In his 2007 best seller “The Black Swan” Nassim Taleb uses the life of a thanksgiving turkey as an analogy for explaining a black swan occurrence i.e. a tail event that is so remote that is completely unforeseen. When a thanksgiving Turkey is born it is fed and taken care of by a seemingly nice human being. The daily occurrence convinces the turkey that the human has essentially been put on earth to look after all its needs. That expectation comes true every day until Wednesday before Thanksgiving, on that day the turkey experiences a ‘revision of belief’. As such the big take way form the analogy is that we shouldn’t be turkeys and expect good times will last forever and at the same time forecasting the future based on previous experience is a dangerous game.
To mark my 1200th issue of Tradernoble 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 121 points yesterday and is now ahead by 1562 points for November having made 1582 points in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Well thankfully expectations of a quiet thanksgiving session became true once again. European equities have managed to eke out small gains, the USD is little changed and with the US market shut for Thanksgiving, European Bond’s have traded in a narrow range.
Looking at currencies in more detail, the USD has lost a little bit of ground against all majors barring the Japanese Yen. At the same time, however, the USD has continued to make some inroads against EM currencies with the Turkish Lira the big underperformer yesterday, down 1.45%. In an effort to protect the Lira, Turkey’s Central Bank unexpectedly raised its benchmark rate to 8% from 7.50%. The Turkish Lira jumped on the news, but the move was quickly reversed with the market sending a clear message that more will need to be done by policy makers if they wish to contain the slide in the currency.
There is a growing concern on EM economies ability to withstand a stronger USD and a rise in US rates. Many of these EM countries have USD-denominated debt, so the stronger USD increases their country’s debt burden and this developing theme needs to be watched carefully for any contagion effect onto other markets. The AUD is back trading above 74c at 0.7450 after trading to a low of 0.7365 yesterday. Support for the currency appears to have been driven by another solid day for commodities. Iron ore gained 1.4% to $76.9, steaming coal was up 2.6% and copper, a bellwether for the global economy, rose 2.2%. Meanwhile oil prices are little changed and gold is down 0.5% at $1183.6
In other news Bloomberg reported that the ECB is considering postponing its decision on the future of its Bond buying programme until early next year. Rising Bond Yields have eased scarcity concerns and there is no longer a sense of urgency to begin “QE tapering”. Market sensitivity to tapering is very high with the US experience a good example of the challenge the ECB faces as and when it decides to end its QE programme.
Yesterday the ECB also published its six-monthly Financial Stability report and it was a sobering read. The report noted that there is an increasing risk of an abrupt global market correction intensified by an increase in political uncertainty. The report also concludes that more market volatility was likely and “vulnerabilities remain significant for euro-area banks”.
As for data releases, Germany’s IFO survey printed in line with expectations and it suggests Germany’s economy should accelerate in Q4.
This morning on the economic front we have UK GDP, Index of Services and Total Business Investment at 9.30 am, followed by UK CBI Retailing Reported Sales. At 1.30 pm we have US Trade Balance and Wholesale Inventories. Finally at 2.45 pm we have the US Markit Services/Composite PMI.
Remember the US markets are only open for a half day today with the Cash Stock markets closing at 6.00 pm and the Futures market 15 minutes later at 6.15 pm.
December S&P 500
It will probably be next week before we see the market start to come under pressure after the enormous rally from the 2028 low print post the US election I am still flat the S&P which just missed my 2195 buy level with a 2197.50 low print.. Today I will raise my buy level to 2193/2198 with a tight 2188 stop. Given the strong seasonality this week I still do not want to be short the S&P at this time.
EUR/USD
Unfortunately the Euro missed my buy level before rallying strongly as indicated by the low DSI readings over the past few days. Today I will raise my buy level to 1.0530/1.0570 with a 1.0495 stop. Remember as long as the Euro can stay over the March 23, 2015 low at 1.0462 then we still have a large negative divergence versus the US Dollar Index which is trading well above it 100.65 low print from the same day.
December Dollar Index
Having watched the Dollar trade to a 102.16 high print after I posted yesterday I was happy to cover my short 101.80 position at my 101.50 T/P level and I am now flat. Today I will again look to sell the Dollar on any further rally to 101.75/102.05 with a 102.50 stop. I will also look to buy the Dollar on any dip lower to 100.30/100.65 with a 99.95 tight stop.
December DAX
I am still flat the DAX and today I will leave my buy level unchanged at 10540/10595 with a 10495 same stop. I still do not want to be short the DAX at this time.
December FTSE
I am still flat the FTSE and today I will raise my buy level slightly to 6740/6780 with a 6710 stop. Given the seasonality and the fact that month end is next Wednesday I still do not want to be short the market at this time.
Dow Rolling Contract
I am still flat the Dow which continues as expected to rally and squeeze higher as one short position after another gets stopped. The Dow is now overbought and due a correct and today I will again look to sell the Dow on any rally higher to 19200/19270 with a wider 19340 stop. Given how overbought the Dow is trading I do not want to be long the market at this time.
December BUND
My Bund plan also worked well yesterday with the market trading lower to my 160.90 buy level before having a nice rally to 161.35. This rally enabled me to cover this position at my revised 161.06 T/P level and I am now flat. The Bund had plenty of two way volatility yesterday. Today I will again look to buy the BUND on any dip lower to 160.65/160.95 with a 160.25 stop which is just below last Tuesday’s low print.
Gold Rolling Contract
My Gold plan worked well with the market trading to a 1170.60 low print overnight which enabled me to buy the market at my 1173 buy level. Gold has rallied $20 off its low and this rally has enabled me to cover my long position too early at 1180.50 and I am now flat. So far Gold has bottomed at the 1170/1175 support level as mentioned yesterday and the big question now is given the very low DSI reading has Gold now put in a tradeable bottom?. I believe it has and today I will look to buy Gold again on any dip lower to 1172/1181 with a 1165 stop.
Silver Rolling Contract
Silver just missed my 16.10 buy level with a 16.14 low print overnight. The fact that we had a good trading day yesterday on top of a good month I have now bought Silver here again at 16.38 with a 15.90 stop.
Following the success of the NFP Live Trading Day and Education Session in London on September 2, Paul Wallace and I are bringing this event to Dublin for the December NFP day on Friday December 2nd. If anyone is interested in attending this event the details are on the following link:
https://www.eventbrite.com/e/live-nfp-trading-day-dublin-tickets-28159689389
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