The focus for markets yesterday was well and truly back on the UK with Sterling the stand-out performer over the past 24 hours, trading this morning with a solid 1.24 handle, a full three big figures above where it opened the week. The rally reflects a combination of 1) the UK High Court ruling that only Parliament can trigger Article 50 of the EU treaty, potentially at least delaying the process (in some minds derailing it); and 2) a more hawkish Bank of England evident in its latest Quarterly Inflation Report. As would be expected, the UK Government has said that it is appealing the decision with an initial hearing likely between December 5-8 and a judgment then expected in late January.
To mark my 1200th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 270 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 you can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 138 points yesterday and is now ahead by 193 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.
There is also the thought that in the event of a vote in Parliament – should it come to that – the House of Commons would be likely to give the trigger a green light but the Lords is another kettle of fish altogether. We watch and wait.
Adding to sterling’s attraction on yield grounds, the Bank of England not only left policy on hold as expected given better data but dispensed with their easing bias. The BoE also indicated a limited tolerance to above-target inflation that is now forecast through most of next year. Inflation forecasts have been upped through 2017 by up to ¾% for Q4 to 2.72% (Inflation is forecast to be above the 2% target from Q2 2017.)
These higher inflation forecasts stem from the weaker Pound but also an upward revision to growth from a better -than-expected base and Sterling, the Oct UK PMI Services index was 54.5 after 52.6 and better than 52.5 expected, continuing the run of positive data surprises. This is all very different from before and could yet challenge the BoE next year given the big challenges ahead for the City and the broader economy after Article 50 is triggered and beyond.
Elsewhere in markets, risk-off sentiment was the general theme still with European equities soggy, a mood that carried over into the US. (The FTSE closed down 0.8%.) The US VIX has pushed higher to 22.21 which is its highest reading since June,and the US main stock markets closed down by up to 0.95% (Nasdaq). Incredibly the S&P has now closed down for eight consecutive trading sessions which is it’s worse losing streak since 2008.
US data has been mostly softer than expected (if still solid), the ISM Non-Manufacturing Oct index below expectations at 54.8 (on a par with the UK index) below the 56.0 consensus and last month’s 57.1. Ahead of Payrolls, the employment component eased to 53.1 from 57.2. Jobless claims in the last week of October pushed a little higher to 265K from 258K but Q3 productivity was up by 3.1% from -0.2%.
There have been more developments on the commodity space with oil softer again, WTI and Brent down 1%-plus, WTI trading at $44.71 and US natural gas prices off 0.86%. As something to watch, the pullback in US natural gas prices might be beginning to weigh on Asian thermal coal prices (through expectations of increased US supply from more competitive gas-fired electricity generation). The Newcastle futures price down $5.85/t to $106.50. Met coal prices though continued to move higher, up another $3.50/t to $253.50 with iron ore up 0.23% to $65.46/t. I also note that Chinese steel prices were higher yesterday. LME prices were higher overnight too, copper +0.8%, nickel +1.55% and ally by 0.26%. Gold actually pulled back by $3.70/oz to $1304.50.
This morning on the economic front we have German and Euro-Zone Services/Composite PMI at 8.55 am and 9.00 am respectively. This is followed at 10.00 am by the Euro-Zone Trade Balance. At 12.30 pm we have US NFP and Average Earnings. The key to this Payrolls is whether that would shift the pricing towards a Fed rate hike in December, on economy grounds or after the recent stock sell-off postpone any rate hike until next year.. Most aspects of the Payrolls Report will be factored into market thinking and then the focus re-sets on the Presidential election into the last few days of the campaign. Also at 12.30 pm we have the US Trade Balance. Finally just before the markets close this evening Fed Vice Chair Stanley Fischer at an IMF Research Event.
December S&P 500
My S&P plan worked very well with the market hitting my 2085 buy level with a 2084 low before having a nice rally to 2099 as indicated by the negative -223 McClellan Oscillator reading. This rally enabled me to cover my long position at my 2092 T/P level and I am now flat. As usual I will stay flat until we get the Non-Farm Payroll data out of the way at the earlier time of 12.30 pm as America does not change its clocks until this weekend. The S&P has important support at 2075 and then very strong support at 2060. As the MO is still weak with a reading last night of -221 which is a slight improvement from Wednesday’s print despite the stock market selling off yesterday, I will again look to buy the market on any dip lower to 2073/2079 with a 2067 stop. If I am taken long or manage to exit any long position with a T/P I will either way look to be an aggressive buyer on any further dip lower to 2054/2061 with a 2048 stop. I still do not want to be short the S&P at this time.
EUR/USD
Again the Euro missed my 1.1040 buy level with a 1.1059 low print before rallying after the stock market reversed to the downside and I am still flat. Today I will raise my buy level slightly to 1.1010/1.1050 with a 1.0975 stop. Again as mentioned yesterday I would hedge at least 50% of any Dollar exposure at current levels as I still expect the Euro to eventually take out the key 1.1300 major resistance level and pivot point.
December Dollar Index
No change as I am still a seller on any rally higher to 98.10/98.50 with a lower 98.90 stop. The US Dollar needs to break and close over the December 2015 high at 100.50 for me to change my stance on the Dollar which I believe will be to the downside as long as we stay below last December’s high.
December DAX
I am glad that I stayed flat in the DAX yesterday which is continuing to struggle on the back of the much stronger Euro. However today I will again try the buy side on any further dip lower to 10160/10220 with a 10115 tight stop. Despite the negative price action I still do not want to be short the market at this time.
December FTSE
On the back of the stronger noises coming out of the Bank of England at yesterday’s meeting the FTSE eventually hit my average buy level at 6740. I am still long and I will leave my stop unchanged at 6685 especially given how oversold the FTSE is trading at this time.
Dow Rolling Contract
I am still flat the Dow which is due a major rally as indicated by a combination of my Daily Bollinger Band, Williams Indicator and the McClellan Oscillator. I am still flat the Dow and today I will leave my buy level unchanged at 17780/17840 with the same 17725 tights stop. Naturally I do not want to be short the Dow at this time.
December BUND
My Bund plan worked well yesterday with the market hitting my 161.95 buy level before rallying a couple of times back above 162.20. As I wanted to be flat ahead of today’s NFP data I emailed my Platinum Members to exit this long position for a small gain at 162.12 and I am now flat. Today my only interest in buying the Bund is on a dip lower to 161.20/161.60 with a 160.85 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of the April low at 160.35/160.65 with a 159.95 stop.
Gold Rolling Contract
Unfortunately Gold missed my 1283 buy level with a 1285 low print before rallying back over 1300 and I am still flat. Today I will raise my buy level slightly to 1278/1285 with a 1271 stop.
Silver Rolling Contract
My long 18.50 Silver position worked well with the market trading higher to my 18.75 T/P level before trading to a low of 17.97. Subsequently I emailed my Platinum Members to re-buy Silver at 18.02 and after a nice rally to 18.35 I emailed them again to T/P on this trade at 18.28 and I am now flat. Today I will again look to buy Silver on any dip lower to 17.90/18.20 with a 17.45 stop.
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