Apart from equity markets, it has been a rather listless past 24 hours for trading, investors recalibrating into Thursday’s US CPI, the next big US data piece in this evolving ‘’high US growth/lack of inflation kick’’ picture for markets. The USD has been moving sideways, while US short term Treasury yields have been steady but longer term yields are down 3-4 bps, having tested higher earlier in the session. Sterling has seen some support as a very short Sterling market gets some positive Brexit mood music but wonders whether this is yet another false dawn. Oil has moved back up, as have base metals, mostly and iron ore/steel China prices.
To mark my 1700th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. 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 83 points yesterday and is now ahead by 421 points for October, having made 1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
The USD has struggled for new direction over the past 24 hours, Sterling the centre of attention earlier in the session especially EUR/GBP that is down 0.36% since yesterday morning. The EU’s chief Brexit deal maker Barnier noted that they had entered a 10 day ‘’tunnel’’, from which they would come out the other side hopefully with an agreement to put to an EU Summit on 18/19 October. PM May is apparently to present a revised Chequers proposal, seeking not to change a frictionless Northern Ireland/Ireland border with trade checks from the UK side. The market remains very short sterling and it is only very recently that May received a cold reception from the EU at that Salzburg informal dinner summit, back to square one again.
There is also the matter of the UK Parliamentary approval to get over, so you can understand that the market is a tad skittish about whether a Withdrawal Agreement (WA) can be nutted out and agreed to by both sides with the clock ticking loudly now into coming EU Summits in coming months and the exit deadline next March. An agreement is presumably needed to extend the status quo beyond next March to January 2021.
The AUD has been trading in an orderly manner, making some net gains toward 0.71 where it sits this morning amid a listless USD. EM currencies have fared better, the ZAR up 2.7% and the BRL up 1.9%, adding some background support, while commodities have generally also been friendly.
I also note that China will further increase export tax rebates from 1 Nov and quicken export tax rebate payments to support foreign trade, the State Council, the cabinet, said on Monday. The rise in tax rebates will help reduce costs for the real economy, help it cope with the complex international situation and maintain stable foreign trade growth, the cabinet said after a regular meeting. This is the 2nd increase this year, last month China increasing export rebates for 397 items, including steel and electronic products to help exporters as the trade war with the United States worsened. The Shanghai stock market was up marginally yesterday after Monday’s near-4% fall.
Bonds
There is little new to report on bonds. European high quality bond yields rose a little, but Italian and Greek bond markets rallied for once, Italian yields down 9.2 bps after the large push higher of late. The US Treasury curve has flatted with 2s steady but longer term yields easing back a net 3-4 bps.
Commodities
Oil prices have continued to get support, WTI up 0.75% and Brent by 1.25% as the market continues to fret about supplies shrinking from Iran and Venezuela, an IEA spokesman calling for more OPEC supply. There is also Hurricane Michael approaching the Florida panhandle with around one fifth of US Gulf production closed as a result.
Economics/Central Bank Talk
The US NFIB Small Business Optimism index for September barely missed expectations of a small pull-back after the August reading hit a record (107.9; L: 108.8; F: 108.3). Last week’s NFIB Employment report had already reported the continuing tightness of the US labour market for businesses, those elements of the survey reporting still elevated numbers of positions unable to be filled as well as increasing compensation and compensation plans.
Fed Presidents Kaplan and Harker have been speaking. Kaplan repeated his recent remarks that he supports further gradual rises in the Funds rate, another three by June 19, but reserves his judgement beyond that. He still does not see ‘’inflation running away’’ and noted the difficulty of not knowing whether productivity is rising, super important for business unit labour costs. Harker also noted that the labour market has very little slack with businesses telling him of the increasing difficulty of being able to fill jobs.
The next big US data release is tomorrow’s CPI.
After the markets closed last night, President Trump has been quoted railing against the Fed and rate rises, saying that there is not an inflation problem.
This morning on the Economic Front we have UK GDP, Trade Balance and Industrial Production at 9.30 am. This is followed at 12.00 pm by US MBA Mortgage Applications. Next we have PPI and Building Permits at 1.30 pm. Finally at 3.00 pm we have Wholesale Inventories.
At 5.15 pm the Fed’s Evans speaks on Monetary Policy and the Economy.
December S&P 500
Unfortunately the S&P just missed my 2871 buy level before rallying to the 2900 resistance level and I am still flat. The S&P is flirting with the 50 Day Moving Average with each test over the past week successfully repelled. The big question is when is one of the breaks through this key support going to be followed by a more aggressive sell-off? Today the 50 Day MA is at 2883. I am not going to chase this market higher and I will leave my buy level unchanged from 2863/2871 with the same 2856 stop. 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 2837/2847 with a 2830 stop. Meanwhile I will leave my sell level unchanged from 2906/2914 with the same 2921 stop.
EUR/USD
Frustratingly the Euro missed my 1.1430 buy level by 2 points before rallying as expected with the Euro trading over 1.15 this morning. Today I will move my buy level higher to 1.1410/1.1450 with a 1.1370 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 lower my sell level to 95.70/96.10 with a lower 96.45 stop.
December DAX
My DAX plan worked well with the market as expected having a nice rally off my 11800 support level. After the DAX hit my 11820 buy level the market quickly rallied to my 11870 T/P level and I am now flat. Today I will again look to buy the DAX on any dip lower to 11790/11850 with a 11735 stop. I still do not want to be short the market at this time.
December FTSE
My FTSE plan also worked well with the market trading lower to my 7160 buy level before having a nice rally. I used this rally to exit this long position at my revised 7185 T/P level and I am now flat. Today I wil again look to buy the FTSE on any dip lower to 7100/7140 with a 7065 stop. The renewed strength in Sterling is pushing the FTSE lower for now.
Dow Rolling Contract
While the S&P is at its 50 Day MA, the Dow is still trading 500 points above this key MA which comes in at 25991 this morning. For me to turn bearish I need to see the three main US Indices close below this key support which has held the markets for most of 2018. Yesterday the Dow again bounced off the 26300 initial support area after a weak opening. I am still flat and today I will leave my buy level unchanged from 26070/26230 with the same 26290 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 25695/25875 with a wider 25550 stop.
December NASDAQ
The NASDAQ continues to be the weakest of the three main US Indices having broken and closed below its 50 Day MA which now comes in at 7495. This level should act as strong resistance on any rally. Today I will now look to sell the market from 7470/7520 with a tight 7565 stop.
December BUND
I am still flat the Bund and today I will now raise my buy level to 157.05/157.45 with a 156.70 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1170/1179 with the same 1163 stop.
Silver Rolling Contract
Yesterday Silver traded lower to my 14.30 latest buy level before having a small rally. I emailed my Platinum members to exit any long position at 14.38 and I am now flat. Today I will again look to buy the market on any dip lower to 13.90/14.30 with the same 13.55 stop.
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