The oil price was the biggest mover over the past 24 hours, hitting a two year high (Brent +3.2% to $64.08 and WTI +3.0% to $57.30) driven by political uncertainty in Saudi Arabia. The move higher in oil supported commodity currencies (Aussie and Krone +0.4%; Canadian Dollar +0.3%) and buoyed equities. In contrast, market breakevens were little changed on the news, suggesting markets do not think the latest increase in oil prices will feed through to higher inflation.
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 email me on bryan@tradernoble.com for deytails.
For anyone following my Platinum Service it ended flat yesterday and is still ahead by 45 points for November, having made 657 points in October, 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.
First to Saudi Arabia. Crown Prince Mohammed bin Salman (and heir to the throne since June) is driving an anti-corruption crackdown in the Kingdom. The Crown Prince is the chair of an anti-corruption committee with the committee recently arresting 11 princes, four ministers and many former ministers. Media commentators have dubbed it the Saudi Arabian Game of Thrones and intelligence consultancy Stratfor have interpreted it as a consolidation of power in the Kingdom.
Adding significantly to the uncertainty were reports of the death of two Saudi Princes – one killed reportedly when he was facing arrest (Prince Abdul Aziz bn Fahd) and another in a helicopter crash with a yet to be determined cause (Prince Mansour bin Muqrin). For markets the key question is will this political uncertainty continue? Possibly yes with one official stating it was “phase one” of an anti-corruption drive.
On the back of the uncertainty the oil price surged to a two year high on the news with Brent up 3.2% to $64.08 and WTI up a similarly 3.0% to $57.30. Energy stocks were supported on the news with the S&P500 Energy sub-index up 2.0% compared to overall gain in the index of 0.2%.
Commodity-linked currencies were supported by the move in oil: Norwegian Krone (+0.4%); Aussie (+0.4%); and Canadian Dollar (+0.3%). Also supporting the Australian dollar was the iron ore price which rose 5.8% yesterday to $63.4 a tonne. Iron ore now appears to be stabilising after falling during September, though is well below the recent peak of $80 in mid-August. Driving iron ore has been steel prices which have rallied as Chinese mills start to cut back production to curb pollution levels in the winter – this puts more emphasis on higher quality iron ore. The Aussie now sits at 0.7686 and the direction today will dependent on the RBA Board meeting later today.
Other FX moves were more contained. There was slight US dollar weakness with the DXY down 0.2%. The Euro was flat (+0.1%) while the Yen rose 0.3% reversing the initial weakness that followed from Governor Kuroda’s emphasis that the Bank of Japan would “persistently outperformer, up 0.7% with no clear catalyst for the move.
Meanwhile Bond Yields movements were contained, with US 10-year Treasuries down 2.0bps to 2.31% and Bunds down 2.8bps to 0.34%. Possibly weighing on bonds was the ECB front-loading purchases under its Asset Purchase Program ahead of the quiet December trading period. Interestingly for your scribe, the moves in oil did not translate to breakevens – suggesting the market thinks there will be little inflationary pressure stemming from the recent leg up in the oil price.
This morning on the Economic Front we have German Industrial Production at 7.00 am and this is followed at 10.00 am by Euro-zone Retail Sales. Finally we have US JOLTS Job Openings from the US and Consumer Credit at 3.00 pm and 7.00 pm respectively.
Meanwhile later this afternoon the Fed’s Quarles speaks at a Clearing House Conference at 5.35 pm while at 5.45 pm we have the Bank of Canada’s Governor speaking in Montreal.
December S&P 500
The S&P has now closed higher in 13 of the past 16 trading sessions as this remarkable bull market continues. We have also closed higher for each of the past 8 weeks. Unfortunately the S&P again missed my buy level before inching higher on what turned out to be another low volume trading session. I am reluctant to chase this market higher especially as we approach round number resistance at 2600 ahead of a major channel resistance line at 2620 as the market gets near its third Standard Deviation at 2792. Therefore I will only raise my buy level slightly to 2570/2576 with a 2564 stop. I am still a seller on any further move higher to 2599/2606 with a 2611 stop. If I am taken short I will be a more aggressive seller in front of 2618 with a wider 2628 stop.
EUR/USD
Frustratingly the Euro just missed my 1.1575 buy level with a 1.1580 low print before rallying into the New York close. Today I will leave my buy level unchanged from 1.1540/1.1575 with a 1.1510 stop. Given how oversold the Euro is trading I still do not want to be short the market at this time.
December Dollar Index
The Dollar also just missed my 95.20 sell level before also selling off into the close and I am still flat. Today I will lower my sell level slightly to 95.15/95.50 with a 95.80 stop.
December DAX
Despite the US Markets again making new all-time highs the DAX struggled yesterday even though the Euro was soft. Maybe the DAX is warning us of an impending sell-off? I am still flat and today I will continue to be a buyer on any dip lower to 13280/13340 with the same 13235 stop. The DAX has strong resistance from 13625/13675 and today I will be a small seller in this area with a 13715 stop.
December FTSE
Unfortunately the FTSE also just missed my 7475 buy level with a 7494 low print and I am still flat. Given the erratic behaviour of the FTSE over the past few months I am reluctant to chase this market higher and today I will leave my buy level unchanged from 7445/7480 with a 7415 stop.
Dow Rolling Contract
The Dow rallied to yet another new all-time high yesterday totally ignoring the latest Hindenburg Omen and weaker Average Earnings in last Friday’s Payrolls. It just does not matter as every dip gets bought, and as I keep saying until we get a sell extreme that lasts for more than a few days it is very difficult to be short this market. Given how overbought we are trading I am only going to move my buy level slightly higher to 23360/23420 with a 23310 stop.
December NASDAQ
Even though the NASDAQ made a new all-time high yesterday, the market has struggled over the past few days held up mainly by Apple which is now worth a mind boggling $900 billion. Yesterday after the NASDAQ traded higher to my 6310 initial sell level the market had a small sell-off to a 6296 low print and I used this weakness to email my Platinum Members to exit this position at 6302 and I am now flat. I still believe that the NASDAQ especially is near the end of its recent rally especially given the internal reading of this component and today I will again be a seller on any rally higher to 6345/6375 with a 6405 stop.
December BUND
Despite stronger than expected German data yesterday to add to the already better economic data from the Euro-Zone the Bund continues to trade higher. Of course the yield at 34 basis points is madness but just like the stock markets above we need a sell extreme before we can turn bearish. Thankfully we have not been short this market for many weeks. Today I will now move my buy level higher to 162.30/16270 with a 161.95 stop.
Gold Rolling Contract
The lack of volatility in Gold is astonishing. Just when you think we are going to trade lower the market re-groups and moves higher as we saw yesterday afternoon. I am still flat Gold and today I will now move my buy level higher to 1257/1264 with a 1249 stop.
Silver Rolling Contract
Silver had a nice move higher yesterday afternoon which took me out of my latest long 17.10 position for a small loss at 17.00 and I am now flat. Silver has been frustrating to trade having had last Friday’s large red candle completely reversed yesterday. If you have not exited your Silver position I would cover here at 17.25 which is where it is as I post. Today I will again look to buy Silver on any dip lower to 16.60/16.95 with a 16.25 wider stop.
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