Yesterday, Sweden’s Riksbank was the latest central bank to announce the cessation of its QE bond buying programme, at the end of the year (albeit it has said it will front load its reinvestment programme for maturing bonds such that its balance sheet will continue to expand in 2018). The Riksbank reiterated it expects to start lifting Interest Rates from the current minus 0.5% – the second lowest in the world after Switzerland’s -0.75% – from mid-2018. Then Donald Trump came along trumpeting his ‘big and beautiful’ tax plan, earlier endorsed in both the Senate and the House of Representatives by the blue party that are the Republicans.
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For anyone following my Platinum Service it made 48 points yesterday and is now ahead by 861 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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A big issue for next year is whether America at large also thinks the tax plan is beautiful. 55% of voters in a CNN poll published yesterday do not think so. This will have big implications for next November’s mid-term US elections and whether the GOP can maintain control of both – or either – Congressional chambers.
In yesterday’s markets, bonds rather than equities or currencies continue to hog the limelight. German 10 year Bund yields are up another 2.5bps (now to above 40bps from below 30bps at the start of last week) while 10 year Treasuries are nudging 2.50%, also up 2.5ps on the day, having been below 2.35% this time last week. 2.60% continues to represents the really significant range top here (only briefly exceeded once this year, back in early March). 10 year gilt yields are already more than 10bps up on where they started the week.
Appreciation that central banks are going to be buying fewer bonds next year at a time when many governments will be selling more of them, plus profit taking on the curve-flattening theme that has been a winning trade for large parts of 2017, all seem to be playing a part, with rapidly thinning liquidity into yearend likely compounding moves.
These latest developments meant that US equities have succumbed to a mild bout of ‘sell the news’ profit taking following the earlier gains in anticipation of the Tax Bill becoming law. The US Dollar is overall a touch weaker as well (DXY -0.14%). Gains in the EUR and CAD (together making up 67% of DXY) are largely responsible. AUD and NZD aren’t much changed on this time yesterday. Commodities are mostly higher with crude oil within a few cents of its mid-December YTD highs.
This morning on the Economic Front we have UK Public Sector Net Borrowing at 9.30 am. We have no Euro-Zone data of note today but In Europe, Catalonia holds its elections following the forced dissolution of the Catalonian parliament after the failed unilateral declaration of independence and subsequent sacking of the government by Madrid back in October. According to Reuters, the election will fail to conclusively resolve a political crisis over an independence drive in the region, judging from the final surveys. The ballot will likely result in a hung parliament, a Metroscopia poll showed, with parties favouring unity with Spain tipped to gain a maximum of 62 seats and pro-secession factions 63, both short of a majority in the region’s 135-seat legislature. If so, weeks of haggling to try form a working government will follow. Such a result could have at least a mildly unsettling impact on all things EUR into year-end.
At 1.30 pm we have US GDP, Weekly Jobless Claims, the Philly Fed Business Outlook and the Chicago Fed Manufacturing Activity Index. This is followed at 2.00 pm by the FHFA House Price Index. Finally we have Euro-Zone Consumer Confidence and US Leading Index at 3.00 pm.
March S&P 500
The S&P certainly was ‘’buy the rumour sell the news’’ yesterday with the S&P unfortunately just missing my 2697 sell level (with a 2695.450 high print after I posted yesterday morning) before having a decent sell-off and I am still flat. Given the significance of the 2700 resistance level I will now lower my sell level slightly to 2693/2700 with a 2707 stop. My only interest in buying the S&P is still on a dip lower to 2648/2655 with a 2643 stop from where the spike low at 2651.75 occurred last Thursday. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2632/2639 with a 2625 stop.
EUR/USD
The Euro continues to follow my road map perfectly with yesterday’s rally to the 1.19 area. Unfortunately I have not been able to get a long position on board and I am still flat. We may see a lower Euro on the back of the Elections in Catalonia but if we do it will be a good opportunity to get long again as I am still looking for a rally back above 1.22 in the new- year. With this in mind I will now raise my buy level to 1.1795/1.1835 with a 1.1760 stop.
March Dollar Index
My Dollar plan worked well with the Dollar trading lower to my 92.80 buy level before rallying this morning to a rebound high at 93.02. As I wanted to be flat overnight I covered my long position at my revised 92.88 T/P level and I am now flat. Today I will again look to buy the Dollar on any move lower to 92.10/92.55 with a 91.70 stop. Remember a break and close below 92.10 is a sell signal.
March DAX
My DAX plan also worked well with the DAX selling off just before lunch to my 13140 buy level before having a nice 60 point rally. This move higher hit my 13180 T/P level and I am now flat. Yesterday’s price action was decidedly bearish especially the fact that we so easily took out the 13200 support level. However given the fact that we are still in December I am still not comfortable in going short the market. The DAX has good support from 12890/12950 and today I will be a buyer on any dip to this area with a 12840 stop.
March FTSE
I am still flat the market and today I will now lower my buy level slightly to 7390/7425 with a 7360 stop.
Dow Rolling Contract
I am not going to chase the Dow lower especially with Trump speaking on the lawn of the White House this afternoon and I will leave my sell level basically unchanged from 24890/25010 with a 25090 wider stop. The Dow has good support from 24550/24620 and today I will be a small buyer on any dip to this area with a 24490 stop which is just below last Thursday’s low print.
March NASDAQ
I am still flat the NASDAQ and today I will be a buyer on any dip lower to 6370/6410 with a 6335 stop. I do not want to be short the NASDAQ at this time.
March BUND
The BUND tried to rally after I posted yesterday morning before again getting hit hard later in the trading session and I am still flat. Today I will now lower my sell level to 162.50/162.90 with a 163.30 stop. The Bund has strong support from 160.55/160.90 and today my only interest in buying the Bund is on a dip to this area with a 160.25 tight stop.
Gold Rolling Contract
Gold traded sideways yesterday still within the key 1260/1270 resistance area. I am still flat the market and will continue to be a buyer on any dip lower to 1244/1252 with the same 1238 stop.
Silver Rolling Contract
Silver continues to trade above the key 15.80/15.90 support level. I am still long at 16.15 with the same 16.35 T/P level. My only interest in adding to this position is on a further dip lower to 15.80. For now I will leave my stop unchanged at 15.55.
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