Late in the New York trading session, President Trump has announced that Jerome Powell will be the next Chair of the Fed, as has been widely flagged in recent days. So no surprises there. He is seen as very much the continuity candidate, he has not dissented in his time as a FRB Governor, his thinking seen as very much allied to the status quo data driven style at the Fed. The US dollar has been “sharply unchanged” as they say with a similar non-reaction in Treasuries which have had a bid tone despite House Republicans releasing their tax plan.
To mark my 1450th 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. This offer is open to both new and existing members and 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 18 points yesterday and is now ahead by 26 points for November, having made 657 points in October, 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
The Tax plan contains a compression of scales and cuts to personal income tax rates but not to the top over $1m rate from 39.6%, a point that will irk some Republicans seeking across-the-board cuts. The plan sees the company tax rate cut from 35% to 20% while businesses can immediately expense the cost of new investments. There is a new limit on mortgage interest deductions from $1m to 500K that has US realtors up in arms.
For the USD, there seems to be a bitter pill from the changes to offshore profits/repatriation taxation. Multinational companies’ accumulated offshore earnings would be taxed at up to 12%, a rate that is still shy of the proposed 20% corporate tax rate, and one that is spread over 8 years. Not enough you would expect for US Dollar bulls to get excited and see these measures as a strong enough incentive to spark a flight of such capital back to the US into US Dollars for those profits still in other currencies.
Reaction to all this news: again, virtually zero also. The USD has been languid after fading yesterday on further leaks yesterday that Powell was going to get the nod and ahead of the expected House tax plan. The S&P 500 is flat for the session, though financials outperformed.
What partial residual resilience there has been in the Dollar indexes has only been because Sterling has been slammed after the Bank of England hiked rates by 25 bps, the first hike for decade. It was very much another in the manner of the dovish taper from the ECB and the Bank of Canada stepping back after two hikes. Sterling is off a tidy 1.77% from levels yesterday afternoon, losing the best part of 2½ big figures in the process. The FTSE rallied, up 0.9% amid soggy European markets as did UK Gilts. The 2 year gilt dropped 7.6 bps while the 10 year was down 8.3 bps.
The takeaway line from the BoE was that “any further hikes (are) to be at a gradual pace and limited extent”. The BoE anticipates another two hikes, but over the next three years to keep inflation in check. Adding another sour taste for the market were observations from BoE Governor Carney lamenting low UK productivity and that despite declining real wages, unit labour costs are on the rise.
This morning on the Economic Front we have UK Services/Composite PMI at 9.30 am. This is followed at 12.30 pm by US Non-Farm Payrolls and the Unemployment Rate. The market is expecting an over 300K bounce after the Hurricane-affected -33k September decline, confirming again the solid US economic activity story if there was any doubt. The potential sweetener for the USD would be if there is another good print on average hourly earnings after last month’s chunky 0.5%/2.9% rise. The market is looking for 0.2%/2.7%, back to a less inflation-threatening level. There’s a pretty wide range of estimates from -0.1% to a high of 0.3%, the distribution thus skewed somewhat to the lower side. Also at 12.30 pm we have the US Trade Balance and this is followed at 2.00 pm by ISM Non- Manufacturing and Factory Orders. Finally we have US Services/Composite PMI at 2.45 pm.
December S&P 500
Thankfully by the time you woke yesterday morning the S&P was trading at 2570 which gave everyone who bought the market at my 2563 level late on Wednesday night a nice profit. However after that it was an extremely frustrating session with the S&P finally selling off to a 2562.25 low print which just missed my 2562 buy level by a hair before rallying strongly into the close. At least we had no sell levels as you just can’t be short this market for any length of time until we finally see a sell extreme that sticks. Every single indicator that I watch is screaming to sell the market but we must be patient as this strategy has avoided us getting into trouble so far. With the NFP at 12.30 pm I am going to stay flat and if the market sells off I will again look to buy the S&P from 2563/2569 with a 2558 stop. I still do not want to be short the S&P at this time.
EUR/USD
As I mentioned over the past couple of days all the research that hits my desk is bearish the Euro. This makes no sense to me given the strength of the Economic data coming out of Europe while the Fed for the moment is on hold. With Fed Chair Yellen only having two more meetings before handing over to Powell, I cannot see her taking any chances unless we get a block buster of a NFP release today and again next month. Unfortunately the Euro also just missed my 1.1595 buy level before rallying to a rebound high at 1.1687. I am bearish the Dollar but ahead of the NFP I will leave my buy level unchanged from 1.1555/1.1590 with a 1.1525 tight stop.
December Dollar Index
With sentiment at extreme bullish levels towards the US Dollar I will leave my sell level unchanged from 94.95/95.25 with the same 95.60 stop. I still do not want to be long the Dollar at this time.
December DAX
I am still flat the DAX which consolidated Wednesday’s huge gains by trading sideways yesterday. Today I will now raise my buy level slightly to 13270/13330 with a 13230 stop. The next target level on the upside is 13595/13625 ahead of strong resistance at 13780/13825.
December FTSE
Despite the first rate hike in the UK for 10 years the fact that the forward guidance for future hikes was weak saw a massive near 2% fall in Sterling which helped propel to the FTSE to near all-time highs after four weeks of erratic trading. I am still flat and today I will now raise my buy level to 7455/7490 with a 7420 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Frustratingly the Dow just missed my 23320 buy level with a 23345 low print before rallying nearly 200 points. Again just like the S&P above I will stay flat until we get the NFP data release later and if the market sells off after the release I will now be a buyer from 23360/23425 with a 23310 tight stop. I still do not want to be short the Dow at this time.
December NASDAQ
Just before the Chicago Futures market closed, better results from Apple saw the NASDAQ trade higher to my 6260 sell level. As I wanted to be flat ahead of the NFP at 12.30 pm I emailed my Platinum Members to exit and short position at the re-open of the Futures market at 6250 and I am now flat. The NASDAQ has strong resistance from 6280/6330 and today I will be a small seller on any further rally to 6295/6335 with a 6370 stop. I still do not want to be long the NASDAQ at this time.
December BUND
No change as I am still a buyer on any dip lower to 161.75/162.15 with the same 161.45 stop.
Gold Rolling Contract
Gold continues to trade sideways and I am still flat. As I am long Silver I am reluctant to chase this market higher and today I will leave my buy level unchanged from 1260/1267 with a 1253 stop.
Silver Rolling Contract
Silver hit my buy level at 17.10 before rallying to a rebound high at 17.27. I used this rally to exit my position at my revised 17.18 T/P level before using a subsequent sell-off to re-buy the market at 17.10. I am still long and will now look to exit on any rally higher to 17.25. If this happens I will be back with anew buy range for my Platinum Members.
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