Take your pick whether Savage Garden’s 1999 hit ’’Crash and Burn’’ references the ignominious performance on Friday by the British Pound or that of Donald Trump as revealed in 2005 tape recordings and which might just have sounded the death knell for his 8 November presidential election chances. Friday’s US payrolls report underwhelmed for the second month running, showing a 151K Employment gain, small net negative revision for the prior two months and the Unemployment ticking up to 5.0% from 4.9% thanks to a 0.1% rise in the labour participation rate.
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 you can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 179 points on Friday and is now ahead by 395 points for October having made 1142 points in September. The previous three months saw gains of 1682, 2550 and 1532 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Average hourly earnings were up only 0.2% against 0.3% expected, though the year-on-year rate did tick up to 2.6%, albeit still beneath the cycle high of 2.7% recorded in July. The data was deemed strong enough to keep December Fed tightening expectations fairly firmly intact. Swaps market pricing saw implied odds for the December meeting slip to 76.4% from 78.0%. The bigger move was in pricing for the November Fed meeting date, down to 26.4% from 33.2%.
Fed vice chair Stanley Fischer and noted FOMC hawk Esther George both paid compliments to the data, though Fischer laments the continued poor GDP growth performance. Fischer said” Since monetary policy is only modestly accommodative, there appears little risk of falling behind the curve in the near future, and gradual increases in the Federal Funds rate will likely be sufficient to get monetary policy to a neutral stance over the next few years”.
US stocks jumped at the open but soon gave ground in a choppy session to end lower, as did Bond Yields and the US Dollar. Focus quickly shifted to Sunday night’s second Trump-Clinton TV debate. The S&P500 ended 0.33% lower at 2153.74. Materials and industrials lead the losses – in contrast healthcare and financials ended with small gains.
In US rates we saw a fairly uniform shift down in the curve, 2s -2.0bps to 0.832% (still +6.8bps on the week) and 10s – 1.9bps to 1.719% (+12.4bps on the week). 10yr Bunds added +3.8bps to close the week in positive terrain (0.02%) and UK Gilts +9.8bps to 0.969, clearly not impressed by the whiff of a Sterling crisis in the GBP shenanigans earlier in the day.
Over the weekend ECB President Mario Draghi speaking in Washington where the IMF meetings are taking place, suggested inflation is about to rise and that growth has stabilised, while Governing Council member Nowotny says that the market needs a signal on the ECB’s intent re its QE programme and should have it before the end of the year.
In FX, the US dollar finished slightly lower in index terms, DXY -0.14% at 96.63 (but still 1.2% up on the week) and the broader BBDXY -0.15% or a 1% gain on the week. USD/JPY was the biggest causality of the weaker than expected headline NFP prints, -0.93% to Y102.98. GBP/USD ended the New York session at 1.2434 after the earlier APAC session flash crash, a fall of 1.82 cents or 1.44% on the day. CAD underperformed despite a blockbuster Canadian September Employment gain (+67.2k). AUD/USD ended fairly flat on the day, -0.04% to 0.7582 having made a pre-payrolls high of 0.7624. EUR/USD +0.45% to 1.1201 ahead of Draghi’s weekend speech. AUD has started the week a touch firmer.
In commodities, oil slipped a little, WTI and Brent both down 60 cents to $49.81 and $51.93 respectively but still up $1.57 and $2.87 on the week. Gold lost 90 cents to $1248.9. The LMEX index gained 0.17% while the China import iron ore market was closed for the Chinese holiday.
This morning on the economic front we have German Trade Balance at 7.00 am. With the US Bond markets closed for the Saint Columbus Day Holiday the only other data of note is the Euro-Zone Sentix Investor Confidence at 9.30 am.
December S&P 500
The S&P just missed my 2136 buy level with a 2138 low print following Friday’s NFP data and I am still flat. Given the extraordinary revelations from the tapes on Trump over the weekend it is very difficult to see how he can possibly win the upcoming Presidential Election next month. Ahead of the Debate overnight, respected Political forecaster Nate Silver (www.fivethirtyeight.com) has of Saturday pushed the probability of Clinton winning up to 81.3% against 18.7% for Trump. However despite the US market’s closing within 2 percent of all-time highs the McClellan Oscillator has weakened again over the past few trading sessions, closing with a negative -127 reading on Friday. Some of the technical indicators that I follow have turned decisively negative. Today, as a result of these developments I will now look to sell the S&P on any rally higher to 2158/2164 with a 2169 stop. I will still look to buy the S&P on any dip lower to 2125/2131 with a 2119 stop.
EUR/USD
Despite the Pound getting crushed again the US Dollar on Friday in what is now been described as a ‘’Flash Crash’’, the Euro recovered its earlier lost ground to close higher on the weaker NFP Report . As mentioned in Friday’s commentary I will use any rally to go flat the Euro ahead of the Payrolls and I covered my long 1.1158 position for a small loss at 1.1144. Subsequently after we got the NFP print the Euro just missed my 1.1110 buy level with a 1.1116 low and I am still flat. Today I will no raise my buy level to 1.1135/1.1165 with the same 1.1095 stop. I still do not want to be short the Euro at this time.
December Dollar Index
The Dollar traded higher to my 97.20 sell level ahead of the Payrolls on Friday and I emailed my Platinum Members to exit this position for a small gain at 96.97 as I wanted as usual to be flat ahead of a major announcement. I am still flat the Dollar and today I will again look to sell the market on any rally higher to 97.05/97.45 with a 97.75 stop.
December DAX
I am still flat the DAX which just missed my buy level before following the S&P higher. However I do not like the price action in the DAX and today I will look to sell the market on any rally higher to 10630/10680 with a 10730 stop. My only interest in buying the DAX today is on a dip lower to 10300/10360 with a 10230 wider stop.
December FTSE
My FTSE plan worked well as shortly after the European Markets on Friday, the FTSE traded lower to my 6880 buy level before having a nice rally which enabled me to cover this position at my 7010 T/P level ahead of the US Payrolls and I am still flat. The ‘’Flash Crash’’ in Sterling appears to me to be overdone and I expect the next meaningful move in the Pound to be higher. Today I will again look to buy the FTSE on any dip lower to 6935/6965 with a 6895 stop. Given the weakness of Sterling, I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan worked well with the market hitting my 18150 buy level before having a nice 100 point rally. This move higher enabled me to cover this position at my 18200 T/P level and I am now flat. Today I will again look to buy the Dow on any dip lower to 17990/18080 with a 17930 stop. As we are so close to the major support level from 17800/18050 I do not want to be short the Dow at this time. However a break and close below 17800 will quickly see me look to change my mind.
December BUND
I am still flat the Bund which has had a huge move lower over the past 10 trading sessions. This market is getting oversold and today I will be a small buyer on any further dip lower to 163.10/163.50 with a 162.75 tight stop. I will still look to sell the Bund on any move higher to 164.80/165.10 with a 165.35 tight stop.
Gold Rolling Contract
Gold continued to sell-off on Friday after a volatile trading session with the market hitting my 1245 buy level before having a quick $12 rally. This move higher enabled me to cover this position at my 1254 T/P level as outlined earlier to my Platinum Members and I am now flat. I did some extensive research on Gold over the weekend especially after it’s huge near $90 fall last week. Last Tuesday’s huge 5% fall was allegedly caused by a large UK Hedge Fund having to exit their long position due to them being unable to meet their margin requirements. It just shows, that even the biggest of hedge funds can over leverage and get themselves into serious trouble. The Daily Sentiment Index Reading for Gold has now closed below 10% for the last four trading sessions with Friday printing at just 5% bulls. Therefore Gold is now due a decent rally to correct this bearish indicator. Today I will again look to buy Gold on any dip lower to 1241/1251 with a wider 1233 stop.
Silver Rolling Contract
I am still long Silver at 17.85 after its 11% move lower last week to a 17.09 low print on Friday. Given the fact that the DSI for Silver is also pointing to an oversold condition, I am going to stay long with the same 16.95 wider stop.
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