U.S. Equities slumped as investors fretted that an escalation in Middle East tensions could dent global growth. Oil jumped along with assets seen as havens. The S&P 500 Index posted its biggest loss in a month after a U.S. airstrike killed a top Iranian commander and the Middle Eastern country vowed “severe retaliation.” A search for safety drove gains in Gold, the Japanese Yen and U.S. Treasuries. Oil jumped the most in four weeks, but was off its peak for the day. The developments in the Middle East dented a bullish mood that had pushed the S&P 500 Index to a record high Thursday after a blockbuster 2019. Traders had returned from holidays to the news that China’s Central Bank had moved to support the economy and President Donald Trump expected to sign the first phase of a trade deal with the Asian nation on Jan. 15. Beijing has yet to confirm the date. The Stoxx Europe 600 Index ended lower. Most shares in Asia slumped, though equities in Japan did not trade because of a Bank Holiday. A gauge of developing-nation stocks joined the sell-off. Equity markets in the Middle East were largely closed for the weekend. In other news, the U.S. and the Euro area face daunting economic challenges in a world of low inflation and interest rates and central banks alone don’t have the tools to cope. That’s the message delivered to the American Economic Association’s annual meeting yesterday by former European Central Bank President Mario Draghi and ex-Federal Reserve Chair Janet Yellen. “I believe that for the Euro area there is some risk of Japanification, but it is by no means a foregone conclusion” if it acts comprehensively to avoid a deflationary malaise, Draghi said via a video link to the conference in San Diego. “The Euro area still has space to do this, but time is not infinite,” he added. Yellen, now at the Brookings Institution in Washington, said she agreed with former Treasury Secretary Lawrence Summers that the U.S. was enmeshed in secular stagnation — a state where desired savings are bigger than investment and interest rates are depressed as a result.
To mark my 1975th 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 details
For anyone following my Platinum Service it made 134 points on Friday and is now ahead by 406 points for January, having made 818 points in December, 780 points in November, 1649 points in October, 1620 points in September, 2387 points in August, 1153 points in July, 1346 points in June,1722 points in May, 955 points in April and 1027 points in March. 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
The S&P 500 Index fell 0.7% to close at 3234.
The Dow Jones Industrial Average fell 233 points to close at a price of 28,635.
The Stoxx Europe 600 Index decreased 0.3%.
The MSCI Asia Pacific Index slumped 0.1%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.1%.
The Euro fell 0.1% to $1.1161.
The British Pound dipped 0.6% to $1.3073.
The Japanese Yen gained 0.5% to 108.07 per dollar.
Bonds
The yield on 10-year Treasuries fell eight basis points to 1.79%, a one-month low.
Germany’s 10-year yield dropped six basis points to -0.29%.
Britain’s 10-year yield dipped five basis points to 0.74%.
Commodities
Oil surged toward a 3 1/2-month high as attention turned to Iran’s threatened retaliation for the U.S. airstrike that killed the Islamic Republic’s top general. Brent futures rose 3.5% on Friday, the highest since the attacks on Saudi Arabia’s oil facilities in September. The airstrike near Baghdad airport killed Qassem Soleimani, the Iranian general who led the Revolutionary Guards’ Quds force. The U.S. intends to send “thousands of additional” troops to the Middle East amid rising regional tensions, CNN reported, citing an unidentified U.S. defence official.
West Texas Intermediate crude increased 3% to $63.01 a barrel.
Gold rose 1.3% to $1,548.64 an ounce, the highest since September.
This morning on the Economic Front we already had the release of German Retail Sales which came above expectations with a print of +2.1%. German, Euro-Zone and UK Markit Services PMI will be released at 8.55 am, 9.00 am and 9.30 am respectively. Also at 9.30 am we have Euro-Zone Sentix Investor Confidence, followed by PPI at 10.00 am. Finally, at 2.45 pm we have U.S Markit Services PMI.
March S&P 500
My S&P plan worked well with the market trading lower to my 3212 buy level shortly after I posted before rallying to my revised 3220 T/P level with a rebound high of 3245 and I am now flat. The month of January can be hyper-volatile for stocks and it is clear from the progressing structure that January 2020 is going to fit this bill. The current rally feels much like the advance from late 2017 into January 2018, and the rally from late 1999 into early 2000. In 2017-2018, stocks rose relentlessly to January 26, after which a steep break lower retraced much of the prior month’s advance. Back in late 1999, the dot.com mania was at fever pitch, with all stock Indexes surging into the year 2000. The Dow topped on January 14,2000, while the S&P and NASDAQ held up until March. A key difference now, possibly due to the degree of an impending high, is the lack of participation by the small-cap stock Indexes. The S&P 600 Small Cap Index, which rallied to new highs with the broad market back in 2000, is still well shy of its August 2018 top. So the current rally has cracks that may be important. If the S&P can break and close below its December 31 low at 3212 then we may see a further acceleration to the downside. Today I will again look to buy the S&P from 3202/3215 with a 3194 stop. Meanwhile as we still have a large ‘’Open Gap’’ from Friday’s 3245 rebound high to Thursday’s Chicago close at 3258 I am not going to chase this market lower and I will leave my 3257/3267 sell level unchanged with the same 3275 tight stop.
EUR/USD
No Change as I am still long at 1.1170 from last Thursday with the same T/P level at 1.1185. I will continue to add to this position on any further move lower to 1.1110. I will leave my stop unchanged at 1.1080 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
March Dollar Index
The Dollar just missed my 96.80 sell level with an intra-day high of 96.75 before having a small sell-off into the close. Today I will leave my 96.80/97.25 sell level unchanged with the same 97.55 stop.
March DAX
No matter where you bought the DAX on Friday you would have made a nice gain as the DAX rallied off it’s 13110 low to a rebound high at 13245, before selling off small into the New York close. Personally, I bought the market at a price of 13130 before covering this position too early at 13158 and I am still flat. The DAX has strong support from 12940/13000 and I will be a buyer on any dip to this area with a 12885 tight stop. Despite the negative price action since last Thursday’s surge above 13400 I still do not want to be short the DAX at this time especially as we are so close to the key 13000 support area.
March FTSE
My FTSE plan worked well with the market trading higher to my 7560 sell level before selling off into the New York close. As I wanted to be flat over the weekend, I covered this position too early at 7550 and I am still flat. Today I will again look to sell the market o any further rally to 7570/7620 with a higher 7655 stop.
Dow Rolling Contract
Frustratingly the Dow just missed my initial 28430 buy level with a low of 28458 before the market rallied nearly 300 points off this low and I am still flat. Just like the S&P above the Dow needs to break and close below it’s December 31 low of 28,376 for the market to accelerate to the downside. Option traders are still so optimistic that the US Indices will continue to rally as shown by the Put/Call Ratio which declined to 0.56 on Thursday. This is the lowest reading since the January 2018 high. Meanwhile despite Friday’s small sell-off the ‘’Fear & Greed Index still closed near it’s all time high with an ‘’Extreme Greed’’ reading of 94. Today I will be a small buyer on any further dip lower to 26240/26390 with a 26155 tight stop. I will leave my 28820/28970 sell level unchanged with the same 29050 tight stop.
March NASDAQ
The NASDAQ just missed my 8870 sell level with a high of 8855 before selling off into the close and I am still flat. Today I will lower my sell level to 8845/8895 with a lower 8935 stop. I will be an aggressive buyer on any further dip lower to 8650/8710 with a wider 8595 stop.
March BUND
The BUND never came close to my buy level as the flight to safety in the Bond markets continued. This morning the Bund is trading just below its 172.50 resistance level. I will now raise my buy level to 171.40/171.80 with a higher 170.95 stop.
Gold Rolling Contract
Gold has now rallied nearly 10% off its December 9 low as for the fifth consecutive December both Gold and Silver have had strong rallies off their respective December lows. Gold is now severely overbought and trading well above its Daily Bollinger Band. We have near term resistance from 1588/1600 and I will be a seller in this area with a 1608 stop.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 18.04 buy level before rallying to an overnight high at 18.48. This move higher enabled me to cover this position at my revised 18.20 T/P level and I am now flat. Silver is also trading above its Daily Bollinger Band but not at the same extreme level as Gold. Today I will again look to buy the market from 17.75/18.15 with a 17.45 stop.
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