Equity markets hit a jittery patch shortly after I posted early yesterday morning, with selling seen across Europe and the US. The US Dollar is as expected softer across the board with safe haven currencies the outperformers. Notably, however, core global Bond Yields did not enjoy a safe haven bid with 10y Bunds yields closing higher while UST yields are little changed. Signs of market nervousness emerged yesterday late in the Asian session with a sharp drop in Japanese equities, seemingly driven by technicals and profit taking. The Nikkei at one stage was down just over 3.5% intraday, but then recovered to the end the day at -0.2%. Europe opened with a negative tone with the resources sector leading the slide and then speculation over the US Senate tax bill aiming to delay the corporate tax rate cut to 20% until 2019 provided an additional excuse to sell equities.
To mark my 1450th 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. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 108 points yesterday and is now ahead by 219 points for November, having made 657 points in October, 447 in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started my New Platinum Service it has averaged a monthly gain of over 1600 points.
Just before the US Markets closed last night, the Senate Republicans have released their “vision” for a tax plan. As expected, the outline includes a corporate tax rate cut to 20% with one year delay to 2019, it retains the seven income tax brackets at slightly different rates relative to the House proposal and it preserves existing mortgage-interest deduction for home purchases with up to $1 million of debt. The estate tax would also be preserved, but double the current $5.49 million exemption for individuals. Marker reaction to the proposal has been pretty muted given Republican Senator Cassidy had already alluded to the details earlier in the session.
As a reminder there are still many rivers to cross before US Tax Reform sees the light of day. Once Republican Senators agree the text of the bill, amendments will follow ahead of a vote aimed on the week starting November 20. Meanwhile the House should vote on its own bill next week and then once both Houses have voted the most likely outcome is that process of reconciliation will need to take place. So, given the apparent differences between the two bills, the implementation of tax reform before the end of the year looks pretty challenging and achieving it before Thanksgiving (November 23rd) seems close to impossible. The US tax saga still has a long way to go.
Moving on to currencies now, the USD was already struggling yesterday, but softness in equities yesterday triggered a bid in safe haven currencies with the Swiss Franc and Japanese Yen the top performers, up 0.62% and 0.51% respectively. After briefly trading above ¥114 during the day yesterday, the drop in the Nikkei triggered a 50pips selloff in USD/JPY and then the softness in equities dragged the pair down to ¥113.33, where it currently trades. The CAD (+0.44%) benefited from a rise in oil prices amid reports of fresh arrests in Saudi Arabia’s crackdown on corruption, adding to geo-political concerns in the region.
The Euro is back trading above 1.1640 ( +0.43%) following upward growth revisions by the European Commission. Output this year is now seen at 2.2% and 2.1% in 2018, versus expectations for a 1.7% increase this year and 1.8% next year. The upward revisions were also seen as the catalyst for the jump in EU sovereign yields with 10y Bunds closing at 0.373%, up 5bps on the day.
Lastly Sterling is up 0.27% and now trades at 1.3150 after hitting an intra-day low of 1.3088. The FT reports this morning that PM May is ready to increase Britain’s offer to the EU over the Brexit divorce bill, after signs that the hard Euro-sceptics in her party will tolerate paying more money to break the deadlock in negotiations.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. Despite today being Veterans Day, the US stock markets are open even though most US banks are closed. At 3.00 pm we have the University of Michigan Consumer Sentiment. Finally at 7.00 pm we have the Monthly Budget.
December S&P 500
Wow what a day with the VIX rising 7.5% to close at 10.5. However this rise does not tell the whole story. As many of you know I am in Florida until next Thursday with my normal release time for my Daily Commentary resuming on Friday. Yesterday morning when I posted my Daily Commentary at 3.00 am the S&P was trading at 2592. A few minutes later when I went to bed we were trading at 2594. Subsequently before the European Markets opened the S&P traded lower to my 2585 buy level before rallying after 7.00 am to my 2590 T/P level which then put me flat. Unfortunately this trade only worked for my Asian, Australian and US Members. When I woke up the S&P had traded the whole of my 2579/2585 buy range and I emailed my Platinum Members who probably bought the S&P at an average rate of 2582 even though this trade was now invalid having worked earlier to exit any long position near a breakeven. Thankfully after a bit of sweating the S&P recovered to a 2583.50 high print before getting slammed for 20 Handles. I cannot emphasise the importance of my Platinum Service especially when the markets turn volatile. I ended up sending 3 three updates with an hour before finally sending one more. In my view this market is on borrowed time and yesterday’s vicious decline is only a taste of what is to come when this market eventually rolls over. After the S&P traded below 2564 the buyers returned to rally the S&P to close at 2583. The bulls will not give up without a fight. The key level to watch is 2570 and as long as we can hold this price then there is a chance we could rally to at least 2625/2640 before we see stronger selling. Today I will now look to buy the market on any dip lower to 2570/2576 with a 2563 stop which is just below yesterday’s low print. Meanwhile I will lower my sell level slightly to 2599/2606 with a 2612 stop.
EUR/USD
I still believe the US economy is slowing as we are not seeing any wage pressure which will keep the Fed on hold. If this scenario plays out then the US Dollar will weaken and is why I have no interest in being short the Euro. In light of yesterday’s move higher I will now raise my buy level to 1.1530/1.1575 with a 1.1495 stop. If I am taken long and subsequently stopped out of this position I will still be an aggressive buyer on any dip lower to 1.1390/1.1445 with the same 1.1345 stop.
December Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 94.90/95.20 with a 95.55 stop.
December DAX
My concerns over the DAX certainly proved to be correct with the DAX at one stage trading over 300 points lower off its early morning high. Mid-morning after the DAX hit my initial 13275 buy level, I woke and did not like the price action. Subsequently I emailed my Platinum Members to exit any long position for a small loss at 13255 and to re-buy the DAX if we traded lower to 13190 with a 13225 T/P level if executed. Thankfully both of these prices were filled and we ended up ahead on what could have been a serious loss. Again I cannot emphasise the importance of my Platinum Service and updated emails which in my view are vital. Today I will again look to buy the DAX on any dip lower to 13050/13120 with a 12995 stop. A break and close below 13100 is a sell signal which could be significant. As we are so close to this support level I will refrain from going short at this time.
December FTSE
With so many of my markets hitting at the same time I emailed my Platinum Members to reduce their buy level in the FTSE to 7390/7430. Unfortunately the market just missed this new buy level and if you did buy at my original 7455 buy level the market subsequently rallied above this price into the close. If you have not exited I would now. Today I will again lower my buy level to 7390/7425 with a 7355 stop.
Dow Rolling Contract
The Dow got hammered yesterday before rallying over 150 points off its mid-afternoon low into the close on what turned out to be the most volatile trading session in many weeks. After the Dow hit my original 23440 buy level the market rallied back 25 points and I emailed my Platinum Members to exit this position at my revised 23445 T/P level and I am now flat. The Dow has strong support from 23120/23200 and it will take a break and close below here for the market to turn at least short-term bearish. With this in mind I will now look to buy the Dow on ay dip lower to 23210/23325 with a 23095 stop. Given the high price I am trading in smaller size with wider parameters.
December NASDAQ
My NASDAQ plan worked well with the market trading lower to my revised 6280 buy level before rallying to my 6310 T/P level and I am now flat. Today I will again look to buy the NASDAQ on any dip lower to 6250/6285 with a 6215 stop. Remember a break and close below 6240 is a sell signal and yesterday’s 6248.50 price should act as decent support in the short term.
December BUND
With so many markets hitting my buy level at the same time including the Bund at 162.75, I emailed my Platinum Members to exit this position ahead of the 1.30 pm US data yesterday at my revised 162.83 T/P level and I am now flat. The Bund has good support from 162.00/162.35 and today I will be a buyer on any dip to here with a 161.75 tight stop.
Gold Rolling Contract
It was interesting that Gold could not really rally even when the equity markets were at their weakest level yesterday. I still do not trust this market and today I will continue to be a buyer on any dip lower to 1258/1265 with the same 1251 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 16.60/16.90 with the same 16.30 stop. Again if I am taken long I will have a T/P level at 17.05. If this happens I will be back with a new update for my Platinum Members.
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