Yesterday all was not well in the Trumpsphere, with the Mexican Peso giving back about half of Wednesday’s strong rally. This was after Mexican Enrique Pena Nieto cancelled – via Twitter – a planned meeting with the U.S. President. It followed the U.S. President blasting him in a tweet late Wednesday evening for saying Mexico would refuse to pay for the boarder wall, the building of which Trump signed into motion earlier this week. The bigger global development has been the continued rise in US Bond Yields. 10 year Treasuries, having traded below 2.40% on Wednesday, pushed briefly above 2. 55% yesterday afternoon before easing back to 2.51% as I write this commentary. The pull-back is seen linked to a well-received 7-year U.S. Note auction as well as some (mild) NY early afternoon slippage in U.S. stocks.
To mark my 1250th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 64 points yesterday and is now ahead by 1552 points for January having made 1351 points in December, 1971 in November and 1582 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.
The rise in U.S. yields has helped lift the U.S. Dollar, with Bloomberg’s BBDXY index up about 0.5% since Thursday’s London market open. The Japanese Yen has – true to form – fared worse in a rising US yield environment. The NZ dollar has given back all of its knee-jerk gains that followed slightly higher than expected CPI figures, to be down 0.63% and the second worse performing G10 currency of the past 24 hours. The AUD/USD rate sits mid-pack, down 0.35% to 0.7546, so still beneath Wednesday’s pre-CPI levels but off Wednesday’s intra-lows.
More broadly, I note that while US Treasuries are now trading at their highest yield levels of the year, the US Dollar is still some 1.5% off its start-of-year levels in Index terms. Key here looks to be the fact while US yields have risen, outside of Japan yields elsewhere have risen by even more. For example, the 10-year US-German benchmark yield spread has compressed by over 20bps.
The US data flow for yesterday has been mixed. Markit’s service sector PMI rose to 55.1 from 53.9 (not widely watched) while New Home Sales fell a sharp 10.4% but for what is a very volatile number. Weekly Jobless Claims rose to 259k from 237k but seasonal adjustment issues are more likely behind the rise than any change in trend. The December Trade Deficit printed at -$65.0bn much as expected while Wholesale Inventories rose by a bigger than expected 1.0%.
The net effect of these latter two numbers has been to see the Atlanta Fed lift its Q4 ‘GDPNow’ estimate to 2.9% from 2.8% .
Finally, in the UK Q4 GDP was revised up to 0.6% from 0.5%, while the UK Government has issued its Brexit Bill – all 137 words of it. This says no more than that the PM may (not will) notify the EU of its intention to withdraw and that this authority will override anything in the European Communities Act of 1972 (which heralded the UK’s original EU membership). Sterling has hardly moved.
We have no economic data of note due from either the Euro-Zone or UK this morning. At 1.30 pm we have US GDP and Durable Goods Orders. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
March S&P 500
After Wednesday’s explosive rally to new highs the S&P took a breather yesterday as the market traded in just a nine Handle range. Unfortunately the S&P missed my 2288 buy level with a 2289.25 low print before rallying into the close and I am still flat. We still have a valid Hindenburg Omen on the clock which is valid until April, so there is still a chance of at least a 5% sell-off coming over the coming weeks. As I have said the election of Trump as President has probably postponed a recession for at least 9/15 months as we are already nine years into this economic recovery which is one of the longest in history. Worrying the VIX has closed at it third lowest level in two decades, and each time that occurred, stocks fell sharply within six months. The S&P is severely overbought after its near 280 handle rally off the lows from the morning on November 9 and this move is not sustainable. However until we get a sell extreme that lasts for more than a few days it is very difficult to put on a short position for more than a few hours. The S&P still has an ”Open Gap” from Tuesday’s close at 2277 to Wednesday’s Chicago afternoon low at 2284 and today I will lower my buy level slightly to 2277/2283 with a 2272 stop. My only interest in selling the S&P is still on a rally higher to 2304/2310 with the same 2315 stop.
EUR/USD
The Euro has turned bearish over the past 24 hours especially with the market breaking and closing below 1.0710 which had previously held the Euro for the past few trading sessions. After the Euro traded lower to my 1.0690 initial buy level the market rallied to 1.0710 and this rally enabled me to cover this position at my revised 1.0705 T/P level as emailed to my Platinum Members. For those members who waited to buy the Euro, the market subsequently traded lower to the bottom of my buy range at 1.0657 before again rallying to an evening high at 1.0705. Yet again this move lower was signaled by the Daily Bollinger Band and Williams Index resulting in a Double Top at 1.0774. Today I will move my sell level lower to 1.0740/1.0775 with a 1.0810 stop. The next support level for the Euro is at 1.0610 and today I will again be a buyer on any dip lower to 1.0580/1.0615 with a 1.0540 stop.
March Dollar Index
Unfortunately the Dollar just missed my 99.80 buy level with a 99.92 low print after I posted yesterday morning before the Dollar rallied as expected given its oversold condition after its 400 point move lower since the high on January 3, 2017. The Dollar was due a rally but for the market to regain its bullish stance we need to break the 102.45 level which is the high off the Downside Key Day Reversal two weeks ago. Today I will move my buy level higher to 99.90/100.30 with a 99.55 tight stop. I still do not want to be short the Dollar at this time.
March DAX
The DAX has again closed over the key 11810 level which is the high from July 2015. Given the fact that the Euro is trading lower I would have expected the DAX to be trading at a higher level. However the market is extremely overbought and has a measured target level at 12040 on this move. Today I will leave my sell level unchanged at 12020/12075 with the same 12120 tight stop. For my buy level I will lower this range slightly to 11750/11800 with a 11695 stop, but only in small size especially given its overbought condition.
March FTSE
No change as I am still a buyer on any dip lower to 7030/7070 with the same 6995 stop. The market came close overnight to my buy level before rallying again. You really have to keep an eye on Cable (USD.GBP) as this currency pair is really affecting the movement in the FTSE since ”Brexit”. The fact that Sterling is also severely overbought and due a correction I do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow also just missed my 20020 buy level after I posted yesterday morning and I am still flat. Today I will move my buy level slightly higher to 19980/20045 with a 19925 tight stop. Again one worry for the Dow is the fact that the McClellan Oscillator which measures the internals of the market closed with a positive reading of just 47 which is worrying when you see all US Indices close to all-time highs.
March BUND
The Bund sold off to a low at 161.30 after I posted yesterday morning before rallying twice to an afternoon high at 161.88. Unfortunately the Bund missed my second buy level at 161.20 and the subsequent rally enabled me to get out of jail on my original long 161.70 position at my revised 161.81 T/P level. Following this exit point I emailed my Platinum Members to re-buy the Bund again at 161.46 before covering this position for a small gain near the close at 161.59 and I am now flat. The Bund is oversold and due a rally and today I will again look to buy the market on any dip lower to 161.15/161.45 with a 160.88 tight stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 160.00/160.45 with a 159.70 stop.
Gold Rolling Contract
The rally in the US Dollar is hitting Gold with the market back at 1182 this morning having failed to break the key 1220 resistance level. I still believe that after Gold finds a bottom over the coming days that we will eventually take out this 1220 resistance level and trade higher to at least 1270. This scenario will stay in place unless we break and close below the December low at 1123. Yesterday after Gold hit my initial buy level at 1188 with a 1184.80 low the market rallied back to 1192 where we traded for a few hours. As I was long Silver I was not comfortable in adding to my exposure so I emailed my Platinum Members to exit this position at 1190.50 and I am now flat. Today my only interest in buying Gold is on a dip lower to 1167/1175 with a 1161 tight stop.
Silver Rolling Contract
I am still long Silver at an average rate at 16.98. Much to my annoyance Silver is following Gold lower and I am disappointed that there has not been more follow through to the upside especially given the promises from Trump to spend a $1bn on infrastructure over the coming months. This should have been more of a positive for Silver but I have to respect the price action. As we are having a profitable January I am going to lower my stop to 16.48 on this position while at the same time lowering my T/P level to 17.00 and go to the sidelines for now.
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