The Bee Gees 1979 classic “Too Much Heaven” pretty much sums up yesterday’s news, with UK GDP printing much better than expected at 0.5% Q/Q against expectations of a 0.3% print. The better than expected UK GDP figures, along with a very strong Retail Trade Survey and Nissan committing to build two new car models at its UK factory, helped put the kybosh on any thoughts of further Bank of England easing, with UK Gilt Yields up 10 basis points to 1.25%. At first glance it seems the UK has shrugged off the Brexit cloud, but, the devil is in the detail with the GDP figures showing an unbalanced economy with declines in Industrial Production and Construction – both likely to be further affected by the initialisation of a formal Brexit.
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 they can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 55 points yesterday and is now ahead by 1366 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 this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
The rise in Gilt Yields bled through to other markets, and combined with the underlying theme of Central Banks being less enamoured with ultra-low rates in the background, saw German Bunds up 8.5 bps to 0.18%. US Treasuries also ended the day up by 5.2 bps to 1.84% with a higher oil price also helping.
The oil price rose by around 1% yesterday with the WTI measure at $49.66 a barrel with reports that OPEC and Saudi Arabia are willing to cut 4% from their recent peak production levels. The next formal OPEC meeting is on November 30 where it is expected OPEC members will formally agree to a production freeze. The recent moves in the oil price have helped lift market measures of inflation expectations and in turn have also helped drive nominal Bond Yields. As for other commodities, Australia’s two key exports – coal and iron ore – both continue to move higher with Thermal Coal up 0.6% to US$94.1 a tonne, Coking Coal up 0.2% to US$237 a tonne and while Iron Ore was unchanged overnight it is currently sitting at US$63 a tonne. That should see Australia’s terms of trade continuing to pip higher in the following quarters.
As for other data yesterday, US Jobless Claims remain at low levels (printing at 258k) and is suggestive of a solid labour market and an OK payrolls print next week. US Durable Goods orders were mixed, with the headline around expectations, but the core non-defence ex-aircraft capital equipment orders falling 1.2%.
In the FX space, despite the UK’s more positive data the Pound fell 0.6%. Some of that fall reflects the broad US Dollar rally, with Bloomberg’s US dollar index up 0.3%. Amongst the currencies, the Norwegian Krone was the outperformer, up 0.1% – likely helped by the higher oil price. Amongst the bottom of the G10 currency board were the Aussie and the Swedish Krona. For the Aussie, there does not seem to be a firm catalyst with Aussie falling consistently since reaching its 0.77 resistance level following Wednesday’s CPI; yesterday it was down 0.8% to US$0.7582.
The Swedish Krone fell by a hefty 1.8% following a dovish Central Bank Statement where the Riksbank said its policy rate needs to “be held at -0.5% for six months longer than was forecast in September. The probability that the rate will be cut further has increased” and goes against the recent themes of Central Banks having less appetite for ultra-low rates.
This morning on the economic front we have Euro-Zone Business Climate Indicator at 9.30 am. This is followed at 10.00 am by German CPI. Next we have US Employment Cost Index and GDP at 1.30 pm. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
Please note with European Clocks moving back one hour on Sunday morning all US Economic data releases and opening/closing of markets will all be one hour earlier as the US does not change their time until next weekend.
December S&P 500
The S&P which initially missed my 2126 buy level with a 2126.50 low print before having a nice rally, subsequently got hit hard in the last 30 minutes of trading with the market hitting my 2124 buy level with a 2122.50 low print right on the close. As I diD not like the fact that the S&P closed below both the 2134 and 2130 pivot points I emailed my Platinum Members late to exit this long position at 2128 and I am now flat. The fact the McClellan Oscillator has now closed negative for the third consecutive trading session has added to my nervous feel. For this reason I will now look to sell the S&P on any rally higher to 2136/2141 with a 2146 stop which is just above yesterday afternoon’s high print. My only interest in buying the S&P is on a dip lower to 2108/2114 with a 2101 stop. Remember a break and close below 2114 and especially the October low at 2107.50 will see this market finally accelerate to the downside.
EUR/USD
No change as I am still a buyer on any dip lower to 1.0830/1.0870 with a 1.0795 stop. I still do not want to be short the Euro at this time.
December Dollar Index
Late in yesterday’s session the Dollar hit my 99.00 sell level before having a small sell-off. Given the carnage in the Bond markets I emailed my Platinum Members to exit this position for a small gain at 98.85 and I am now flat. Today I will again look to sell the Dollar on any rally higher to 99.20/99.50 with a 99.85 stop.
December DAX
Shortly after the European Markets opened the DAX sold off to a 10638 low print just missing my 10625 buy level before having a huge 140 point rally and as a result I am still flat. Today I will lower my buy level slightly as I do not like the price action in the US Market to 10540/10590 with a 10490 stop.
December FTSE
Just like the DAX above the FTSE also missed my buy level by a few points before surging in the UK GDP data release and I am still flat. Today I will raise my buy level to 6895/6935 with a 6865 stop which is just below yesterday morning’s low print. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow also missed my 18135 buy level with a 18147 low print before also rallying strongly and I am still flat. Today I will lower my buy level to 18010/18070 with a 17950 stop. A break and close below 17950 will see this market accelerate to the downside. However despite all this negative price action I still do not want to be short the Dow, preferring instead to sell the S&P as mentioned above.
December BUND
Thankfully we exited our long Bund position at 8.30 pm on Wednesday at 163.15 and had no buy levels yesterday with the Bund hitting a 161.72 low print. For any member who did not exit this long position on Wednesday, thankfully the Bund held in until we got the UK GDP release at 9.30 am yesterday morning. The Bund which was trading at a 0.0% yield last Monday closed last night at 0.18%. This is a huge move and will see Hedge Funds and Pension Funds looking to exit their now off-side positions. The next big support for the Bund comes in at 160.50/160.90 and today I will be a buyer in this area with a 160.15 stop. The fact that the Bund took out the double bottom at 162/60/162.80 means the market should now encounter strong resistance in this area. For this reason I will now lower my sell level to 162.70/163.10 with a 163.45 tight stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1249/1257 with the same 1241 stop which is just below the 1242 low print from three weeks ago.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 17.20/17.50 with the same 16.85 stop.
Please note that as Monday is a Bank Holiday in Ireland there will be no Daily Commentary. For my Platinum Members there will be updates if the market hits any of my buy/sell levels over this time frame. My next Daily Commentary will be on Tuesday November 1.
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