this is a dangerous market. The tiny sell-off on Friday saw a large move in the McClellan Oscillator which closed barely in positive territory with a 9 print. This is not a healthy scenario despite markets trading at all –time highs. Today I will again be a seller in the S&P from 2552/2560 with a 2566 stop. I am going to continue to be a small seller on rallies until we get a long overdue sell extreme. Meanwhile I will leave my buy level unchanged from 2525/2532 with a 2519 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2505/2513 with a 2499 stop.
EUR/USD
The Euro just missed my 1.1755 sell level overnight with a 1.1748 high print and I am still flat. Today I will raise my sell level slightly to 1.1765/1.1805 with a 1.1845 wider stop. I will only look to sell in small size. Meanwhile I will now raise my buy level slightly to 1.1605/1.1645 with a 1.1570 stop.
December Dollar Index
I am still flat the Dollar and today I will now lower my buy level to 92.90/93.30 with a 92.60 stop. I still do not want to be short the Dollar at this time.
December DAX
Given the strength of this morning’s German Industrial Production, I would have expected to see the DAX break 13000 on this news. There is no doubt the market is overbought after the huge near 1000 rally since the 12020 low on September 5, and is due a correction. Today I will leave my sell level unchanged from 13060/13110 with a 13145 tight stop. Meanwhile I am not going to chase the DAX higher and for the third consecutive trading session I will leave my buy level unchanged from 12820/12880 with a 12780 stop.
December FTSE
The FTSE traded in a narrow range on Friday and I am still flat. The fact that the FTSE has continued to build upon its break and close over its 100 Day Moving Average at 7380 is positive. Today I will leave my buy level unchanged from 7395/7430 with the same 7360 stop. Despite the FTSE trading overbought and a worsening political situation, I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Despite the CNN Greed & Fear Index at multi- year extremes the Dow only had a small sell-off on Friday following the release of the much weaker than expected NFP on Friday. I am a broken record of repetition, noting that P/E’s are egregiously high, that margin usage is egregiously high, but it matters not as stocks just continue to advance. At this point in the cycle, it is not the market bulls that are in control, but it is the market’s short positions that are losing control. Those who are short… either definitionally ‘’short’’ or who are ‘’short’’ of their benchmarks and are under-invested… are now under very real and very severe pressure to cover in both instances. Panic is setting in and irrationality is the order of the day. On Friday after I posted the Dow traded in a very narrow range and I covered my short 22765 position at 22777 ahead of the NFP release as I wanted to only hold my short S&P position into the NFP release. I know most of you only trade either the Dow or S&P and if you held the Dow into the 1.30 pm release the Dow had a small sell-off before trading sideways for most of the day ahead of a tiny rally to unchanged into the close. Today I will continue to look to sell the market on any rally higher to 22840/22900 with a 22960 wider stop. I will also be a buyer on any dip lower to 22570/22630 with a 22520 stop. I will still be an aggressive buyer on any dip lower to 22360/22440 with a 22295 stop.
December BUND
My Bund plan worked well with the market trading lower to my 160.65 buy level before rallying 60 points. Unfortunately I lowered my buy level after the NFP release on Friday which did not hit and I missed out on this gain and I am still flat. If you stayed long over the weekend then I would take your profit here at 161.30 and go flat. Today I will again look to buy the Bund on any dip lower to 160.65/160.95 with a 160.30 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Frustratingly Gold just missed my latest 1257 buy level with a 1260 low print before rallying $28 to an overnight high at 1288. This rally was a strong buy extreme off the important 1260/1265 support level. Today I will now raise my buy level to 1262/1269 with a 1255 stop.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 16.40 buy level with a 16.31 low print before rallying to my 16.60 T/P level and I am now flat. Incredibly Silver rallied to a 17.02 high print overnight which is a 4% rally off Friday’s post NFP low and in the process left a large buy extreme. Today I will now be a buyer on any dip lower to 16.40/16.80 with a 16.15 tight stop.
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