The violent upwards reaction in all things Euro in response to a set of ECB decisions that underwhelmed expectations (and which President Draghi was himself responsible for creating) was compounded by the momentum established in the minutes leading up to the announcements by a Financial Times tweet – “ECB leaves rates unchanged in shock decision”. As the wags at Zero Hedge quickly tweeted, ‘Good start for the Nikkei Times” (this being day two under their new Japanese ownership). The ECB announced four things: 1. A 10bp cut to the Deposit rate to -0.3%. 2. An extension of the planned end-date of the QE programme from September 2016 until March 2017. 3. Agreement to reinvest the principal of bonds maturing on the ECB’s balance sheet. And 4. A broadening of the range of assets the ECB can buy under its Asset Purchase Programme (APP), to include regional and local government debt.

For anybody following my New Platinum Service it made 85 points yesterday and is now ahead by 277 points for December. The previous six months saw gains of 1510, 1600, 2195, 1810 and 3045 points respectively. If anybody is interested in my new Platinum Service, please email me on bryan@tradernoble.com for details.

The markets’ disappointment stemmed from the failure to announce an increase in the scale of monthly asset purchases beyond the current €60bn per month, and the fact that the consensus expectation on the Deposit rate was for a cut of more like 15bps than 10bps. According to several source reports, what the ECB announced was exactly what ECB chief economist Peter Praet and Mr. Draghi had proposed. Given the decision was not passed unanimously the strong suspicion is that if Praet and Draghi had proposed something more aggressive, they may have struggled to win comfortable majority support. Hence Mr Draghi has effectively now lost his ‘Super Mario’ moniker.

From pre-announcement (or pre FT-tweet) levels of around 1.0550, EUR/USD jumped to around 1.09 in the hour or so after the announcement and since risen to around 1.0950 before selling off overnight and is currently trading at 1.0890. The biggest gains for the Euro have been recorded versus the CAD and USD (both down more than 3%) followed by AUD and NZD (both down by just over 2.5%). Risk assets were especially disappointed by the apparent confiscation of Mr. Draghi’s ‘big bazooka’. Eurozone stock markets were mostly off by more than 3%. 10 year German Bund yields, meanwhile, jumped by almost 20bp to 0.664%.

Notwithstanding the knee-jerk response to the ECB’s action and the evident very stretched short EUR positioning running into it, if the Fed do not hike rates later this month then we will definitely see another rout in the US Dollar. In particular, the cut to the deposit rate will further enhance the Euro’s status as the pre-eminent funding currency, as well as encouraging Eurozone banks to buy more foreign currency assets rather than pay yet more to park deposits at the ECB.

As for the Fed, Yellen’s Congressional testimony a few hours after the shock announcement from Dragi was identical to the speech she gave on Wednesday. She did emphasise the restraining influence of Dollar strength, so the fact the Dollar has just shed over 2% immediately lessens this constraint. Hence US yields have risen by almost as much as their Eurozone counterparts.

Data wise, the yesterday’s highlight was the US Non Manufacturing ISM, which came in beneath expectations at 55.9 (down from 59.1 in October and 58.0 expected). The Employment sub-component fell, but not to the point where it seriously dents consensus expectations for a near 200k payroll print today.

In testimony, Yellen reminded us that 100k new jobs per month is now sufficient to keep pace with labour force growth (and hence keep the unemployment rate from rising, assuming unchanged participation).

This morning on the economic front we already had the release of German Factory Orders which came in a lot strong than the 1.2% expectation with a 1.8% print. At 8.30 am we have German Construction PMI. This is followed at 9.10 am by the release of Euro-Zone and German Retail PMI. Finally at 1.30 pm we have the Non- Farm Payrolls which are expected to show a 200K rise following last month’s much stronger 271K print. The NFP is surely the only data that now stands between the Fed and 17 December rates ‘lift (or rather crawl) off’. Consensus is for an unchanged 5.0% unemployment rate. Anything close to this set of outcomes will seal the deal for the Fed, this week’s fallback in the ISMs notwithstanding.

As well as US Payrolls, the speaker circuit is very full (including Mario Draghi hopping to New York hot from the ECB meeting to speak at 11:45 am NY time which is 4.45 pm our time. Hopefully this isn’t because he’s running away from some irate Bundesbankers). Bullard, Kocherlakota and new Philadelphia Fed president Patrik Harker are all due to speak. at a Philly Fed conference where the theme is the ‘new normal’.

December S&P 500

The S&P plan worked very well yesterday as shortly after the DAX got hammered on Dragi the S&P traded lower to my average buy level at 2075 before having a nice 12 Handle rally which enabled me to cover this position at my 2084 T/P level as outlined earlier to my Platinum Members and I am now flat. The S&P is on course for a Key Weekly Reversal which in itself is rare if we do not rally on the NFP data this afternoon. Yesterday the S&P stopped falling at the 2040 level which is its next major support and today I will be a small buyer on any dip lower to 2041/2047 with a 2035 stop. My only interest in selling the S&P is on a rally back to 2072/2078 with a 2084 stop.

EUR/USD

Now you know why I was so adamant in not selling the Euro as my fear was the Euro was due a massive rally given the near record number of short positions against the Euro. As I mentioned yesterday the Euro had large support at the 1.0490/1.0520 level and the market stopped with a 1.0523 low print before going on to have a near 500 point rally. If the NFP today prints weaker than expected then the Euro will continue to rally. Forecasting the Euro today is going to be extremely difficult as following the NFP data we then have Daragi speaking in New York and he cannot be happy with yesterday’s developments. This morning the Euro is still trading above its Bollinger Band coupled with the fact that the Euro has very strong resistance from 1.1020/1.1100 which I cannot see getting broken at this time. Today I will be a small seller on any further rally higher to 1.1005/1.1055 with a 1.1095 stop. My only interest in buying the Euro today is on a move lower to 1.0720/1.0770 with a 1.0680 stop. Yesterday’s move higher in the Euro was one of the largest Key Day Reversals that I have seen in a very long time and if the Euro stays at these levels this evening then we will have a substantial Key Week Reversal.

December Dollar Index

The Dollar did indeed briefly break its April high at 100.39 before getting slammed on Dragi. I am still flat the Dollar and today I will look to go short on any rally higher to 99.10/99.50 with a 99.80 stop. I still do not want to be long the Dollar at this time as we already have weakened by more than 23% over the past 18 months which in itself is enough to tell us that the Dollar rally is over/almost over.

December DAX

When I wrote my commentary and stated that the DAX had major resistance at the 11290/11340 area that the market would test this level and then fall nearly 700 points for what was an incredible trading session. I went short at 11310 and as I wanted to be flat ahead of Dragi I covered this position at my 11275 T/P level. I sincerely hope that most of you took more points than me. Subsequently when Dragi started his press conference the DAX fell 300 points in a few minutes thus bursting through both my buy level and stop without giving me a chance to go long thankfully and I am still flat. The DAX has major support at the 10600/10670 area as this is the level that we broke down in August which led to a follow through low at 9350 before finally breaking this level on the way back up which led to yesterday’s 11335 high print. Just like the Euro above the DAX had a major Key Day Reversal and unless something dramatic happens today we will also see a major Key Week Reversal which long term is very bearish. Today I will be a small buyer on any dip lower to 10620/10680 with a 10580 stop. Given the extent of yesterday’s sell-off plus the fact that we are near a major support level I do not want to be short the DAX at this time.

December FTSE

My FTSE plan did not work out as shortly after the market traded lower to my 6365 buy level I was very quickly stopped out of this position for a small loss at my 6325 stop level and I am now flat. We now know that the 6430/6480 area is going to be extremely difficult to break and that all rallies from here will get sold. Today I will look to go short the market on any rally higher to 6310/6340 with a 6375 stop. I do not want to be long the FTSE at this time.

Dow Rolling Contract

The hint of a Hindenburg Omen on Wednesday was enough to hit the Dow hard yesterday. As I have mentioned over the past few months I believe the US is in or heading into at least a mild recession and if the FED follows through with its rate hike at this month’s FOMC Meeting this could well tip the economy over the edge. This is what makes today’s NFP data so critical and what makes short stocks so hard also is the fact that the Central Banks have been propping up al the major Indices. It would not surprise me to see the FED have to do QE4 as despite the trillions of Dollars spent so far on QE we are still not seeing any inflation. Today I will lower my sell level to 17690/17750 with a 17810 stop. I still do not want to be long the Dow at this time.

December BUND

Wow the BUND gets whacked for over 350 points yesterday on the non move by Dragi. Now we have more and more Pension/Hedge Funds trapped long above the market. Remember we have had trillions of Bonds trading with a negative Interest Rate which makes absolutely no sense to me. The Bond fiasco is an even bigger crisis that the stock market as when this party ends there will be carnage. To show how dis-functional the Bond market is the Irish 5 year rate was trading yesterday morning yielding just 15 bps and this is with an economy with a 4/6% growth level?? Thankfully we had no buy levels in the BUND yesterday and today I will lower my sell level to 156.60/157.10 with a 157.35 stop.

Gold Rolling Contract

I must say I taught given the events of yesterday that Gold would be trading substantially higher. Having got stopped out of my long 1057 position early yesterday morning at 1049 it is still frustrating to see the market trading back above 1060. Today I will again look to buy Gold in small size on any dip lower to 1045/1053 with a 1039 stop.

Silver Rolling Contract

No change as I am still long at 14.03 with the same 13.65 stop.