US equities retained the negative tone seen during the European session and have been unable to trade in positive territory amid concerns over the prospects for US tax reform. Stronger US Retail Sales only provided a temporary boost to the US Dollar and US Treasury yields while the Euro came under pressure after the ECB forecasts for inflation underwhelmed. The AUD has retained its postemployment gains, but CAD is the big G10 mover following hawkish comments from Bank of Canada Governor Poloz, who also weighed in on the Crypto-currencies debate, noting that buying Bitcoin is more gambling than investing.
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For anyone following my Platinum Service it made 10 points yesterday and is now ahead by 679 points for December, having made 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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US Tech stock were initially boosted by the U.S. Federal Communications Commission’s decision to sweep aside internet neutrality rule, a move that is likely to empower cable and wireless providers. But later in the day equities came under renewed pressure after a spokeswoman for Republican Senator Rubio told Senate leaders that he will vote against the GOP Tax unless child-tax is expanded for working-poor families. Meanwhile Senator Mccain is back in hospital and US Republicans can only afford to lose two votes if they want to pass the US tax legislation. A vote is still expected early next week.
Yesterday, US Retail Sales surprised on the upside (ex. auto 0.8% vs 0.4% exp. with strength in part to iPhone X sales), including the important ‘Retail Control Group’ that is an input to GDP. The data helped US front end Bond Yields bounced back (y2 up 4bps to 1.81%) flattening the curve as longer dated yields were unable to retain their initial move higher. After trading to an intra-day high of 2.39%, 10y UST now trade at 2.345%.
A similar price action has been seen in USD FX Indices with gains from Retails Sales pared back as the US Tax debate heats up. The Euro came under pressure during the European session after the ECB upgraded its growth forecast, but downgraded its core inflation numbers for next year (1.3% to 1.1%).HICP is now seen at 1.4% in 2018 up from 1.2% previously (unchanged at 1/5% in 2019 and 1.7% in 2020). At his press conference Draghi sounded upbeat on the strength, broadness and self-sustaining element of the recovery and expressed confidence inflation will pick up. Still, the fact that inflation numbers remain below the just under 2% target disappointed Euro bulls. The pair initially traded to an intra=day high of 1.1863, but then quickly dropped to an overnight low of 1.1764 and now it has settled just under the figure at 1.1790.
The Canadian Dollar has been the big mover over the past 24 hours boosted by hawkish comments from BoC Governor Poloz. USD/CAD dropped over one big figure to 1.2750 from 1.2860 as Poloz uttered confidence the economy needs less stimulus going forward. He also noted that use of the word “cautious” when talking about Interest Rates means being careful and avoiding mistakes, not being on hold.
The Australian Dollar has retained its gains from yesterday’s strong jobs number and currently trades at 0.7685, little changed relative to yesterday’s opening levels. From a technical perspective the Aussie has room to move higher and a weekly close above 0.7611 would support the view for further gains near term. That said with a light domestic calendar, US tax reform and its impact on the USD is likely to be the determining factor of AUD fortunes over the coming week.
Meanwhile, Sterling is also little changed after no surprises from the Bank of England. The Bank stuck with its forecast for some “further modest increases” in the Cash Rate over the next few years and sounded optimistic on the UK’s prospect for a transitional deal with the EU, which would likely boost confidence.
Last but not least, commodities had a decent 24 hours with copper, oil and even gold recording modest gains. Iron ore was the exception, down 0.5%.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 1.30 pm we have US Empire Manufacturing and this is followed at 2.15 pm by Industrial Production. Finally, just before the close at 9.00 pm we have the Net TIC/Net Long Term Flows.
March S&P 500
Initially, after I posted yesterday morning the S&P rallied before running into trouble on the latest Tax Reform Bill and closed on its lows. After the market traded lower to my initial buy level at 2661 I did not like the price action and I emailed my Platinum Members to exit any long position at 2662 and I am now flat. Subsequently the S&P traded to a 2652 low print before rallying back to 2659 this morning. Today is known as Quadruple Expiration Friday when all the December Futures and Options Contracts expire. While the Futures Contract expire five minutes after the Chicago open the Options Contracts do not expire until 9.00 pm. These expiration days are difficult to get an edge as you can have a lot of two way price action with quick spikes in both directions. Today I will again look to buy the S&P on any move lower to 2645/2652 with a 2640 stop. Despite yesterday’s weak close I am reluctant to chase this market lower and I will leave my sell level unchanged from 2681/2693 with the same 2702 wider stop.
EUR/USD
Unfortunately the Euro just missed my 1.1750 buy level and I am still flat. Today I will narrow my buy range to 1.1710/1.1755 with a 1.1670 stop. I still do not want to be short the Euro at this time.
March Dollar Index
No change as I am still a buyer of the Dollar on any dip lower to 92.15/92.60 with the same 91.85 stop.
March DAX
Frustratingly the DAX missed my initial 13000 buy level with a 13003 low print before rallying 130 points and I am still flat. Subsequently the DAX sold off late in the New York session and that weakness has continued this morning. The 12900 is a key pivot point for the DAX and today I will now lower my buy level to 12880/12940 with a 12835 stop. Despite yesterday’s late sell-off I am still not comfortable in having a short position on board.
March FTSE
On the re-open of the Futures Market this morning the FTSE hit my 7380 buy level. I am still long and I will now lower my T/P level to 7395. If my T/P level is not filled I will only add to this position on any further move lower to 7340 with the same 7320 tight stop. If my second buy level is filled I will then lower my T/P level to 7375.
Dow Rolling Contract
Despite the late sell-off in the Dow it is very difficult to have a short position on board especially if the Republicans can hang on to their majority in order to get the Tax Bill passed. I am still flat and today I will be a small buyer on any further dip lower to 24380/24450 with a 24330 stop. As I have a sell level in the S&P above I will not have one in the Dow at this time especially as it is a Friday and the market could open strongly on Sunday in the event of a positive outlook for the Tax Bill over the weekend.
March NASDAQ
The NASDAQ was the strongest of the US Indices yesterday and I am still flat as the market never came close to my 6365 buy level. Today I will now raise my buy level slightly to 6340/6380 with a 6310 stop. Remember the NASDAQ needs to break and close below 6300 for the market to turn short-term bearish.
March BUND
I am still flat the BUND with the market rebounding strongly off yesterday’s 162.90 low print. The Bund has strong resistance at 164.00 and today I will now raise my sell level to 163.95/164.35 with a 164.60 stop.
Gold Rolling Contract
I am still flat Gold which has now closed over 1250 for the past two days which is constructive. However Gold has strong resistance from 1255/1270 and it needs to break 1270 for the bulls to regain control. Today I will now raise my buy level to 1234/1242 with a 1227 stop.
Silver Rolling Contract
Silver traded lower to my 15.90 latest buy level. I am still long and I will leave my T/P level unchanged at 16.10. I will only add to this position on any further move lower to 15.50 with the same 15.20 stop.
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