Understandably, price action yesterday was pretty subdued ahead of a series of events which have the potential to determine markets’ direction over the coming months. UK MPs voted last night with the key Brady and Spellman Amendments both passing while the Cooper Amendment failed as expected. After the US Markets closed Aplle came out with slightly better earnings and this is giving the Equity Futures Market a boost as we wait for the FOMC Rate Decision at 7.00 pm this evening followed by the Fed Chair Powell’s press conference at 7.30 pm. Meanwhile the US Dollar is steady and US Treasury yields are a few bps lower with a softer Consumer Confidence reading a factor at play.
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For anyone following my Platinum Service it was flat yesterday as none of my calls were hit and is still ahead by 1494 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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Equities
US equities have traded in an out of positive territory although technology shares are notable underperformers ahead of earnings by Apple and AMD after the bell. The NASDAQ closed 0.80% lower while the Dow managed a gain of just 0.2%. The S&P 500 closed 0.15% in the red with IT and Communication the sectors in negative territory. Earnings results from US corporates have sent mixed messages. 3M beat both revenue and earnings expectations, and reported growth across all regions in Q4 (albeit with some slowdown evident in China). Meanwhile, pharmaceutical company Pfizer said it expected little or no increase to revenues in 2019 and US wireless provider Verizon forecast flat earnings this year, disappointing the market. While around 70% of corporates have beaten earnings expectations so far this quarter, a recurring theme has been slower growth in China and more cautious earnings guidance for the year ahead.
US-China trade talks begin this afternoon and US Treasury Secretary Mnuchin has been on the wires talking up the prospects of a deal. Mnuchin said that if China presents enough trade concessions to President Donald Trump, there is a chance the administration may lift all tariffs. Yesterday the Wall Street Journal reported that early indications are that the two sides remain sharply divided, implying that it will be difficult to achieve significant progress over the next two days. The deadline for a deal is March 1st, so there is still plenty of time for more drama, if negotiations fail, President Trump promised to increase the current 10% tariffs on $200bn Chinese imports to 25%, conversely if a signed US-China trade deal is in the offing, this would be a major boost to risk assets given the growing evidence of a slowdown in growth in China and the global economy.
Currencies
In currency land, the USD is little changed in Index terms. A tad stronger against Emerging Markets with BRL the underperformer (-1.22) and against the majors USD Indices are a tiny bit stronger, largely reflecting some weakness in CHF ( -0.35) and AUD( -0.17%).
Yesterday the AUD traded down to a low of 0.7138 following a very sharp fall in Business Conditions to +2 from +11. its largest monthly fall since the GFC. The next NAB Survey will carry greater importance than normal, and if the survey does not bounce back, it points to a more subdued economic outlook than that embedded into the RBA’s forecasts. RBA Board Member Harper gave an upbeat assessment of the Australian economy in a later WSJ article and said he thought the next move by the RBA would be a hike, although the interview took place before the NAB Survey was released. AUD now trades at 0.7152 ahead of Australia’s Q4 CPI.
Yesterday, the UK House speaker Bercow selected seven amendments to delay Brexit and renegotiate the deal to go to a vote. Voting saw the Copper amendment been rejected by Parliament, this amendment sought to block a no deal via an extension to Article 50. Sterling fell on this news, down to 1.3060 from 1.3169 a few minutes before the vote. The Spelman amendment, a Tory motion to not leave the EU without a deal and Reeves (Labour) which is actually a cross-party motion to extend Art. 50 by two years if there is no deal by 26 Feb both passed.
Bonds
US Treasury yields are modestly lower over the past 24 hours, with the 10 year Treasury yield falling 2bps to 2.72%. A much weaker than expected US Consumer Confidence reading was partly to blame. The Conference Board Index fell sharply in January, to its lowest level in 16 months, although it remains at historically elevated levels. The fall in the Index was driven by the future expectations component (likely related to the recent fall in the US stock market and the government shutdown) whereas consumers’ assessment of their present situation was more optimistic.
Commodities
Looking at commodities, oil prices continue to lead movements within the sector, after a sharp drop on Monday, prices closed higher yesterday buoyed by news that the US has imposed sanctions on Venezuela’s state-owned oil company PDVSA. The move is seen as a strategy by the US to cut-off foreign currency flow to President Nicol’s Maduro’s government. Aluminium and Nickel prices are also higher ( +1.4% and 2.5% respectively) while copper is not far behind at 0.9%. Meanwhile it was another steady session for iron ore and coal.
This morning on the Economic Front we have German Import Prices and the GFK Consumer Confidence at 7.00 am. This is followed by UK Consumer Credit, Mortgage Approvals and Money Supply at 9.30 am. Next we have Euro-Zone Consumer Confidence and Business Climate at 10.00 am. At 12.00 pm we have US MBA Mortgage Applications at 12.00 pm followed by German CPI at 1.00 pm. This is followed by US ADP Employment Change and Pending Home Sales at 1.15 pm and 3.00 pm respectively. Finally at 7.00 pm we have the FOMC Statement and the Powell press conference at 7.30 pm.
March S&P 500
The S&P again fell short of my 2622 buy level with a 2629 low print before rallying after the close on the better than expected earnings from Apple. With a deluge of data I would expect the market to stay on hold ahead of the FOMC at 7.00 pm and then the post-Statement press conference with Fed Chair Powell. The last two hours will see an increase in volatility. I am still flat the S&P and today I will now raise my buy level slightly to 2620/2632 with a 2608 stop which is just below the falling 50 Day Moving Average which comes in at 2610 this morning. I still do not want to be short the S&P at this time.
EUR/USD
No Change as I am still a buyer on any dip lower to 1.1330/1.1370 with the same 1.1285 stop. I still do not want to be short the Euro at this time.
March Dollar Index
Ahead of the FOMC this evening I am now going to raise my Dollar sell level to 96.00/96.40 with a higher 96.75 stop.
March DAX
I am still flat the DAX which traded in a narrow range yesterday ahead of today’s key economic data on both sides of the Atlantic. Today I will raise my DAX buy level to 11030/11110 with a 10985 stop. I still do not want to be short the DAX at this time.
March FTSE
With the Pound falling after the Cooper and Grieves Amendments failed this should help the FTSE to rally. I am still flat and today I will now raise my buy level to 6710/6750 with a 6675 stop.
Dow Rolling Contract
The Dow also fell short of my 24300 buy level before spending most of yesterday’s session trading sideways/higher before the Apple results sent the market higher in afterhours trading. Today I will now raise my buy level to 24270/24420 with a 24150 stop.
March NASDAQ
Frustrating the NASDAQ just missed my buy level by 16 points before having a strong rally on the Apple results and I am still flat. Today I will raise my buy level to 6560/6620 with a 6510 higher stop. I still do not want to be short the NASDAQ at this time.
March BUND
I am still flat the Bund and today I will now raise my buy level slightly to 164.20/164.60 with a 163.85 stop.
Gold Rolling Contract
I am still flat Gold and today I will now raise my buy level to 1292/1300 with a 1284 stop. Despite the aggressive move higher in Gold over the past two months the Daily Sentiment Reading is only at 51% bulls meaning there is plenty of room for Gold to trade higher.
Silver Rolling Contract
I am still flat Silver and today I will now raise my buy level to 15.30/15.70 with a 14.95 stop.
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