Markets are again choppy in the midst of Okay U.S. earnings, especially from a better performance from semi-conductor stocks yesterday. Overall, markets weighed down by continuing concerns over a global slowdown without resolution on trade issues, the shutdown, and Brexit if you wanted to throw that in too. ECB President Draghi made clear that they have downgraded the outlook from balanced to clear downside risk, Euro PMIs were mixed but with distinct signs of trade-related softness. US Jobless Claims printed very low, but the US Leading Indicator for December was soft, tilting toward recession risk a little more.
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For anyone following my Platinum Service it made 95 points yesterday and is now ahead by 1429 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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Currencies
At the centre of the FX market has been further weakness in the Euro and the AUD for their own reasons, while Cable has seen some more support as a Brexit crash out on March 29 looks increasingly unlikely. The US Dollar is on net stronger but has had its own whippiness, getting some support from EUR softness, but not helped by US Commerce Secretary Wilbur Ross’s comments in an interview suggesting still some gulf between the US and China over trade policy.
To recount yesterday’s events for the AUD, it rose in the immediate aftermath of a better than expected labour market report for December, Unemployment back down to 5% (below 5% unrounded). But then the market saw NAB had increased mortgage rates, the market joining the dots that, reading through that this would put more pressure on the RBA to ease, supporting bonds and scuttling the AUD. It was pulled down also with EUR weakness, only supported for a time by a whippy USD. It is now trading near its lows of last night at 0.7090.
The EUR was volatile in the aftermath of a mixed set of French/German/Euro PMIs released earlier in the morning, but then a downbeat Draghi laid his risk growth risk cards on the table, the ECB formally changing its risk outlook from balanced in December to downside risk from a combination of geopolitics, protectionism and global factors. This Meeting was one to take stock rather than delve into policy implications, Draghi said, but the read through was very much that a previously-posited rate rise after the summer now looks a very distant prospect.. It is always a worry too when central banks assert that the risk of recession is low.
The suite of preliminary French, German, and Euro-Zone PMIs readings for January had their soft parts, especially the German Manufacturing PMI that printed sub-50 at 49.9 (51.5 expected), as did the French Services Index (again) at 47.5 (French banks?). The Composite Indexes were a little better than expected for Germany, worse for France and the Euro-Zone. There was particular weakness in German Manufacturing orders, especially export orders, coming with ongoing softness in the German auto industry from softer offshore demand.
US Commerce Secretary Wilbur Ross did a TV interview making clear that while he expressed some confidence a deal could/would be done with China (what would it look like and when?), he made clear there is still quite a gulf between the US and China over trade and especially intellectual property and technology, much more prickly areas to come to any mutually acceptable agreement. Chinese Vice- Premier is to meet with US Trade Representative Lighthizer next week, Jan 30-31. The US Government shutdown enters day 34 with unpaid US government workers unable to get unemployment benefits and some availing themselves of food stamps.
US Jobless claims thus remained low. In fact they printed below 200k at 199K, a sign of a still strong US labour market. Despite this, the US Leading Indicator (a key recession risk indicator, one of the most reliable) for December again wavered, down 0.1% as it has in recent months, held down by lower ISM orders, building permits and of course the rout in stocks.
Bonds
With markets still choppy and global slowdown chatter continuing, the bid tone for global bonds continued, US 2s down 1.87bps and 10s down 2.52bps to 2.7157%, testing 2.7%. There were even deeper falls in benchmark Euro yields, 10y bunds down 4.5bps to 0.18%.
Commodities
Oil has been steadier, WTI seeing a modest recovery, up 1.2%, the LMEX base metals index was down 0.2% and copper by 0.5%. Gold was also somewhat lower (-0.4%) while bulks were more mixed, Dalian iron ore futures and Chinese steel rebar futures also higher, looking at Chinese macro growth support measures.
This morning on the Economic Front we have the German IFO at 9.00 am and this is followed by UK BBA Mortgage Approvals at 9.30 am and the CBI Distributive Trades Survey at 11.00 am. Finally we have the US Monthly Budget Statement at 7.00 pm.
March S&P 500
Unfortunately and frustratingly the S&P just missed my 2648 sell level with a 2647.50 high print before the market fell 20 Handles. Subsequently the S&P traded sideways to higher into the close with the S&P again closing over the key 50 Day Moving Average which is now lower at 2617. Today I will again look to buy the S&P on any dip lower to 2605/2618 with a 2595 higher stop. I will also raise my sell level in the S&P to 2654/2666 with a higher 2673 stop.
EUR/USD
My Euro plan worked well with the market trading lower to my 1.1315 buy level on Dragi’s slowdown comments before the Euro rallied to my 1.1350 T/P level and I am now flat. Subsequently the Euro made new lows for the year at 1.1300 into the New York close. The price action is bearish and today I will be a small seller on any rally higher to 1.1360/1.1400 with a tight 1.1435 stop. As we know the Euro has huge support at 1.1200 and today I will be a buyer on any dip lower to 1.1180/1.1220 with a 1.1135 stop.
March Dollar Index
My Dollar plan also worked well with the Dollar trading higher to my 96.30 sell level before the market traded lower to my 96.00 T/P level and I am now flat. Today I will again look to sell the Dollar on any further rally to 96.60/97.00 with a 97.35 stop.
March DAX
Despite the awful German data over the past few months the DAX is refusing to trade lower as the market continues to build value above the key 11000 support area. I am still flat and today I will now raise my buy level to 10950/11030 with a 10895 wider stop.
March FTSE
My FTSE plan also worked well with the market trading lower to my 6750 buy level before rallying to my 6780 T/P level and I am still flat. Today I will again look to buy the market on any dip lower to 6675.6710 with a 6645 stop. Despite the awful price action I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow has god support at its 50 Day Moving Average which comes in at 24250, while at the same time having strong resistance at the 24975 area which of course is its 200 Day Moving Average. I am still flat and today I will now raise my buy level to 24120/24305 with a 24050 tight stop. I will also raise my sell level slightly to 24720/24900 with a 25050 wider stop.
March NASDAQ
No Change as I am still a buyer on any dip lower to 6530/6580 with the same 6485 stop. However I will raise my sell level slightly to 6770/6820 with a 6865 stop.
March BUND
Thankfully we had no sell levels in the Bund with the market rising on Dragi’s slowdown comments as mentioned above. Today I will now raise my buy level to 164.30/164.75 with a 163.95 stop. The Bund has good resistance at the 166.00/166.50 area and today I will be a seller in this range with a tight 166.85 stop.
Gold Rolling Contract
Gold just missed my 1274 initial buy level before having a small rally and I am still flat. As I am back long Silver I will now lower my Gold buy level to 1261/1269 with a lower 1253 stop.
Silver Rolling Contract
Silver traded lower to my 15.25 buy level. I am still long and today I will now raise my stop on this position to 14.70 while also lower my T/P level to 14.45. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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