The main news over the weekend is that OPEC and some non-OPEC producers hammered out a deal on Saturday culminating in Saudi Arabia signaling its intent to cut oil production by more than agreed on Nov.30th and possibly to below 10mn bpd from 10.64mn of late. The news sees oil prices 5% higher in early trade this morning which in turn should further support inflation break-evens and nominal Bond Yields and, if so, the US Dollar.
To mark my 1225th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 58 points on Friday and is now ahead by 770 points for December having made 1971 points in November and 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.
On Friday, the FX market’s symbiotic relationship with US Treasury yields remained very much in evidence, the US Dollar pulling ahead once more on a day when yields pushed back up toward the recent highs. However the tick charts shows that the Dollar moved ahead of Treasuries, most of the day’s gains occurring prior to the release of a better than expected University of Michigan consumer sentiment index (to 98.0 from 93.5) and most of the run up in US yields only coming after.
The S&P gained 0.59% to 2259.53 and a new record high, to be 3.1% higher on the week. The VIX finished 0.89 lower at 11.75, 2.37 points or 16.8% down on the week. European stock indices ended higher as well, despite shares in Italy’s Monte di Paschi Sienna (MPS) being suspended limit-down after a report than the ECB had rejected an extension beyond year-end for a planned EUR5bn recapitalization. The market’s collective and considered take on Thursday’s ECB announcements was that that it was ‘dovish’ – reflected in higher stocks, a weaker Euro and Bund yields falling slightly against a backdrop of higher Treasury yields. Over the weekend, Italian foreign minister Gentiloni (a Renzi loyalist) has been mandated by President Mattarella to form new Government which could now be place early this week – a positive for Euro sentiment.
US Bond markets meandered fairly aimlessly until after the Consumer Sentiment release, pushed higher in the two hours afterwards and then trading sideways near the day’s highs in afternoon trade. 2yr treasuries added 2.3bps to 1.135% and +3.7bps on the week; 10s +6.0bps to 2.468% and 8.4bps on the week but still (just) beneath the 2.4919% 1st December post-US election high.
In FX, the US Dollar was higher against all G10 currencies bar the CAD (+0.1%) and in EM against all bar RUB (+1.35%) and the Chilean Peso (+0.77%). USD/JPY was the best performing G10 pair, trading back above Y115 for the first time since February 10th this year. It ended Friday +1.12% at 115.32.and at +1.6% is also the biggest G10 mover on the week. The DXY added 0.48 to 101.59 (the high on November 24th was 102.05). The broader BBDXY added 0.46%. AUD/USD ended 0.19% down at 0.7449.
In commodities, WTI crude gained 70 cents to $51.50 but ended the week 18 cents down. Brent added 40 cents to $54.33 to be 13 cents down on the week. This is of course before the weekend production accord news. Gold lost $11 to $1159.40 as is $15.70 down on the week. The LMEX index added 1.07% and is 1.3% up on the week. Iron ore -12 cents to $84.35 (+$3.87 on the week). Coking coal didn’t trade Friday so ends the week at $280 down from its recent high of $300. Steaming coal was down $3.05 on the week at $84.35 (+$0.35 on the day).
Today, incredibly we have no economic news of consequence on either side of the Atlantic as we await the FOMC Rate decision on Wednesday at 7.00 pm.
December S&P 500
This is the last week for trading the December Contract which expires at 2.35 pm on Friday. Very late in Friday’s trading session the S&P hit my 2257 sell level but as I was already short the Dow, I emailed my Platinum Members to exit this trade for a breakeven and I am still flat. The S&P opened higher on the re-open last night on the back of the cut in oil production but quickly sold off and is now back below Friday’s close as I write this commentary. Incredibly the McClellan Oscillator weakened on Friday despite all three US Indices closing higher with the MO closing with a +179 print from Thursday’s 186 close. I was hoping that the MO would have closed between +220/250. The S&P is is now overbought on both a Daily and Weekly basis and is due a correction especially with the RSI for the Dow at near record levels. Today I will again look to sell the S&P on any rally higher to 2268/2274 with a 2279 stop. I will only look to sell this market in small size. My only interest in buying the S&P is still on a dip lower to 2233/2239 with a 2227 stop.
EUR/USD
Following the sizeable downside Key Day Reversal for the Euro on Thursday, the Euro continued as expected to sell off on Friday as we tested the November low at 1.0517. I am still flat the Euro which still has to break its March 23, 2015 low. Today I will be a small buyer on any dip to 1.0440/1.0475 with a tight 1.0410 stop. I will also lower my sell level in the Euro to 1.0650/1.0690 with a 1.0725 stop.
December Dollar Index
This will be my last day trading the December Contract as I will roll to the March Contract tomorrow. As expected my short 100.95 December position from last Thursday got stopped out on Friday at 101.40. Subsequently the Dollar traded higher to my second sell level at 101.80 before selling off to an overnight low at 101.45. As I wanted to be flat the Dollar over the weekend I emailed my Platinum Members to exit this position for a small gain at 101.68 and I am now flat. The Dollar has key resistance at its November high at 102.05 and today I will again look to sell the Dollar on any rally higher to 102.00/102.40 with a 102.70 stop.
December DAX
I wrote on Friday that trying to short the DAX was a bad idea and this was certainly the case with the market trading higher to a 11238 high so far. This morning the DAX is struggling despite the much higher oil price and is overbought short term. Today I will again look to buy the DAX on any dip lower to 11050/11110 with a 10995 stop. Despite the DAX being overbought I do not want to be short the market at this time.
December FTSE
I am still flat the FTSE which traded over 7000 overnight on the back of the 5% rally in oil. Today I will raise my buy level slightly to 6895/6925 with a tight 6860 stop. Despite the FTSE trading weaker than the other major Indices I still do not want to be short the market at this time.
Dow Rolling Contract
The surprise OPEC agreement on Saturday saw me get stopped out of my very late 19750 short position from Friday at the re-open at my 19840 stop last night and I am now flat. In hindsight I should not have kept this position over the weekend as I normally go home on a Friday flat. The only good part of my short position was it was in very small size. Last week I touched on the Relative Strength Indicator for the Dow and after a lot of research over the weekend I want to give you an update as to where we stand. Friday’s closing RSI of 85.47 remains the highest in two decades, since late November 1996 when the RSI pushed to a peak at 87.83 on November 25. Prior to that, the highest overbought extreme in this measure occurred on April 19, 1971, when the RSI jumped to 85.10. The Dow made its high seven trading days later on April 28, 1971 and started a 17% decline over the next seven months, to November 23, 1971. The most extreme RSI reading for the history of the Dow occurred on June 20, 1944 several weeks after D-day, when the RSI surged to 89.58. The Dow pulled back for seven days and then rallied to a high on July 10, 1944. Since at least 1920, the common thread between each instance of peak RSI is that it indicated that stocks were in the late stages of their respective advance as the turn down in RSI coincided with at least a short term market pull back prior to a resumption of each ongoing rally. Sometimes the pull back was shallow, sometimes more protracted, such as in 1971. In summary we are at or very near at least a short term top for the Dow which should see the market sell-off for several days before rallying again into year end and the start of 2017. Today I will again look to sell the Dow on any rally higher to 19850/19950 with a 20070 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller from 20200/20350 with a 20450 stop. Given the volatility I have to use wider parameters with smaller stake size. Naturally I do not want to be long the Dow at this time.
March BUND
My Bund plan worked well with the Bund trading lower to my 161.30 buy level before rallying back above 162 again. This rally enabled me to cover this position at my 161.60 T/P level. This morning the Bund has opened lower on the back of the OPEC deal on Saturday and I have bought the Bund again here at 160.95 with a 160.55 stop.
Gold Rolling Contract
Gold again traded lower to my 1158 buy level before rallying. Subsequently as I did not want to have a long Gold position on board over the weekend I emailed my Platinum Members to exit this position at 1161.50 and I am now flat. Today Gold is trading slightly lower and today I will again look to buy the market on any dip lower to 1139/1147 with a 1132 stop.
Silver Rolling Contract
No change as I am still long Silver at 17.14 with the same 16.60 stop. If I am stopped out of this position I will be an aggressive buyer on any further dip lower to 16.00/16.40 with a 15.60 stop.
Please note that I will hosting my monthly take on the markets in IG Index Dublin tomorrow at 6.00 pm and if you would like to attend please click on the following link to register
https://www.ig.com/uk/euro-in-2017
Recent Comments