Frankfurt is the town and the great and the good of the global central banking fraternity will be the doing the talking later today at an ECB sponsored conference on Central Bank Communication. Yellen, Draghi, Carney and Kuroda are among those scheduled to talk. The message from Yellen will be that the Fed will likely continue to be moving Interest Rates up gradually (“with or without me”. The message from Draghi, meanwhile, will be that we are not going anywhere on rates for a long time – a narrative that I expect is likely to change at some point next year if the economy continues to track as strongly as it is right now. I have long learned not to trust BoE governor Carney’s communication credentials, while Mr Kuroda of late has been talking dovishly, lamenting the lack of improvement in inflation expectations.
To mark my 1475th 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 in this offer can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 32 points yesterday and is now ahead by 303 points for November, having made 657 points in October, 447 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.
Looking across markets yesterday, what stands out is that AUD/USD has bent if not yet decisively broken the effective 0.7625-0.77 range that has held most of the price action since late October. Amid a fairly mixed picture on commodity prices – and a largely stable US dollar – I would point here to the combination of a fresh rise in US shorter dated yields (2-year treasuries up another 3bp to a fresh cycle high of 1.68%) and the earlier rise in the VIX to above 12 from just over 11 on Friday. The NZD has suffered similarly.
The VIX has since dropped back onto an 11 handle and has helped the AUD pull back up a couple of spreads, but it looks like the damage has been done. Any semblance of US dollar strength in the coming few sessions should be enough to have AUD/USD starting to trade on a 75 handle. Either that or any unexpected weakness in either today’s China data or Wednesday and Thursday’s local wage price index and labour market figures.
Sterling is the weakest currency so far this week, but most of the damage here was done just after I posted early yesterday morning. Suffice to say that in the absence of progress within UK political circles this week and next toward offering up a higher Brexit divorce bill, Sterling could be down another 5% or more by month end. If instead Mrs May does somehow manage to pull a proverbial rabbit out of the hat, it will be 5% or more stronger. The pound will be a very sharp toy in the coming few weeks.
US stock markets closed marginally higher after opening lower despite the 8% hit to GE’s share price after announcing a cut to its quarterly dividend for only the second time since the Great Depression.
Meanwhile, Commodities see Brent crude off 36 cents, Gold up $4 with most industrial metals stronger as well, save for iron ore which has lost 41 cents to $62.19.
This morning on the Economic Front we have German GDP and CPI at 7.00 am. This is followed by UK CPI and the House Price Index at 9.30 am. At 10.00 am we have Euro-Zone Industrial Production and the German ZEW Survey Current Situation/Expectations. Next we have Euro-Zone GDP at 10.05 am and this is followed at 11.00 am by the US NFIB Small Business Optimism. Finally we have US PPI at 1.30 pm.
However all eyes will be on Frankfurt where as well as Yellen, Draghi and Carney and Kuroda, the Fed’s Charles Evans, and the ECB’s Lautenschlaeger and Nouy are also appearing at the same conference. On top of this, speakers elsewhere include the ECB’s Villeroy (who some are tipping as Draghi’s successor in 2019), the ECB’s Couere and from the Fed, James Bullard and Raphael Bostic. This promises to be a volatile trading session across all asset classes.
December S&P 500
My S&P plan worked well with the market trading lower to my 2572 buy level before rallying 12 Handles. However with all five of my stock Indices hitting my buy level near the same time I had to reduce my risk unfortunately and I covered my long S&P position for a small gain at 2573.30 and I am now flat. The fact that the S&P continues to hold the key 2570 now strong support level ahead of last Thursday’s 2563.25 low print is bullish in the short-term. For me to turn bearish I need to see a break and close below 2560. Today I will now look to buy the S&P again on any dip lower to 2567/2573 with a 2562 stop. I still do not want to be short the market at this time especially as we still have an ‘’Open Gap’’ from last week at 2592 and as we know all ‘’Open Gaps’’ tend to get filled.
EUR/USD
Given the amount of Central Bank speakers in Frankfurt this morning it promises to be a volatile trading session for both the Euro and US Dollar. I am still flat the Euro and today I will now lower my buy level slightly to 1.1535/1.1580 with a 1.1495 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 1.1370/1.1440 with a 1.1320 wider stop. I still do not want to be short the Euro at this time.
December Dollar Index
No change as my only interest in selling the Dollar is still on a rally higher to 94.90/92.25 with a 95.55 stop.
December DAX
My DAX plan worked well today but not for me as after the market traded the whole of my 12970/13030 buy range the market rallied over 120 points off the low giving anyone who held on to this trade a nice gain. However the move lower in the DAX has produced a sell signal and having got hit on all my other Indices at the same time I covered my long 13020 position for a small loss at 13010 and I am now flat. The DAX has strong resistance from 13220/13300 and today I will be a small seller in this area with a 13350 tight stop. My only interest in buying the DAX today is on a dip lower to 12870/12930 with a 12825 stop.
December FTSE
The FTSE also produced a sell signal with the market again closing below 7450. My FTSE plan initially worked well with the market hitting my 7390 buy level before bouncing 30 points. I used this rally to cover my position at my revised 7397 T/P level and I am now flat. It was interesting that the FTSE could get nothing going on the upside given the extreme weakness of Sterling yesterday. The market also closed weak despite the late recovery in both the US and German equity markets. However given the weakness in Sterling I am reluctant to go short and today I will again be a buyer on any dip lower to 7315/7345 with a 7280 stop.
Dow Rolling Contract
My Dow plan also worked well with the market trading lower to my 23345 buy level before rallying over 100 points. Unfortunately I got nervous with yesterday’s price action and I foolishly covered my long position at 23352 and I am still flat. The key level to watch for the Dow is still from 23120/23200 and as long as we can hold this area then it is possible to challenge the Dow’s ‘’Open Gap’’ from last week at 23563. Today I will again look to buy the Dow on any dip lower to 23280/23350 with a 23215 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 23140 with a 23070 stop.
December NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 6290 buy level before rallying 30 points and I used this move higher to cover my position at my revised 6300 T/P level and I am now flat. As I mentioned over the past few days the 6240 level must hold for the bulls to stay in control. Today I will again look to buy the market on any dip lower to 6250/6280 with a 6220 stop.
December BUND
No change as I am still a buyer on any dip lower to 160.25/160.60 with the same 159.95 stop. Unfortunately the Bund just missed my 161.75 sell level before selling off into the close ahead of today’s huge amount of today’s Central Bank Conference in Frankfurt. I am not going to chase this market lower and I will leave my sell level unchanged from 161.75/162.10 with a 162.35 stop.
Gold Rolling Contract
Gold continues to meander in a sideways manner with no direction I still do not trust this market especially after the 400,000 contracts sold last Friday caused a quick 1% move lower. I am still flat and will continue to be a buyer on any dip lower to 1242/1250 with the same 1235 stop.
Silver Rolling Contract
Silver rallied to my revised 16.95 T/P level on my latest long 16.90 position and I am now flat. Silver has also traded directionless for the past few weeks and today my only interest in buying the market is on a dip lower to 16.50/16.80 with a 16.20 stop. If I am taken long I will have a T/P level at 17.00.
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