The ECB meeting came and went with absolutely no change in Monetary Policy, as expected, but also with a whippy Euro, flicked around as ECB President Mario Draghi responded to questions at the press conference on whether the Council discussed extending QE beyond next March and, did they discuss tapering. A firm “NO” on both was the response from the President. Due to the recent media stories that reported the ECB Governing Council had reached a consensus on tapering QE after the current programme ends in March 2017, markets/ journalists (unrealistically) wanted specifics yesterday. That made for a messy and sometimes confusing ECB press conference.
To mark my 1200th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested, please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 110 points yesterday and is now ahead by 1030 points for October having made 1142 points in September. The previous three months saw gains of 1782, 1682 and 2550 points respectively. Since I started my Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Predictably one of the first questions was about QE extension and Draghi gave a straight “No” (period) to whether the Governing Council had discussed extending it. In subsequent and persistent questioning on the subject an increasingly irritated Draghi pushed back further, saying there was no discussion on tapering and even, “we haven’t really discussed the agenda for the December meeting.” He then said our decisions in December will tell you what we are going to do in coming months, but added, “an abrupt ending to bond purchases is unlikely.”
Draghi’s initial pushback on QE extension discussions and a quip that QE could not last forever were taken as hawkish. EUR/USD popped from 1.0960 to 1.1040, while Bond Yields followed before dropping back and then to lower levels as headlines such as the Governing Council did ’briefly’ touch on negative rates appeared. Dropping to 1.0916 – level with June and March lows, with the Bund yield slumping to zero from a session high of +0.07%. Markets took the combination of the comments of ‘no abrupt end to QE’ and a ‘brief’ discussion of negative rates as an indication the ECB will be extending QE come next March at the same unchanged (EUR80bn) per month levels. EUR/USD is trading at 1.0928 early this morning, while the German Bund Yield is 0.003%.
UK retail sales in September unveiled another month of flat sales on the High Street. The market was looking for growth of 0.2-0.3% and sales flat-lined again, this month from a 2.8% decline in clothing sales and prices up 5.2%. So Sterling has pushed up prices after all, it’s now apparent.
While sterling gave back some of its recent gains late yesterday, it’s the AUD that’s now a cent lower than before yesterday’s employment release, buying enthusiasm reversed for now anyway. Next week’s CPI will be another important signpost. The VIX was down 0.6 points to 13.81 yesterday, base metals were mostly lower, while the Australian bulk resource export prices are little changed, iron ore up 0.8%, met coal steady and steaming coal -0.1%. Also, oil was lower yesterday, WTI and Brent by over 3%, more than $1/bbl.
US data was unlikely to trouble the scorers too much and that’s how it’s panned out. Existing Home Sales were stronger in September (+3.2% after softness the previous two months), while Jobless Claims were higher at 260K (up from 247K), though likely affected by Hurricane Matthew claims. US Treasury yields were little changed (2s up 2.4 bps and 10s up 0.5) with the market pricing in a 73% chance of the Fed hiking in December, but there’s only 36 bps priced in total by the end of next year, including the upcoming December meeting, so not even one more for the whole of next year. The market has more than embraced the dovish tilt of US policy and factored in still low inflationary expectations.
This morning on the economic front we have UK Public Finances (PSNCR/PSNB) at 9.30 am. This is followed at 10.00 am by the latest ECB Survey of Professional Forecasters, and the Government Debt/GDP Ratio. Finally on a day when we have no scheduled US Economic data we have Euro-Zone Consumer Confidence at 3.oo pm.
However the Fed’s Tarullo and Williams are both speaking at 3.15 pm and 7.30 pm respectively.
December S&P 500
My S&P plan worked very well yesterday with the market hitting my 2131 buy level before having a nice 10 Handle Rally which enabled me to cover this position at my 2137 T/P level and I am now flat. You can see it on TV, the Bears are getting really frustrated as no matter what or how weak the economic data is the market just shrugs it off by saying the Fed will not or do not have the guts to hike rates at this time. This has been the ongoing theme since the only rate hike last December. Who says that after the Fed hike rates again this December that we will be still talking about the same issues next year minus the US Election. With the October Options Contract expiring at 9.00 pm it is another reason why not to short the market. Today I will again look to buy the S&P on any dip lower to 2123/21290 with a 2118 stop. I still do not want to be short the market at this time.
EUR/USD
My long 1.0962 Euro position worked this morning with the Euro trading at 1.0985 ahead of the Dragi press conference. I emailed my Platinum Members to exit their long position here and look to re-buy on a significant dip. The market obliged with a flustered Dragi not really knowing what to say. Subsequently the Euro hit a 1.1040 high print before trading to a 1.0916 low print which is just above the June 24 post Brexit low print at 1.0910. This drop lower saw me buy the market again at 1.0930. I am still long and I will leave my stop unchanged at 1.0880.
December Dollar Index
The Dollar traded higher to my 98.35 sell level. As I was already long both Silver and the Euro, I emailed my Platinum Members to exit this position at 98.20 and I am now flat. Today I will again look to sell the Dollar on any rally higher to 98.80/99.10 with a 99.45 stop. Remember the key level to watch for the Dollar is last December’s high at 100.50. A break and close over this level will be very constructive.
December DAX
The weaker Euro is helping the DAX to try and break higher. Thankfully we have not been short the DAX all month. I am also impressed that the DAX was able to close over the 10680 resistance level. If the market can again close over this level tomorrow then we could have a break higher to at least 11,000. Today I will move my buy level higher to 10570/10630 with a 10520 stop.
December FTSE
The FTSE again missed my buy level before trading higher and I am still flat. Today I will go ahead and raise my buy level to 6940/6970 with a 6910 stop. The continued weakness in Sterling prevents me for trying to sell the market.
Dow Rolling Contract
Unfortunately the Dow just missed my 18100 buy level with a 18126 low print before rallying over 100 points and I am still flat. Today even though I am bullish this market I will leave my buy level unchanged at 18030/18100 with the same 17950 wider stop.
December BUND
My Bund plan also worked well yesterday with the Bund trading lower to my 163.55 buy level. However and I make no apologies for this, when we have a major announcement or as in yesterday’s case the Dragi press conference I emailed my Platinum Members to exit this position at 163.67 before he spoke. Subsequently the Bund rallied over 164 before falling in a straight long to 163.26 before re-grouping after Dragi mentioned negative rates again. I am still flat the Bund and there is no doubt that since we bottomed last Monday at 162.81 that the price action is positive. Today I will again look to buy the Bund on any dip lower to 163.60/163.90 with a 163.20 stop which is just below yesterday afternoon’s spike low print.
Gold Rolling Contract
I am still flat Gold which traded in a narrow sideways pattern through yesterday’s trading session. Today I will lower my buy level slightly to 1250/1257 with a 1241 stop which is just below the October low at 1242.
Silver Rolling Contract
No change as I am still long at 17.85. Given the fact that we have had a good trading month plus the fact that I have this position on board too long I will now lower my exit point to 17.70.
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