It was another sea of red, the US main board indexes down in size again, led by the FAANG stocks though the market had tried to rally at 8.30 pm before selling off into the close on the worries over a US Government shutdown. The Eurostoxx600 Index declined by 1.45%, led by banks. A delayed reaction to the Fed? A little perhaps, as the 2-year Treasury yield has pushed up on net by perhaps 1-2bps since before Wednesday’s FOMC announcement. (The Treasury curve has flattened with longer term yields lower on net since the FOMC.) A marked negative stock reaction to the FOMC would normally have been associated with an even higher dollar (maybe it has hit a wall), but the USD has lost some grip and is down pretty much across the board over the past 24 hours. US energy stocks are also under-performing after yet another sizeable decline in oil prices. Congress and the Administration remain in a stand-off over funding for the Wall, Congress not giving the President money for that funding, unhelpful for market sentiment.
To mark my 1725th 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 50 points yesterday and is now ahead by 2455 points for December, having made 1541 points in November, 2094 points in October, 1279 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
The USD has been on the back foot in yesterday’s session, losing ground across the board. The DXY is down 0.66%, a bigger beneficiary among the majors being the yen. It has been nothing to do with yesterday’s Bank of Japan meeting when Governor Kuroda said that the BoJ has more tools for adding stimulus if needed, adding that it is no problem if government bond yields fall into negative territory, so long as the move reflects economic fundamentals and yields remain within the BOJ’s target range. 10 year JGBs yesterday closed at 0.027%, within sight of testing the tolerance of the BoJ’s drawn at a zero 10-year JGB rate target.
Emphasising the importance of yields, the Swedish Krona took top spot after the Riksbank told a bold step and lifted Interest Rates for the first time in seven years, from -0.50% to -0.25%. The Krona is up 1.43% in the past 24 hours. While most analysts expected rates to remain on hold, a sizeable proportion (10 of 24 in the Bloomberg survey) looked for a hike, so not a total surprise. Swedish stocks though fell 2%, a somewhat larger fall than European counterparts. On the other side of the ledger, the CAD has not made any ground against the soggy USD. Meanwhile the Euro close above the key 1.1425 resistance level at 1.1450.
Economics
The Banks of England met amidst extreme Brexit uncertainty (noted as having ‘’intensified considerably’’) and it was no surprise that it left rates on hold. Meanwhile the UK Society of Motor Manufacturers and Traders warned of the impacts of a crash out Brexit, not in months or days but in hours, warning of just-in-time major disruptions, tariffs, job losses and more. UK Retail Sales in November shot the lights out, up 1.2% against expectations of a 0.2% rise though the CBI Retailers survey for December slumped to -13 from +19, likely fearing the worst ahead.
In the US, the Philly Fed survey was somewhat softer than expected at 9.4, down from 12.9 and lower than the 15 expected. Jobless Claims remained low in the December payrolls survey week at 214K from 206K and the 215K consensus. The Leading Index in November rose was a little stronger than the flat result tipped, up 0.2% as real economy measures such as orders and building permits more than outpaced the drag from the stocks component.
Commodities
The main mover was again oil on the downside, WTI trading around $46 and Brent at around $54.50, oil off north of 4%. OPEC is disclosing further transparency around the country details of the 1.2mb promised supply cut. Base metals were off smalls, LME copper down 0.25%, gold higher, getting support from the softer USD.
Chinese iron ore and steel rebar prices were higher yesterday as the PBoC announced measures to support lending to micro and private businesses through a dedicated lower-rate bank lending facility.
Bonds
European bond markets were generally stronger, though Treasury yields are somewhat higher, 2s up 2.3bps while 10s are up 3.74bos to 2.79% as stocks attempted a late comeback.
This morning on the Economic Front we already had the release of the German GFK Consumer Confidence which came in at 10.4 versus 10.3 expected. At 9.30 am we have UK GDP and this is followed at 1.30 pm by US Durable Goods Orders and the PCE Deflators. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
March S&P 500
Yesterday was a frustrating trading session as I had the correct view with my buy range in the S&P but I got stopped out of my average 2468 long position near the low of the day at 2449 before the market turned around and rallied off the 2443 low to a high of 2490 before a late sell-off into the close. I may have to change my stops to only come in to effect at the Chicago close of 9.00 pm. The oversold conditions that I have been looking for in the market finally kicked in last night with the McClellan Oscillator closing below -250 with a -267 print. Meanwhile new NYSE 52 Week lows were an extraordinary high 1272. Today is the expiry for the December Futures and Options Contracts which will add to the volatility. Finally we are still in the seasonally strongest part of the year and I still would not rule out a strong rally based on this scenario. Today I will again look to buy the S&P on any further dip lower to 2452/2472 with a 2438 stop which is just below yesterday’s low print. If the S&P can build value above 2500 then there is every chance we will rally back to the now key 2600 resistance area. Remember the Daily Sentiment Index closed last night with a 6% print thus adding to my bullish case at these prices.
EUR/USD
The Euro built value above my 1.1425 resistance level. After lunch I emailed my Platinum Members to buy the Euro on any dip to 1.1415 which was filled before the market rallied to my 1.1450 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1380/1.1420 with a 1.1345 stop.
March Dollar Index
The Dollar continued to sell-off after I posted yesterday morning as the FX traders finally realise that the US Economy is slowing and that the end of the rate hiking cycle is close by. I am still flat the Dollar and I will ow lower my sell level to 96.40/96.80 with a 97.20 stop.
March DAX
My DAX plan worked well with the market trading lower to my 10520 buy level before rallying to my revised 10560 T/P level and I am now flat. The stronger Euro is hindering the DAX at this time but given how oversold the market is trading after the previous 10 week sell-off I will again look to buy the market on any dip lower to 10420/10490 with a 10360 stop. If the DAX does hit my buy level please be careful with holding a position over the weekend as the DAX Market on Eurex is closed next Monday for the Christmas holiday.
March FTSE
Unfortunately the FTSE just missed my 6555 buy level by a few points before rallying as Sterling again came under pressure. As I mentioned yesterday with the FTSE Dividend at a 30 year high of 4.5% the FTSE will garnish added support from this development. Today I will now raise my buy level to 6555/6595 with a higher 6525 stop.
Dow Rolling Contract
My Dow plan worked well with the Dow trading lower to my 23060 buy level before rallying to my 23180 T/P level and I am still flat. Subsequently the Dow broke above 23200 before falling 550 points before rallying overnight helped by the extreme oversold condition of the market as mentioned in my S&P commentary above. The Dow has now fallen nearly 3500 points since its 26080 rebound high from December 3. Today I will again look to buy the market on any dip lower to 22700/22920 with a wider 22550 stop.
March NASDAQ
No change as I am still an aggressive buyer on any dip lower to 6060/6130 with the same 5990 stop. Yesterday the low for the NASDAQ was just above my buy level at 6170. I will still look to sell the market on any rally higher to 6500/6560 with the same 6605 stop.
March BUND
My 163.95 sell level in the Bund worked well with the market selling off to my 163.65 T/P level after I posted and I am now flat. With the Bund closed on Monday for the Christmas holiday I am going to stay flat the Bund until the new year as I do not want to get caught with a position over the Christmas period.
Gold Rolling Contract
Gold is slowing creeping higher as expected as yet again it looks like the precious metal have put in a tradeable low for the fourth consecutive December. The weakness in the Dollar is certainly helping. I am still flat Gold and today I will now raise my buy level to 1235/1243 with a 1228 stop.
Silver Rolling Contract
Shortly after I posted yesterday morning Silver rallied to my 14.75 T/P level on my latest 14.60 long position and I am still flat. However Silver has to break its strong 14.80/15.10 resistance level for it to catch up with the movement in Gold over the last few months. Today I will now raise my buy level to 14.40/14.70 with a 14.10 stop. If I am taken long I will have a T/P level at 15.05.
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