After observing MLK day on Monday, US equities have opened the week sharply lower reflecting a change in market sentiment amid a flurry of headlines suggesting US-China trade talks are not heading in the right direction, China’s President speech stressing the need to maintain political stability has been interpreted as a worrying sign over the country’s slowing economy while US data also printed on the softer side of expectations. US Treasury yields are lower across the board and in spite of the risk off tone USD Indices have edged a little bit lower weighted down by Sterling’s outperformance (driven by data and Brexit news) while JPY benefited from a safe haven bid and its link to UST yields. AUD is the G10 underperformer not helped by the China news and a softer commodities backdrop with oil and copper leading the declines.
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 130 points yesterday and is now ahead by 1124 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
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notification
The recovering in risk assets has taken a breather this week, China’s data on Monday raised concerns over the degree of slowdown in the world’’s second largest economy and yesterday’s speech by President Xi, at an unusual meeting of China’s top leaders, added further fuel to the notion that China may be slowing faster than what the official numbers suggest. In his speech President Xi stressed the need to maintain political stability adding that the Communist Party needed greater efforts ‘’to prevent and resolve major risks’’. The speech has been interpreted by many as a sign the party is becoming more concerned about the social implications of a slowing economy.
The US-China trade war remains front of mind as well with Trump tweeting yesterday for China to ‘’stop playing around’’ and ‘’do a real deal’’. The Wall Street Journal reports that in a joint report to the US Trade Representative, the US Chamber of Commerce and the American Chamber of Commerce in China say Beijing’s ambitious plan to become a global technology leader is being widely implemented, casting doubt on efforts by Chinese officials to play down its significance.
Equities
News yesterday that the US will pursue the extradition of Meng Wanzhou, China’s Huawei Technologies CFO, has been an additional factor adding to concerns over US-China trade tensions while the FT reported the US negotiators turned down an offer of preparatory trade discussions. Markets were already trading with a risk off tone, but the FT news accelerated the deterioration in risk sentiment.
So given the above mentioned backdrop, US equities have opened the week sharply lower with the S&P500 closing down 1.5%. IT, Telecoms and Consumer discretionary sectors have led the decline. The NASDAQ is -2.00% and the Dow is -1.3% with Caterpillar and DowDuPont the big underperformers. After closing Friday with a 17 handle, the VIX has been on a steady upward trajectory overnight and currently sits at 20.62.
Currencies
USD Indices have edged a little bit lower (DXY now trading at 96.282) reflecting outperformance by GBP and JPY while commodity linked currencies have underperformed with AUD at the bottom of the pile.
The pound is up 0.56% to 1.2960 supported by a strong labour market report and increasing optimism that a no-deal Brexit can be ruled out. there are continuing signs that the UK Parliament will be more in control of the Brexit process with a number of amendments proposed by various MPs, including staying in a Customs Union with the EU, a second referendum on Brexit, an Article 50 extension which would significantly delay any Brexit outcome, and ruling out of a no-deal outcome. The speaker will decide which amendments can go to a vote. The FT reports that the Cooper-Boles amendment to stop a no-deal Brexit looks to have a good chance of being selected next week and voted on in early February.
In addition to the China and trade news above, the decline in commodity prices led by falls over 2% in oil and copper have weighted on the AUD. The pair currently trades at 0.7120, 0.50% lower relative to yesterday’s level.
Bonds
US Treasury yields have moved lower across the board with the 10y note currently trading at 2.7338%, 5bps lower relative to Friday’s close.
This morning on the Economic Front we have UK CBI Industrial Trends Survey at 11.00 am and this is followed at 12.00 pm by US MBA Mortgage Applications. Finally, at 3.00 pm we have the Richmond Fed Manufacturing Index and Consumer Confidence.
March S&P 500
The S&P opened weak on the back of the breakdown in trade talks and the prospect of lower growth. This weakness turned into a nasty correction with the S&P trading the whole of my buy range for an average long position at 2630 with a 2616.50 low print. However with five minutes of trading left it was announced that the Trade Talks were still due to go ahead and this led to a small rally. Subsequently IBM came out with much better than expected earnings and the S&P soared to my revised 2634 T/P level and I am now flat. It was important that the S&P closed over its 50 Day Moving Average (2623) as the bulls will not want to give the bears any hope after the best start to New Year since 1987. The 1.5% fall across the board saw the McClellan Oscillator get hit hard closing at +185, well-off last Friday’s near record +313 close. It was frustrating to get stopped out of last Friday’s short position at 2669 which was only seven Handles below where this 350 Handle stopped. The S&P has strong resistance from 2640/2650 and today I will be a small seller on any rally to this area with a 2659 stop. My only interest in buying the S&P today is on a dip lower to 2593/2605 with a 2584 stop.
EUR/USD
I am still flat the Euro. I will continue to be a small seller on any rally higher to 1.1410/1.1450 with a 1.1485 stop. The Euro has strong support from 1.1270/1.1310 and I will be a buyer on any dip to this area with a 1.1240 stop.
March Dollar Index
No Change as I am still a seller on any rally higher to 96.40/96.80 with the same 97.20 stop.
March DAX
The DAX traded lower to my 11020 buy level before eventually rallying 70 points. As I wanted to be flat overnight I covered this long position at my revised 11035 T/P level and I am now flat. The DAX needs to hold the key 10860/10920 support level or else all the good work done over the past few weeks could easily come un-done. Today I will be a buyer in the above support range with a 10815 tight stop.
March FTSE
Just as I posted the FTSE thankfully traded at my 6800 T/P level and I am now flat. Subsequently the market got hit hard on a combination of a stronger pound and weaker US Indices. Today my only interest in buying the market is on a dip lower to 6700/6740 with a 6670 stop.
Dow Rolling Contract
The good part about yesterday as no matter where you bought the Dow in my buy range you should have made a nice gain with the market rallying nearly 300 points off its late session low to trade to a high of 24520 overnight. Personally I bought the Dow at 24395 before covering this position at my revised 24425 T/P level and I am now flat. Today I will lower my Dow sell level to 24500/24650 with a 24780 stop. The Dow has strong support from 24050/23900 and I will be a buyer on any dip to this area with a 23795 tight stop.
March NASDAQ
The NASDAQ got hit hard yesterday and I am still flat as we had no buy levels in yesterday’s commentary. The market has support from 6520/6570 and today I will be a buyer in this area with a 6475 stop.
March BUND
My BUND plan worked well with the market trading lower to my 164.15 buy level shortly after I posted yesterday morning before rallying to my 164.40 T/P level and I am now flat. Today I will again look to buy the Bund on any dip lower to 163.95/164.35 with a 163.60 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
The boring action in Gold continues and I am still flat. Today I will leave my 1260/1269 buy range unchanged with the same 1252 stop.
Silver Rolling Contract
Silver just missed my 15.05 buy level yesterday before the market had a small rally and I am still flat. Today I will now raise my buy level to 14.80/15.20 with a 14.45 stop.
Recent Comments