The Economist has described it as political chaos, a Scottish parliamentarian described Brexit as ‘’a step backward into the imagined past’’. Somebody else urged me to use ‘’Houston, we have a problem’’. Whatever the description you choose, it has been extremely tumultuous 24 hours for Brexit and UK politics, Sterling taking a bath, losing more than two big figure against the USD, the Euro gaining nearly two big figures against sterling. Finally both the Dow and S&P reversed earlier losses to close 1% higher.
To mark my 1700th 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 309 points yesterday and is now ahead by 1078 points for November, having made 2094 points in October,1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. 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/UK Politics
The pressure escalated with no less than the resignation of Brexit Secretary Raab in the wake of Wednesday’s five hour Cabinet meeting that approved the Withdrawal Agreement (WA), Raab saying that he could not support the terms of the WA. It was then off to the races as another five ministers joined the resignation queue, the tense political climate heightened by MPs suggesting that there would be a challenge to Prime Minister May’s leadership, led by prominent Brexiteer Jacob Rees-Mogg.
When the Prime Minister called a press conference late in the afternoon, there was speculation she might resign. But no, when the going gets tough, the tough get going and she was batting on to get the job done. She said that she believed with ‘’every fibre of my being’’ that the course she has set out for Brexit is the right one, telling the Commons later in the afternoon that ‘’British people want us to get this done’’.
Just on the leadership challenge, before a vote can take place, under Conservative party rules, the Chairman of the 1922 Committee needs letters from 15% of Conservative MPs before a vote can be called. That equates currently to 48 letters that apparently have not been received, as yet. If there is a vote, and if she survives, she’s then immune from another challenge for 12 months.
Not surprising that in this fast-changing environment, Sterling volatility is the highest since the 2016 Brexit referendum. Markets now have the almost impossible task of navigating thought a maze of possibilities with the potential for leadership changes, whether she can get Parliamentary approval, could the Government lose the confidence of the House and therefore another election, would there be a change of Government, will the Europeans approve the deal and get it passed by continental parliaments? There are truly many questions and possibilities.
Almost as an aside, UK Retail Sales were on the soft side, but the damage had already been done to Sterling and it was full-on Brexit focus. Retail Sales excluding fuel fell 0.4% against expectations that a 0.2% gain would follow last month’s 0.3% decline. The disappointment was partly ascribed to a mild autumn denting winter clothing sales.
Equities
Stocks have had a mixed session, down in Europe, initially choppy in the US, but having a better closing session. While Ireland had its worst one-day fall in over two years with the market closing almost 4% lower, both the S&P 500 and Dow closed 1% higher after reversing earlier substantial loses on the back of some trade tension optimism.
Commodities
Oil had been staging a mild rally after the big sell off in recent weeks, but this mild rally was stifled by the weekly US crude inventories report revealing a whopping 10.27mb rise against expectations of a 2.914mb rise. Despite this inventory build, both WTI (currently $56.18) and Brent ($66.53) are up 1% net for the day, suggestive of the unwinding of some shorts. Elsewhere, gold is up marginally, by 0.33%, despite some net rise in the USD. Base metals were mixed, copper and zinc up in size, but ally and nickel lower. Iron ore and Chinese steel rebar futures made some net gains yesterday.
Bonds and Economics
UK gilts rallied in size, the 10y down 13.3bps in a European market with a bid tone. US yields have eased marginally, by around 1bps along the curve, 10s currently at 3.11% well within its recent range. The US Retail Sales report for October revealed headline sales were stronger than expected, while the ‘’control group’’ that feeds into household consumption was a little shy of expectations. The Atlanta Fed’s GDPNow estimate for the December Quarter was shaved to 2.8% from 2.9% with consumption growth lowered to 2.7% from 2.9% after the Retail Sales report.
Import prices ticked higher in October, up 0.2% (excluding oil) against expectations of a flat result, a hint perhaps of some tariff impact, and following some declines in recent months from USD strength. Fed President Bostic noted that while the tariffs had so far not affected inflationary expectations, he noted that trade tension and tariffs had seen businesses delaying investments. Powell was also speaking, mentioning that wages were about where he expected them to be given inflation and productivity, having said late Wednesday that he was essentially waiting to see how inflation and growth would evolve to condition the Fed’s stance further. Gradual for now.
This morning on the Economic Front we have Euro-Zone CPI at 10.00 am. Next we have US Industrial Production and Capacity Utilisation at 2.15 pm. Finally The Fed’s Evans speaks at 4.30 pm and this is followed by the Total Net TIC Flows at 9.00 pm.
December S&P 500
Shortly after I posted yesterday the news of the resignation Brexit Minister Robb led to a quick sell-off in the S&P to my 2695 buy level before the market rallied to my 2702 T/P level. Subsequently I emailed my Platinum Members to re-buy the S&P at 2683 and after this was filled the market rallied to my 2688 revised T/P level and I am now flat. The S&P got hit hard following my exit to a low of 2671 before reversing and rallying over 60 Handles into the close. As I mentioned yesterday we are now in one of the seasonally strongest periods of the year with the Thanksgiving Holiday next Thursday and this is why I have no sell levels in the market at this time. If the S&P can close over 2730 this evening it will be bullish for a move to 2760/2772 and possibly as high as 2817/2840 over the coming days. Today I will again look to buy the market on any dip lower to 2699/2711 with a 2690 stop.
EUR/USD
My Euro plan worked well with the market trading lower to my 1.1280 buy level before rallying to my revised 1.1310 T/P level and I am now flat. Given the price action over the past few days there is a fair chance that we saw at least a temporary bottom for the Euro at last Monday’s 1.1215 low print. Sentiment would certainly confirm this scenario. Today I will again look to buy the market on any dip lower to 1.1265/1.1305 with a 1.1230 stop.
December Dollar Index
After the Dollar traded higher to my 97.20 sell level I covered this position too early at 97.12 as I had too many open positions on board at the same time. Given the near 95% DSI reading for the Dollar all week coupled with the small reversal in both Crude and Gold the Dollar should trade lower over the coming weeks. Today I will again look to sell the Dollar on any rally higher to 97.05/97.45 with a 97.80 stop.
December DAX
My DAX plan also worked well with the market trading lower to my 11320 buy level before rallying to my 11350 T/P level and I am now flat. The DAX is struggling to break hold the 11500/11600 resistance area with the now strong Euro another obstacle. Today I will again look to buy the market on any dip lower to 11250/11320 with a 11175 tight stop.
December FTSE
After the FTSE traded lower to my 6990 buy level I had covered this position too early at 7000 as I continue with my theme of banking points when available and I am still flat. Subsequently the FTSE rallied into the close with the Cash FTSE opening higher this morning. With the pound so weak it is difficult to be short the FTSE. Today my buy level will be form 6980/7025 with a 6945 stop.
Dow Rolling Contract
The two-way volatility in the Dow is incredible with the market moving above and below its 200 Day Moving Average at a frightening pace. Yesterday after the Dow hit my 24900 buy level the market quickly rallied to my 24980 T/P level before subsequently falling nearly 200 points. After trading to a low of 24787 the market turned on a dime rallying to an intra-day high above 25350 before closing at 25289 which is now well above its 200 Day MA which comes in at 25094 this morning. If the Dow can build and close above its 200 Day MA this evening then we may well see a test of the 50 Day MA at 25813 over the coming days. Given how strong the seasonals are I would not rule out a test of this key resistance level. Today I will be a buyer on any dip lower to 24950/25120 with a 24860 stop.
December NASDAQ
I am still flat the market which just missed my 6925 sell level before having a small sell-off into the close. Frustratingly the NASDAQ also missed my 6710 buy level with a 6712 low print before rallying over 200 points. Today I will now raise my buy level slightly to 6710/6760 with a 6665 stop. Ahead of the weekend I no longer want to be a seller of the market at this time.
December BUND
After the Bund traded higher to my 160.85 sell level the market had a small sell-off to 160.50 before spending the rest of the session trading sideways to higher. I covered my short position at my revised 160.69 T/P level and I am now flat. Today I will again look to sell the Bund on any rally higher to 161.10/161.50 with a 161.85 stop.
Gold Rolling Contract
I am still flat Gold and today I will now raise my buy level to 1199/1209 with a 1190 stop.
Silver Rolling Contract
Late in the New York session Silver rallied to my 14.35 T/P level on my latest 14.20 long position. Finally we are seeing some upward price action for this depressed market with a strong possibility that this week’s 13.87 low will be a tradeable low that lasts for more than a few days. This morning I have bought Silver again here at 14.30 with a 13.80 stop and a 14.60 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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