Risk assets were boosted in the last 90 minutes of trading last evening amid speculation the US is considering lifting trade tariffs on China in order to appease markets. The report suggests this is a debate between trade officials with President Trump not yet involved in the discussion, so at this stage the news is on the speculative side. However the Wall Street Journal subsequently reported that the US Treasury is denying there has been any China tariff recommendation.. More often than not where there is smoke there is also fire, but it is hard to tell at this stage. Prior to these headlines US equities where modestly trading in positive territory with solid US data releases one positive driver while disappointing Morgan Stanley results did not result in negative contagion within financials. Rumours that President Trump might impose tariffs on EU auto imports were also source of cautiousness. Meanwhile in G10 Sterling is the outperformer buoyed by speculation of a delay to Article 50 and support for a second referendum.
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 175 points yesterday and is now ahead by 1032 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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After an up and down sideways trading session the US equities ended the day in positive territory with the S&P 500 closing above its 50 Day Moving Average with a gain of 0.75%. This is the 8th session of gains in the last ten days. Many investors are keeping a close eye on technical levels for signs on whether the Index still has room for further gains or whether is best to take profit, for a instance a close above the 50 day moving average would be a positive sign, notably too all 12 sectors of the S&P 500 closed in positive territory.
Elsewhere, Taiwan Semiconductor (TMSC), the world’s largest chip maker, reported a surprise drop in revenue, citing a weaker macroeconomic environment amidst a slowdown in iPhone sales and pressure on Huawei. And Alcoa forecast that aluminium demand would slow to it its lowest rate of growth in a decade at its earnings report, suggestive of slowing global growth (although better than expected earnings boosted its share price nonetheless). After a wobbly start, Netflix shares closed up on the day.
Aside from the US China trade headlines mentioned above, early in the session European equities traded in a cautious mode following comments from US Senate Finance Committee Chair Chuck Grassley noting that he thought President Trump was ‘’inclined’’ to impose tariffs on European cars to win better terms on agriculture. Grassley news knocked the EU auto sector, while financials traded softer following disappointing Q4 results from Soc Gen.
Bonds
US Treasury yields continue to track moves in equities and are up across most of the curve with longer dated yields unchanged resulting in a slight flattening bias. The 2yrs and 10yrs are up 3bp to 2.56% and 2.74%, respectively. Early in the session UST yields were boosted by better than expected US data releases. The Philadelphia Fed business survey unexpectedly rose, going against the grain of weakness in other manufacturing surveys, but the underlying components were more mixed (there were falls in the employment and shipments components but a rise in new orders). Jobless claims declined, although there can be issues adjusting for seasonality at this time of year, compounded at present by the ongoing US government shutdown.
Currencies
After some volatility following the trade headlines above, USD Indices are little changed ( DXY at 96.07) and within G10 GBP is the outperformer, up 0.70% to 1.2976 following increasing speculation of a delay to Article 50 and growing support for a second referendum. The FT reported today that the UK had informed the EU before Christmas that if the talks carried on into the New Year (as they have) the UK did not have enough time to pass all the pieces of legislation that it needs to meet the 29 March deadline. The implication being that the UK will have to request an extension relatively soon, though Theresa May continues to publicly say that she wants the UK to leave as planned in March. May has met politicians from other parties (although not Jeremy Corbyn), but has refused to shift her ‘’red lines’’ at this stage (i.e. she won’t countenance a customs union solution). She needs to return to parliament with a ‘’Plan B’’ on Monday, with voting on that to take place on 29th January. Sterling was also supported by a You Gov poll showing 56% would now vote to stay in the EU, against 44% who want to leave. YouGov noted that the 8% swing from Leave to Remain since the 2016 referendum was significant.
The AUD now trades just below the 72 mark. Yesterday the pair traded down to a low of 0.7147 not helped by disappointing AU loan figures and a softer equity backdrop in APAC. Overnight the AUD steadily regained lost ground and the US China headline this morning saw the pair briefly jumped to 0.7221, but the US treasury denial has seen the AUD trade back close to the figure. For now it is evident the AUD remains at the mercy of offshore events, worth noting however that the Q4 CPI figures are out on January 30th ahead of the RBA meeting on February 5th.
Commodities
Moves within commodities have been relatively modest. Oil prices are essentially unchanged, Gold is a tad lower and Iron ore a tiny bit higher.
This morning on the Economic Front we have UK Retail Sales at 9.30 am. At 2.15 pm we have US Industrial Production. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
Meanwhile the Fed’s Williams and Harker are speaking this afternoon at 2.05 pm and 4.00 pm respectively.
March S&P 500
My S&P plan worked well with the S&P spiking to trade the whole of my buy range on the Tariff news for an average short position at 2635. Subsequently the S&P fell 10 Handles and I used this sell-off to email my Platinum Members to exit any short position at my revised 2629 T/P level and I am now flat. Yesterday’s 2644 high print is 312 Handles above the December 26 low to record one of the largest points rallies in history and which only took three weeks. Although the S&P closed above its 50 Day Moving Average the McClellan Oscillator closed at a severely overbought reading of +281 which is a serious warning sign. I certainly would not be chasing the S&P higher from here. The S&P has further resistance from 2645/2660 and today I will be a seller on any further rally with a 2669 tight stop. Although the S&P has followed my roadmap it has been difficult to get a long position on board. Today I will now raise my buy level to 2606/2616 with a 2598 stop.
EUR/USD
No Change as I am still a buyer on any dip lower to 1.1310/1.1350 with the same 1.1275 stop. Given the fact that most US Markets are closed on Monday and the fact that we are so close to the key 1.1200/1.1300 support area for the Euro I do not want to be a seller of the market at this time.
March Dollar Index
The Dollar traded in a narrow range yesterday and I am still flat. Today I will lower my sell level slightly to 96.10/96.45 with a 96.75 tight stop.
March DAX
Although the DAX has rallied 150 points of yesterday’s morning’s low the market is still finding it very difficult to break the key 11000 resistance level. I am still flat and today I will now raise my buy level to 10800/10870 with a 10735 stop. Despite the strong resistance here I still do not want to be short the DAX at this time.
March FTSE
The strength of Sterling is hindering the progress of the FTSE as expected per yesterday’s commentary. With Cable finally closing above its 100 Day Moving Average at 1.29 there is plenty of scope for GBP/USD to trade as high as 1.33/1.34 over the coming weeks which will have an impact on the FTSE market. Yesterday the FTSE just missed my buy level before having a small rally and I am still flat. Today I will now raise my buy level slightly to 6730/6770 with a higher 6695 stop.
Dow Rolling Contract
My Dow plan also worked well with the market trading higher to my 24410 sell level before selling off to my revised 24295 T/P level as emailed to my Platinum Members and I am now flat. As I mentioned yesterday the Dow has strong resistance from 24400/24600 and after a near 2800 points rally over the past three weeks is due a correction. Today I will again look to sell the Dow from 24520/24670 with a tight 24780 stop. Given how overbought the Dow is trading I no longer want to be a buyer of the market at this time.
March NASDAQ
No Change as I am still a seller on any further rally to 6770/6840 with the same 6895 stop.
March BUND
With the Equity markets having a late rally the Bund got sold with the market trading the whole of my buy range for a now average long position at 164.18. I will now raise my stop on this position to 163.78 while also lowering my T/P level on this trade to 164.30 as I want to try and be flat over the weekend.
Gold Rolling Contract
I am still flat Gold as the market is finding it increasingly difficult to break the key 1300/1310 resistance area. Again if Gold prints 1311 I will buy the market with a 1297 stop. If this trade is executed my T/P level will be 1325 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Silver Rolling Contract
No Change as I am still long Silver at 15.60 with the same 15.25 stop. I have had this position for a number of days now and as a result I will now lower my T/P level on this trade to 15.65.
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