Just before the New York close, US Senate Majority Leader McConnell announced that President Trump plans to sign a bipartisan spending deal and then declare a national emergency to fund his border wall, averting another government shutdown Friday. “He is prepared to sign the bill,” McConnell said. “He will also be issuing a national emergency declaration at the same time.” It is a little bit of late tonic for the markets that have been on the defensive for most of the days with stocks are off their session lows, the Nasdaq getting support from a good Cisco earnings report. Late in the session, equities ended close to flat taking more heat earlier in the session from the big Retail Sales negative print, getting some renewed support from lower bond yields later in the session.
To mark my 1800th 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 205 points yesterday and is now ahead by 566 points for February, having made 1671 points in January, 2803 points in December, 1541 points in November and 2094 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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US retail sales come in as a shocker, Jobless Claims ticked higher and the trade talks are not near being resolved as China printed a larger than expected trade surplus in January. UK Prime Minister May loses another vote in the House, but it seems inconsequential for now as she endeavours to re-fashion a deal with the EC, deadlines fast approaching.
Meanwhile the wire services were reporting yesterday that the 1 March increase in US tariffs on Chinese imports might be extended by 60 days, but, the news flow has been pointing to a lack of fundamental progress on the US-China trade talks.
Currencies
Amidst this now evolving least-bad contest of news and economic performance, there has been some tilt since late yesterday toward the JPY and the CHF, the NZD has made up some ground against the USD too, the DXY slightly lower. Even the Euro made some ground up against the USD, despite the German economy near to technical recession late last year. Sterling is lower on the Brexit political news, despite the likelihood still of either a deal or extending Article 50 for some months when push comes to shove in coming weeks.
Economics
The main news has been the ‘’unbelievable’’ and shocking US Retail Sales release for December that fell 1.2% in headline terms, -1.4% excluding autos and gas and -1.7% for the so-called Control Group that feeds into GDP Consumption estimates. The Atlanta Fed slashed their estimate of US December quarter GDP from 2.7% to 1.5% in what was expected to be a good quarter for the economy into the distorting effects of the government shutdown and the polar vortex.
Many analysts were left dumbfounded by the release, it caught the attention of Fed Governor Brainard who was speaking, running counter to what has been a still strong labour market. The equity meltdown? Maybe there is something in that perhaps, as there was from the apparent inability of seasonal adjustment factors to cope with the now-pervasive bring forward of (on line) sales into November from Black Friday and Cyber Monday. Perhaps revisions are pending.
The data though does open a risk the US economy might be slowing faster than commonly expected, also coming with a further tick higher in Weekly Jobless Claims to 239K from 235K. Late last year, Jobless Claims were tracking to and testing 200K.
The German economy saw no GDP growth in Q4 after -0.2% in Q3, flat-lining, skirting technical recession. Euro GDP growth was left unrevised at a meagre 0.2%, Germany, France, and Italy all having a very soft second half, Italy having two negative quarters.
Besides the ongoing Brexit uncertainty (with the UK parliament voting against the government on a motion to support Theresa May’s approach to leaving the EU), dovish comments by Bank of England MPC member Vlieghe contributed to the fall in the Pound. Vlieghe said he thought the appropriate response to a no-deal scenario would likely be for either a rate cut or an extended pause, and even in the event a deal can be reached, signs of slowing in the global economy and weakness in UK domestic data meant that the Bank could ‘’probably wait to see evidence of growth stabilizing and inflation pressure rising before considering the next hike in bank rate.’’
Bonds
US Treasury yields moved sharply lower after the retail sales release, with the 10 year rate falling from 2.7% to 2.64%, although it has since bounced back to 2.66%. Influential Fed Governor Brainard commented that the release had ‘’certainly caught my eye’’. Brainard noted that ‘’it is one month of data, so I do not want to take too much signal from it. It certainly adds to a story where we want to take on board that there are some downside risks.’’
Fed Rate expectations fell, with the market pricing-out the few basis points of Fed tightening for 2019 and building in greater chance of rate cuts for 2020 (around a 2/3 chance of a rate cut is now priced by mid-2020). Elsewhere on the data front, Weekly Jobless Claims were higher than expected, with the four week moving average moving up to 232k. Jobless Claims appear to be trending gradually higher, indicative of some slight softening in the US labour market, although they remain at very low levels on a historic basis.
Commodities
There have not been big moves over the past 24 hours, oil getting some more support, iron ore seemingly finding a base in the high 80s for now, base metals mixed, while Gold and Silver ended the day flat.
This morning on the Economic Front we have UK Retail Sales at 9.30 am and this is followed at 10.00 am by Euro-Zone Trade Balance. At 1.30 pm we have the New York Empire Manufacturing Index, followed by Capacity Utilisation and Industrial Production at 2.15 pm. Next, we have the University of Michigan Consumer Sentiment and Fed Member Bostic’s speech at 3.00 pm. Finally, at 9.00 pm we have the Net Long-Term TIC Flows for December.
March S&P 500
My S&P plan worked well with the market trading the whole of my buy range for an average long position at 2736 before rallying to my 2748 T/P level and I am now flat. Ahead of a long weekend in the US with the markets closed for the Presidents Holiday on Monday despite the weaker price action this morning. I will look buy the S&P on any further dip lower to 2714/2725 with a 2707 stop.
EUR/USD
I am still flat the Euro and today I will now raise my buy level to 1.1200/1.1240 with a 1.1145 stop.
March Dollar Index
No Change as I am still a seller on any rally higher to 97.30/97.70 with the same 98.05 stop.
March DAX
The DAX was weak for moist of yesterday which was no surprise given the continuing weak economic data out of Germany and the Euro-Zone. I am still flat and today I will now lower my buy level to 10900/10970 with a 10835 stop.
March FTSE
The renewed weakness in Sterling sawe the FTSE trade higher yesterday and I am still flat. Today I will move my buy level higher to 7030/7070 with a 6995 tight stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 25300 buy level on the awful Retail Sales print before rallying to my 25365 T/P level and I am now flat. Today I will look to buy the Dow on any further dip lower to 25100/25240 with a 24995 stop which is just below the 200 Day Moving Average. I still do not want to be short the Dow at this time.
March NASADAQ
The NASDAQ just missed my 6945 buy level before rallying and then selling off overnight. Today I will lower my buy level slightly to 6870/6920 with a 6825 tight stop.
March BUND
My BUND plan worked well with the market trading higher to my 166.70 sell level before selling off to my revised 166.50 T/P level and I am now flat. Today I will again look to sell the Bund on any further rally to 166.95/167.35 with a tight 167.75 stop.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1289/1297 with the same 1281 stop.
Silver Rolling Contract
I am still long Silver at 15.83 with the same 15.45 stop. I will now lower my exit level on this position to 15.70 and if any of the above levels are hit I will be back with a new update for my Platinum Members
Tomorrow I am speaking at the Showfxworld Economic Conference in Prague. If any of my Members are attending this event please introduce yourself after my speech.
As the U.S. Markets are closed for the Presidents Holiday my next Daily Commentary will be on Tuesday. If any of my calls not hit today are subsequently filled on Monday I will be back with an update for my Platinum Members.
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