It has been an up and down session, marked initially by a good session in Europe, helped by a proposal out of China to cut its 50% car purchase tax, currently 10%, taking the tax to 5%, adding to the other stimulus measures announced by China in the wake of the US tariffs and some signs of growth moderating. Not surprisingly, this proposal to cut taxes for cars sold in China helped European auto stocks, VW up 4.05%, Daimler up 2.06%. This initial positive sentiment spilled over into what looked to be a positive first part for the US session. The sentiment among risk assets soured late in the European session. In an otherwise generally innocuous UK Budget as far as the markets were concerned, it was the announcement by UK Chancellor Hammond of a proposed Digital Services Tax that scuppered sentiment among tech stocks, the Nasdaq leading the march lower, momentum accelerating in the final part of the session, though what transpired as looking like it was in freefall in the past hour has seen markets gather some composure to close somewhat above intraday lows. Note also that along with the UK Digital Services Tax was a wire story that another US move on tariffs could arrive if next month’s proposed talks between Trump and Xi fail.
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 399 points on Friday and is now ahead by 2094 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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Equities
The Dow has closed down 0.99%, the S&P 500 by 0.66%, and the Nasdaq by 1.63%. The S&P 500 is now off 9.9% from its early month high.
Currencies
It has been a relatively positive session for the USD, though not again fully from its own doing. Weighing on the Euro this week has been press speculation, followed up by an announcement from German Chancellor Merkel, that after her Party’s poor showing in the Hesse by-election at the weekend, she will step down from the leadership of her party at the next election, due in 2021. The Chancellor’s departure announcement as party leader of the CDU caused an initial 50 point fall in the EUR to 1.1360, though the Euro subsequently bounced to 1.1390, after Merkel later said she would stay on. With the souring of risk sentiment in the second half of the intra-day session, the AUD has been drifting off, but only at the margin, equities still the main show for markets. The AUD is down from earlier touching 0.71, currently trading at 0.7057, toward the lower end of its recent range. It has again been relatively orderly trading, the VIX up to 25.68 and commodity prices drifting lower, including base metals, oil, and gold, iron ore little changed after some gains last week.
Economics and Bonds
It has not been a big day for economic reports, the main one being the US Personal Income and Spending report for September, this one already embodied in last Friday’s GDP report for Q3. Real consumption increased by 0.3% in September, as expected, as did the headline and core PCE deflators, the headline deflator up 0.1%/2.0% and the core PCE deflator up 0.2%2.0%, both bang on the Fed’s inflation target.
Along with the then positive sentiment in stocks, this provided some background support to Treasury yields, daily yield movement dipping in and out of positive territory, finishing less than a basis point from the previous close. There is quite a lot of key data coming up in the US this week, culminating in Non-Farm Payrolls on Friday with its focus on jobs and especially on earnings growth. The Q3 Employment Cost Index is out tomorrow and the ISM Manufacturing Index is being released on Thursday.
This morning on the Economic Front we have German CPI and Unemployment at 9.00 am and 9.55 am respectively. Next we have Euro-Zone Consumer Sentiment, GDP and Economic Confidence at 10.00 am. We have no data of note due from the US today as all eyes will again be on the equity markets.
December S&P 500
Incredible two-way volatility since last Friday’s Daily Commentary was published. After the S&P had initially just missed my 2645 buy level I lowered my buy level to 2640 which was filled before the market rallied to my 2650 T/P level. Yesterday the S&P rallied to an intra-day high of 2707 before falling 100 Handles into the last hour of trading before rallying 35 of those lost Handles into the close. I cannot emphasise enough the importance of my Platinum Service with the updated emails the key. On Friday after I had cover my long position at 2650 I emailed those members to re-buy the S&P on any dip lower to 2612 with a 2630 T/P level. In the last 30 minutes of trading last night both of these scenarios played out and I am now flat. The Daily Sentiment Index fell to 9% bulls on Friday and is obviously lower last night although I do not have the official print as I go to press. The McClellan Oscillator which closed at -130 on Friday improved to close last night with a -122 print. This will give the bulls some level of comfort that yesterday’s low may hold for the time being. The S&P has initial support from 2598/2618 and today I will be a buyer on any dip to this area with a 2588 stop. If I am taken long at this level and subsequently either stopped out of this position or I manage to make a gain, I will be an aggressive buyer on any further dip lower to 2550/2570 with a 2535 stop. Given how severely oversold the S&P is trading I still do not want to be short the market at this time.
EUR/USD
My Euro plan worked well with the market trading lower to my 1.1336 buy level on Friday morning before rallying to my revised 1.1365 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1290/1.1330 with a 1.1255 stop.
December Dollar Index
No Change as my only interest in selling the Dollar is still on a rally higher to 96.80/97.20 with the same 97.55 stop.
December DAX
It is difficult to be short the DAX as every dip gets bought with the market managing to close above its key 11400 pivot point into its official close. Obviously the DAX got hit hard in after-hours trading on the back of the massive sell-off in US Equities from their intra-day highs. I am still flat and today I will only raise my buy level slightly to 10940/11020 with a wider 10855 stop.
December FTSE
My FTSE plan worked well with the market trading lower to my 6825 buy level before rallying to my way too early 6860 T/P level and I am now flat. Yesterday the FTSE rallied a further 200 points into its official close before getting hit hard in after-hours trading. Today I will again look to buy the market on any dip lower to 6800/6860 with a 6745 wider stop.
Dow Rolling Contract
Unfortunately the Dow just missed my 25130 sell level yesterday afternoon with a 25035 high print before falling over 900 points. Thankfully we had no buy levels in this market over the past few days and I am still flat. The Fear & Greed Index close last night with an Extreme Fear reading of 7. These are the type of readings we need to see in order to have a more sustainable bottom and is why I will be an aggressive buyer of the S&P on any dip lower to the 2550/2570 area per my commentary above. The equivalent level in the Dow is from 23750/23950 and today I will also be an aggressive buyer on any dip to this area with a 23500 wider stop.
December NASDAQ
My NASDAQ plan worked well with the market trading lower to my 6740 buy level before rallying to my 6780 buy level on Friday morning and I am still flat. The NASDAQ fell to a low of 6585 late yesterday before rallying 140 points into the close and this move higher could be classed as a buy extreme off some decent support. Today I will be a buyer on any dip lower to 6560/6640 with a 6495 wider stop.
December BUND
Frustratingly the Bund just missed my 160.95 sell level on Friday with a 160.90 high print before falling over 80 points yesterday and I am still flat. Today I will lower my sell level slightly to 160.85/161.25 with a 161.55 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1204/1214 with a 1196 stop.
Silver Rolling Contract
Late on Friday I emailed my Platinum Members to exit any long Silver position at 14.75 and I am now flat. Surprisingly Silver got hit hard yesterday and today I will again look to buy this market on any further dip lower to 13.80/14.25 with a 13.45 stop which is just below the December 2015 low print of 13.62.
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