The British pound came under pressure in front of the vote on the Prime Minister’s Brexit withdrawal Agreement, which she has lost by a crushing 432 to 202 votes. Sterling is bouncing on this, on the view that the Labour opposition no confidence motion tabled after the result will be defeated (this evening) and that an extension of Article 50 and a possible second referendum are the singularly most likely ways forward from here. I would agree. Meanwhile ECB President Mario Draghi speaking to the EU parliament in Strasbourg, where he notes that: ‘’The question we should ask is: Is this a sag or heading toward a recession’’ Draghi told members of the European Parliament in Strasbourg. ‘’The answer we give is: No, it is a slowdown, which is not headed toward a recession. But it could be longer than expected.’’
To mark my 1750th 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 detail
For anyone following my Platinum Service it made 28 points yesterday and is now ahead by 807 points for January, having made 2803 points in December, 1541 points in November, 2094 points in October and 1279 points in September Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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‘’We still see a situation where consumption is still expanding, relatively strong, investment still expanding, supported by our monetary policy, export growth is still good and the labour market keeps on being very strong,’’ Draghi said. ‘’All this is happening at lower and lower growth rates’’. A significant amount of monetary-policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term,’’ he said.
China December Loan data published just after I posted yesterday morning shows both new Yuan Loans and Aggregate Financing expanding by more than expected last month, New Yuan loans by 1.08tn against ‘’825bn expected and Aggregate Financing by ‘’1.589tn against 1.3tn expected.
The credit numbers came hot on the heels of China’s announcement yesterday afternoon of additional of fresh economic stimulus measures to support its economy in the form of tax cuts for small businesses and higher public spending. Officials said they would cut taxes ‘’on a larger scale’’ in order to boost business activity, announced against a backdrop of disappointing industrial production figures and the first drop in car sales for almost three decades.
While exact details of the stimulus package are yet to be unveiled, the Chinese Finance Ministry suggested the measures would include cutting value added tax for some companies, particularly in the manufacturing sector, as well as rebates for other businesses to ward off a more damaging slowdown. Some estimates I have seen this morning suggest the fiscal stimulus could be worth in the order of 1% of GDP.
US January Empire Survey fell by much more than expected, to 3.9 from a revised 11.5 in December, following the earlier sharp drop in the December ISM Manufacturing Survey in December
The US administration has just admitted to a bigger than earlier estimated economic impact from the partial government shutdown (due to private sector contractors unable to work as a result of the shutdown). It now reckons growth will be 0.1% per week lower, double the prior estimate of 0.1% per fortnight (last weekend, S&P estimate the shutdown was costing $1.2bn per week or about 0.6% of GDP, closer to the original White House estimate)
Currencies
Sterling fell by as much as 1.5 cents against the USD in the hours leading up to the Brexit vote (to a low of around 1.27) but currently sits at 1.2890 following the heavy defeat for PM May’s Withdrawal agreement and which, as per above, now sees markets starting top price for an extension of Article 50 and a possible second referendum. This is despite EU official now out in force suggesting that the chances of disorderly ‘’no deal’’ Brexit have increased.
AUD has been choppy between about 0.7220 and 0.7180 (0.7194 now) with really not much to say about overnight activity which has tended to fluctuate with swings in broader risk sentiment but where a broadly firmer US dollar has been the overriding feature, GBP volatility aside, and led by weakness in EUR/USD off the back of Draghi’s above comments and which has pushed the single currency down to its lowest levels since January 4th.
Equities
US equities are higher, led by 6-7% gains for Netflix ahead of its Q4 results tonight on news that it was raising subscription prices (from $11 to $13) which is the largest rise in its 12 year history and first time all 58 million subscribers will be affected simultaneously.
In corporate earnings, JP Morgan missed its earnings estimates due to a sharp slowing in fixed income trading revenue in Q4, amidst the surge in market volatility, but its share price has recovered from earlier falls to be up marginally on the day (0.45%). JPM’s core loan book increased 6.7% on the year, above the bank’s 6% target, despite some softening in demand for mortgages amidst higher rates. Wells Fargo’s results were less well received, its 5% drop in revenue seeing its stock off 1.9%. The earnings season continues today with other US banks reporting (including MS, GS and BoAML).
Broader indices closed up by between 0.6% (DJIA) and 1.7% (NASDAQ).
Bonds
US Treasury yields are very narrowly mixed, 2s -0.6bp to 2.529% and 10s -0.2bp at 2.709%. Nothing to see here.
Commodities
Oil has staged a decent rebound after a few days of loss, both blends up $1.50 and where yesterday’s economic stimulus announcements from China is being given credit. This also looks to have supported base metals with aluminium and nickel both up more than 2% and copper by 0.7%.
This morning on the Economic Front we already had the release of German CPI which came in as expected at +0.1%. At 9.30 am we have UK CPI and PPI ahead of US MBA Mortgage Applications at 12.00 PM. This is followed at 1.30 pm by Retail Sales and at 7.00 pm the Fed releases its latest Beige Book. Finally we have the Total Net TIC Flows at 9.00 pm
March S&P 500
The S&P continues to build value off the earlier January 2445/2470 support area for market with the S&P finally able to close over its next resistance level at 2600. However for the Bulls to regain complete control we need to take out the key 2630/2645 major downtrend resistance area which of course is where the 50 Day Moving Average comes in. Today I will raise my sell level to this area with a 2659 wider stop. With the McClellan Oscillator still extremely high at +252 I am reluctant to chase this market higher and today I will leave my 2564/2576 buy range unchanged with a higher 2556 tight stop.
EUR/USD
Dragi’s bearish comments saw the Euro trade lower to my 1.1400 buy level. I am still long and today I will now lower my T/P level on this position to 1.1420 with a now higher 1.1459 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
March Dollar Index
I am still flat the Dollar which closed 0.5% higher last night. The Dollar has strong resistance from 95.90/96.30 and I will be a seller on any rally to this area with a 96.65 stop.
March DAX
My DAX plan worked well with the market trading lower to my 10815 buy level before bouncing nearing 100 points. As I had lower buy levels in my other Indices which unfortunately I expected to get hit and did not I ended up covering my long DAX position at my revised 10835 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 10730/10800 with a 10675 stop. I still do not want to be short the DAX at this time.
March FTSE
Frustratingly the FTSE missed my 6785 buy level with a 6786 low print before rallying hard ahead of the Brexit vote helped by the renewed sell-off in Sterling. With the Pound recuperating most of its earlier losses the FTSE subsequently sold off into the close. I am not going to chase this market higher and today I will leave my 6750/6785 buy level unchanged with the same 6715 stop.
Dow Rolling Contract
The Dow also came short of my buy level before rallying over 250 points off its intra-day low and I am still flat. Even though I am bullish for higher prices eventually in the Dow, a combination of a severely overbought market as shown by the McClellan Oscillator and massive overhead resistance I am reluctant to chase the Dow higher and today I will only raise my buy level slightly to 23680/23830 with a higher 23570 stop. The 24400/24600 area is where the next strong resistance comes in and today I will be a seller on any rally to this area with a 24720 stop.
March NASDAQ
After the NASDAQ just missed my 6520 buy level the market rose to a high of 6689 which was just shy of my 6690 initial sell-level. Subsequently I emailed my Platinum Members to cancel my sell order and I am still flat. Today I will now raise my buy level to 6510/6560 with a 6455 stop. After yesterday’s impressive 2% gain I no longer want to be short the NASDAQ at this time.
March BUND
The BUND rallied to my 164.92 sell level before having a small 20 point sell-off. I used this move lower to cover my position at my revised 164.84 T/P level and I am now flat. The insanely low yield in the BUND is hastened by the grim picture painted by the ECB in last week’s Minutes from the December Meeting and this negativity towards the Euro-Zone economy was reinforced by Dragi yesterday in Strasburg. If Europe is not careful we could end with a Japanese Deflationary situation very soon. It is clear that there is very little chance of the ECB raising rates or ending QE anytime soon. Today I will now look to buy the Bund on any dip lower to 163.95/164.35 with a 163.60 stop.
Gold Rolling Contract
The boring sideways action in Gold continues and I am still flat. Today I will again leave my 1267/1276 buy range unchanged with the same 1259 stop.
Silver Rolling Contract
No change as I am still long at 15.60 with the same 15.25 stop and 15.75 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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