Friday’s price action saw an extension of the feel good vibes from previous days boosted by news that China had offered to buy more than $1trn in US goods over 6 years in order to reduce China’s trade surplus with the US. Mostly solid US data releases also helped eased concerns of a US slowdown. U.S. and European equities closed the week with strong gains, the USD was broadly higher recording a fourth consecutive day of gains. The improvement in risk appetite also helped US Treasury yields move higher along the curve while oil prices led the gains within commodities with WTI trading above $53 for the first time since early December.
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 lost 50 points on Friday and is now ahead by 982 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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China has offered to increase goods imports from the US by a combined value of more than $1trn over the next six years in order to bring the trade surplus to the U.S. down to zero by 2024. The offer was made early in January and it was met with scepticism by US negotiators, still the report suggests US officials asked to go further and clear the surplus in two years. Later on Friday a Reuters report noted that US negotiators were looking to impose “regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal” while the “threat of tariffs is not going away, even if there is a deal”. Although China is not keen on the compliance checks, positively these US demands have yet to derail the negotiations.
Yet again trade news on Friday raises more questions than answers. From a practical perspective it is difficult to see how the US will be able to increase export to China by $1trn in four years, let alone two years. Also worth noting that this could be good news for US exporters, but not so good news for other countries exporting to the China. Less Brazilian soybeans in exchange for more U.S. soybeans? Similarly does the deal mean more LNG from the US instead of Australian LNG?. Also worth noting to that the US angst with China is not just about trade, concerns over protection of intellectual property malpractices and state support of industry are also major sticking pointing and it is unclear if any progress has been made in this regards.
For now markets are going ahead with the growing perception that there is a lot of willingness by both parties to make a deal, but as the March 1st deadline approaches the market is also likely to demand more concrete evidence that a deal looks more likely than not. Now that not much can be expected from Davos, given the downgrade by US and China officials attending, China’s Vice-Premier Liu He U.S. visit at the end of the month will be an important test for the current positive trade vibes.
Equities
US and European equities posted solid gains on Friday with the S&P 500 now off to its best start since 1987. Positively as well the rebound in the Index since the start of the year has been broad based with all 11 sectors up year to date. U.S. data releases on Friday also helped ease concerns of a US economic growth slowdown, U.S. Factory Production expanded in December by the most in 10 months, but in less positive note Consumer Confidence fell in January amid concerns over tariffs and government shutdown .
Bonds
The improvement in risk appetite and positive US data releases also helped pushed UST yields higher with the 5y part of the curve leading the move, climbing 5.2bps to 2.62%. The 10y rate climbed 3.4bps to 2.78%, its highest level year to date.
Currencies
The USD also had a good session outperforming most currency pairs within G10 and EM FX. On Friday both DXY and BBDXY Indices posted gains for a fourth day in a row and now trade close to the upper end of their 6 month range. Last week safe haven currencies such as JPY and CHF losst over 1% against the USD with USDJPY closing the week at 109.67 and while CHF closed at 0.9954. Notably, NZD and AUD to a lesser have been unable to benefit from the improvement in risk appetite.
Last week, NZD was the big G10 underperformer, down 1.30% and closing the week at 0.6754. The CPI release will be important for the kiwi this week, market and BNZ expectations are for a flat result for the quarter.
Sterling gave back Thursday’s gains, but still managed to be one of the two G10 currency to make some gains (0.22%) against the USD for the week. CAD was the other up 0.05%, stronger than expected Canadian CPI reading along with higher oil prices were two factors helping the Loonie perform. Meanwhile Brexit news remain very fluid, however there is still no clear guidance of what is likely to happen next. PM May is due to present her Plan B this afternoon and weekend news suggest senior Labour figures have made major inroads in order to steer the party to backing a fresh Brexit referendum while a new Opinion poll for the Observer noted voters would back staying in the European Union over accepting Theresa May’s Brexit deal.
Commodities
Oil prices have lead the move higher within commodities with WTI gaining over 3% on Friday (closing at $53.80) while Brent jumped 2.5% to $62.7. Gold lost a bit more ground (-0.8%) and iron ore edged a little bit higher.
Fed Williams spoke on Friday night and emphasised the Fed message of data dependency. He cautioned that ‘’a softer economic outlook does not mean we should prepare for doom and gloom’’ as he forecast growth of -2-2.5% in 2019. However he also noted that as growth tailwinds fade ‘’prudence, patience, and good judgment’’ are needed while a prolong shutdown is a rising risk to the outlook.
This morning on the Economic Front we already had the release of Chinese GDP which came in as expected with a +6.4% print. Also released earlier was German PPI which printed higher at +0.4% versus +0.1% expected. The U.S. Markets are closed for the Martin Luther King Holiday and all eyes will be on the U.K. to see what the latest developments on Brexit are when PM May gives her latest proposals to Parliament.
March S&P
The unrelenting rally continued in the S&P with market now trading an incredible 340 Handles higher than the December 26 low of 2332 with the market off to its best start to a new year since 1987. My S&P plan did not work well with the market trading higher to my average sell level at 2654.50 before stopping me out of this position at 2669 and I am still flat. The Futures Market closes at 4.30 pm today while the Cash Markets are closed for the MLK Holiday, so we should expect a quiet session. The McClellan Oscillator made new highs for the move closing at +316 on Friday again emphasing how overbought this market is. The fact that the 50 Day Moving Average was broken so easily on Thursday is bullish longer-term. This key MA closed at 2625 on Friday and today I will now raise my buy level to 2620/2632 with a 2610 stop. The 200 Day MA is still well above current prices at 2741 and it will take a break and close below here for the market to re-test December 3 high at 2810. Over the coming days I will be an aggressive seller on any further rally to 2712/2730 with a 2742 stop.
EUR/USD
The Euro just missed my 1.1350 buy level before having a small rally and I am still flat. Today I will lower my buy level slightly to 1.1300/1.1340 with a 1.1265 stop. The Euro has strong resistance from 1.1420/1.1460 and today I will be a small seller on any rally to this area with a 1.1490 tight stop.
March Dollar Index
No Change as I am still a seller from 96.15/96.45 with the same 96.75 stop.
March DAX
Just as I posted on Friday the DAX broke the key 11000 resistance level. Thankfully we had no sell levels in the market with the DAX rallying to close over 11250 on strong volume. This was the fourth time that the 11000 area had been tested and should now act strong support on any initial sell-off. Today I will raise my buy level to 11000/11080 with a 10940 tight stop.
March FTSE
With Cable breaking back below its 100 Day Moving Average the FTSE had a strong rally. I am still flat as thankfully we also had no sell level in this contract on Friday as the market rallied over 120 points after I posted on Friday with the Cash FTSE closing over the key 6950 resistance area, which equates to a price of 6890 in the March Contract. As a result I will now raise my buy level to 6840/6880 with a 6805 tight stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow has now rallied over 3000 points in three weeks as one short position after another gets slammed. On Friday after the Dow traded higher to my 24550 sell level I emailed my Platinum Members to exits any short position for a small gain at 24485 and I am still flat. The 50 Day MA (which comes in at 24330) will act as strong support. However the Dow has very strong resistance above here with the 200 Day MA at 24968. On top of this we have a strong falling trendline from the October highs which comes in at a price of 25240. In my opinion it will take a break of these two key resistance areas for the Dow to rally to new all-time highs. Today I will be an aggressive buyer on any dip lower to 24220/24400 with a 24050 stop. I will also be an aggressive seller on any further rally to 24950/25180 with a wider 25300 stop.
March NASDAQ
My NASDAQ plan worked well with the market trading higher to my 6780 sell level before selling off to my revised 6750 T/P level and I am now flat. Today I will again look to sell the market on any rally higher to 6825/6875 with a 6925 stop.
March BUND
No Change as I am still at a price of 164.18 with the same 164.30 T/P level and 163.78 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am still flat Gold as yet again the key 1300/1310 resistance area is proving extremely difficult to crack. Gold has good support from 1260/1270 and today I will be a buyer on any dip to this area with a 1252 tight stop.
Silver Rolling Contract
I am still long Silver at a price of 15.60 with the same 15.25 stop. Silver is close to my stop trading at 15.30 as I post this commentary not helped by the fact that we closed below the 200 DA MA on Friday which comes in at 15.48. If I am stopped out of this position I will again look to buy the market on any further dip lower to 14.65/15.05 with a 14.30 stop. If I am taken long a second time I will have a T/P level at 15.30.
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