US Bond Yields ended the NY session on the day’s highs, 10 year treasuries at 2.385%, their highest close since 12th July (they were last above 2.40% on May10th). The US Dollar ended close to the highs, DXY +0.47% to 93.70, its best close since Oct 6th. This was accompanied by new record closing levels for the S&P500, Dow and the NASDAQ, up 0.5%, 0.7% and 0.4% respectively. Momentum from Thursday night’s passage by the Senate of a Budget resolution allowing for a $1.5tn addition to deficits over the next 10 years was added to in Friday NY trade after Fox News pre-released an excerpt from an interview with President Trump, to be aired on Sunday. Asked if bringing John Taylor and Jerome Powell together was an option, Trump says ‘It is in my thinking, and I have a couple of other things in my thinking but I like talent and they’re both very talented people’. Fox reported Trump may appoint a Fed chair and vice chair together. Asked who he’s like to see running the Fed, Trump responded ‘Most people are saying it’s down to two, Mr Taylor, Mr Powell. I also met with Janet Yellen, who I like a lot. So I have three people that I’m looking at, and there are a couple of others – I’d say I will make my decision very shortly’.
To mark my 1450th 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 86 points on Friday and is now ahead by 470 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.
Fed Chair Janet Yellen delivered a speech to the National Economists Club in Washington on Friday evening after the NY close. The Two key takeaways were that:
- She does not expect the bond term premium – the compensation demanded by investors for bearing the interest rate risk on longer term securities – to rise appreciably as the Fed proceeds with balance sheet normalisation given its slow and predictable nature compare to the pace of QE and its various surprises.
- If the currently estimated neutral policy rate of 2.75% (the median Fed longer term ‘dot’) doesn’t rise over time, the chances of the Fed having to again resort to unconventional policy measures is ‘uncomfortably high’.
In the Q&A that followed her speech, Yellen said “We’ve had a series of weak, soft readings on inflation, core inflation, beginning in March and the reasons for that are not immediately clear”. Reasons for low inflation were “pretty understandable until this year. This year has been a surprise”.
In FX, continuation of NZD losses post Thursday’s political news (-1% to 0.6963) was eclipsed by CAD (- 1.1%) after lower than expected CPI (1.6% vs. 1.7% expected) and Retail Sales (ex-autos -0.7% vs. +0.3% expected). These are seen to take additional Bank of Canada tightening off the agenda this week (and probably for December too). AUD/USD closed 0.8% down at 0.7817. Sterling was the only currency to buck the stronger USD trend (+0.2%) the story here a sense that EU sensitivity to the fragility of UK PM May’s political position is prompting a slight softening in their hitherto hard-line approach to Brexit negotiations (recall that German chancellor Merkel last Thursday said that the ball was not just in the UK’s court) .
In US Interest Rates Markets the Treasury curve bear steepened, 2yrs +4.6bps to 1.578% (+8.3bps w/w) and 10s +6.6bps to 2.385% (+11.1bps w/w).
In commodities, Gold took a hit from the rebounding dollar, -$9.50 to $1,277.40, for a loss of $24 or 2% on the week. Oil was little changed, WTI +20 cents to $51.47 and Brent +50 cents to $57.75. Iron ore recovered from its mid-week dip, +$1.60 to $62.46 to be flat on the week.
This morning on the Economic Front we have Euro-Zone Government Debt/GDP Ratio at 10.00 am and this is followed at 11.00 am by UK CBI Business Optimism. The only US data is the Chicago Fed National Activity Index at 1.30 pm. Finally at 3.00 pm we have Euro-Zone Consumer Confidence.
December S&P 500
Very late on Friday the S&P traded higher to my 2573 sell level before having a small 2 Handle sell-off to 2571. I did not sell the market myself and I emailed my Platinum Members that anyone who short to cover ahead of the weekend. Last night the S&P opened higher trading at 2576 as I post this commentary, with no end in sight to this relentless bull market. Internally this market continues to trade weak as shown by the McClellan Oscillator which closed with a negative 14 print despite the S&P, NASDAQ and Dow all closing at new all-time highs while the CNN Greed and Fear Index closed with an Extreme Greed reading of 90. The way we are going it will not take long for the S&P to hit its Third Standard Deviation at 2792. Today I will now raise my buy level to 2557/2563 with a 2552 stop. I will continue to be a small seller on rallies with tight stops as I patiently wait for a decent sell extreme to start. Today my sell level will be from 2583/2590 with a 2595 stop. I will also look to sell the S&P on any break and close below 2545.
EUR/USD
My Euro plan worked well on Friday with the Euro trading lower to my 1.1765 buy level before rallying to my revised 1.1786 T/P level and I am now flat. With the High Volume Price moving higher as mention on Friday I will continue to be a buyer of the Euro on dips with today’s buy range from 1.1685/1.1720 with a 1.1655 stop. I still do not want to be short the Euro at this time.
December Dollar Index
I am still flat the Dollar and today I will now raise my buy level to 92.95/93.30 with a 92.55 stop.
December DAX
I am still flat the DAX which is struggling to follow the US Indices higher. I have no interest in selling the DAX and today I will move my buy level slightly higher to 12885/12935 with a 12845 stop.
December FTSE
No change as I am still a buyer on any dip lower to 7420/7455 with the same 7395 stop. I still do not want to be a seller of the FTSE at this time.
Dow Rolling Contract
I keep finding valid reasons why not to be a buyer of the Dow as this relentless bull market continues with no pause for any sort of sustained sell-off. Normally when the 14 Day RSI is trading over 70, the market is overbought. On Friday this RSI measure closed just under 88. I can never remember a RSI with such a high reading in any contract that I have traded over the past 30 years. Thankfully after the Dow opened in the US on Friday the market traded to a 23200 low print which gave everyone who was short from late Thursday a profitable exit level. I covered my 23280 latest short position at my 23230 T/P level and I am now flat. I have no idea when this market is going to roll-over but with sentiment and RSI readings at extreme levels on top of all the other measures as outlined in my Daily Commentary the end of this rally cannot be far away. Today I will again look to sell the Dow on any further rally to 23425/23490 with a 23545 stop. I also have to respect the bounce off the 23000 low print on Thursday and today I will be a buyer on any dip lower to 23060/23130 with a 22995 stop.
December NASDAQ
Although the NASDAQ closed at a new all-time high, the market is struggling to advance much hampered by the recent weakness in Apple. I am still flat and today I will continue to be a seller on any further rally to 6185/6225 with a 6260 stop.
December BUND
I forgot to put in my Bund commentary on Friday which I apologise for. The Bund sold off on Friday as it followed the US Bond market lower. The Bund has strong support at 160.80 and I would expect the Bund to have difficulty in breaking this level initially. Today my buy level will be from 160.60/161.00 with a 160.30 stop.
Gold Rolling Contract
Just after the US Markets re-opened last night Gold traded lower to my 1274 buy level. As I am already long Silver I emailed my Platinum Members to exit this position at my revised 1275.50 T/P level and I am now flat. As I am long Silver I will now lower my Gold buy level to 1258/1265 with a 1252 stop.
Silver Rolling Contract
Silver traded lower to my 17.05 buy level late Friday. I will now only add to this position on any move lower to 16.70 with a 16.45 tight stop. I will now look to exit my long Silver position on any move higher to 17.10. If I manage to exit at 17.10 I will again look to buy Silver on any subsequent dip lower to 16.55/16.85 with a 16.25 stop and a 17.05 T/P level if executed.
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