Following the severe earthquake yesterday morning in South Island NZ, the Wellington CBD is out of action including the BNZ Harbour Quays building. BNZ Markets will be operating from Auckland / Christchurch and DR sites. The NZD fell by about half a cent at the open, but bear in mind that sharp falls in the currency in the days following the February 2011 earthquake (5-6%) were reversed in subsequent weeks and months as anticipation of insurance payouts from overseas and the positive economic impact of the rebuilding of Christchurch were factored in. Friday’s Veterans Day holiday, the closure of US bond markets and a bit of fatigue following the dramatic market moves of Wednesday and Thursday made for a quiet Friday. US stocks closed mixed (S&P down smalls but Dow and NASDAQ higher) while the US Dollar continued to push ahead on the view that higher growth and higher inflation are headed America’s way in 2017 and on the view that a December Fed tightening is still highly likely.
To mark my 1200th issue of Tradernoble Daily Commentary I am offering a special 20 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 made 102 points on Friday and is now ahead by 927 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.
The S&P lost 0.14% to 2164.45 but is still 3.8% up on the previous Friday’s close. Financials (on hope for the repeal of Dodd-Frank) and Industrials (on hopes for major infrastructure spending) have driven the past week’s gains. The Dow was 0.21% higher Friday and the NASDAQ +0.54%. The VIX lost another 0.57 to 14.17 having been 22.51 the previous Friday. The Eurostoxx 50 ended Friday’s session down 0.54% (+2.6% on the week) and the German Dax 0.36% (led by a 4.6% gain for Deutsche Bank, its stock 20% up on the week).
US Bond markets were closed Friday but in Europe the selloff continued, Bunds +3.4bps to 0.308% and gilts +2.2bps to 1.364%. As a reminder, 10 year Treasuries ended Thursday night 37bps higher on the week at 2.15%.
In FX, the US Dollar rally continued, gains now being dominated by falls for commodity currencies. NZD/USD – 1.15% to 0.713, AUD/USD -0.88% to 0.7546 and USD/CAD +0.54% to 1.3542. Asia EM didn’t fare too badly, ADXY down just 0.02% (and -0.56% on the week). The narrow DXY gained 0.28% led by the further fall in EUR/USD (-0.35% to 1.0855) and to an overnight low at 1.0772. USD/JPY gave back a tiny portion of its Wed/Thu rally, -0.17% to Y106.65 while Sterling continues to bask in the view a US/UK free trade could be readily achieved and that the factors that drove first Brexit then the election of Trump could soon befall one or more continental European countries. This, the argument goes, would play in favour of a softer than otherwise UK exit from the UK as Europe is forced to bend the UK (and US) way for its own salvation. GBP/USD was +0.33% to $1.2596. Bloomberg’s broader BBDXY gained 0.2% for a rise of 2.6% on the week.
In commodities, in contrast to falls for Gold (-$42 to $1,224) oil (WTI -$1.30 to 42.41 and Brent -$1.1 to $44.75) and exchange traded metals (LMEX -1.32%) iron ore added an eye-popping $5.7 to $79.81. A week ago it was $65. Steaming coal out of Newcastle lost $1.55 but coking coal added another 50 cents to yet another fresh cycle high.
The US November University of Michigan preliminary consumer sentiment index at 91.6 was well up on the 87.2 final October read and 87.9 expected. As – perhaps more – important, 5-10 year inflation expectations lifted to 2.7% from 2.4% (as did 1-year expectations).
Overnight the USD/JPY has again rallied strongly to trade currently at 1.0755. This continued weakness in the Japanese Yen led to a 1.7% rise in the Nikkei which closed at 17,672.
This morning on the economic front we have no UK or US data with the only release of note being Euro-Zone Industrial Production at 10.00 am.
This evening at 6.00 pm the Fed’s Kaplan is due to speak, while this morning the ECB’s Constancio speaks at a European Finance Meeting in Frankfurt.
December S&P 500
My S&P plan worked well on Friday with the market hitting my average buy level at 2154 before having a nice rally to 2164 which enabled me to cover this position at my revised 2160 T/P level and I am now flat. Incredibly this rally has continued overnight with the S&P hitting a 2174 high print. For anyone fund who went into the election short equities, long bonds and long gold have been destroyed with these incredible moves in these three asset classes. On Thursday the US Stock market delivered a second Hindenburg Omen which is the second one in 10 days. Remember for a confirmed Hindenburg Omen we need to readings within a 30 day period which has now occurred. This is bearish but does not mean the stock market will fall straight away but needs to be kept on the radar. The McClellan Oscillator is struggling to stay above par with a +13 reading on Friday which is incredibly low when you consider the Dow made another new all-time closing high. So far the S&P has not broken its 2193 all-time August high which is a negative especially with the Dow this morning trading nearly 300 points higher than its July previous high. This is negative divergence but if the S&P breaks this key resistance level then we could see the market have its final acceleration to the 2300/2334 target level that I have been mentioning over the past six months. Today I will again look to buy the S&P on any dip lower to 2157/2163 with a 2151 stop. My only interest in selling the market is still on a rally higher to 2190/2196 with the same 2202 stop.
EUR/USD
My Euro plan worked well on Friday with the market hitting my 1.0858 buy level before having a nice rally back above 1.09 which enabled me to cover this position at my 1.0890 T/P level. Unfortunately I re-bought the Euro again at 1.0845 before getting stopped out of this position overnight at 1.0785. In what must be a first scenario for me in my near five years of writing Tradernoble I emailed my Platinum Members this morning to re-buy the Euro again at 1.0790. I am still long and I will leave a stop at 1.0730 which is just below the key 1.0750/1.0800 support level. With the European Finance Misters Meeting in Frankfurt this morning I just cannot see how the Bundesbank are going to be happy with the current sell-off in the Euro.
December Dollar Index
As I was long the Euro I waited to sell the Dollar with the market eventually hitting my 99.40 sell level overnight. Given how overbought the Dollar is trading I have now raise my stop on this position to 99.85.
December DAX
My DAX plan also worked well on Friday with the market hitting my 10585 buy level before quickly trading 100 points higher and this rally enabled me to cover my long position too early at my 10635 T/P level and I am now flat. The move lower in the Euro is finally resulting in the DAX to trade higher but as I mentioned on Friday the market needs to take out the 10800/10850 key resistance level first. I still do not want to be short the DAX and today I will now raise my buy level to 10650/10710 with a 10595 stop.
December FTSE
Friday was such a busy trading day with 7 of my 9 market calls again getting hit. As I have said countless times a Trump victory is the best thing to happen for the Banking Industry and trading in many years. The fact that the onerous Dodd Frank Act is going to be repealed is fantastic news as lending conditions throughout the world will now get easier. Even Deutsche Bank which is Europe’s largest Bank has risen 20% since Trump won on Wednesday morning. However the continued strength in the FTSE is hampering the progress of the FTSE. The fact that this Index contains so many mining stocks has now helped. After the FTSE hit my average buy level at 6740 I emailed my Platinum Members to exit this position at 6755. Subsequently I bought the market again at 6720 before again covering this long position for a small gain at 6735 and I am now flat. Today I will again look to buy the market on any dip lower to 6735/6765 with a 6690 stop which is just below last Friday’s low print. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my 18700 buy level with a 18740 low print before rallying strongly as expected and I am still flat. If the S&P does not soon break its previous 2193 high then with the negative divergence as mentioned in my S&P commentary above, there is a chance that the Dow could roll-over especially with the now confirmed Hindenburg Omen. Today I will raise my sell level in the Dow slightly to 19020/19080 with a 19130 tight stop. I will also raise my buy level to 18720/18790 with a 18660 stop.
December BUND
I am still flat the Bund which continues to sell-off. Today I will raise my buy level to 159.10/159.55 with a 158.70 stop. Given how oversold the Bund is trading I do not want to be short the market at this time.
Gold Rolling Contract
Gold has now fallen form a post-Trump victory high at 1340 to this morning’s 1210 low print. Thankfully after Gold hit my 1242 buy level on Friday I emailed my Platinum Members to exit this position at 1245.50 and I am still flat. Gold again has strong support from 1200/1210 and today I will be a small buyer in this area with a 1193 stop. Remember the sell-off on Friday saw over $15bn worth of Gold traded on the Comex Futures Exchange.
Silver Rolling Contract
Much to my surprise Silver got slammed on Friday with a bigger percentage fall than Gold. Soon after I posted on Friday I was stopped out of my long 18.70 position from Thursday at 18.25. Subsequently Silver traded lower to my second buy level at 17.65. I am still long and I have now lowered my stop level to 16.80 to allow for the volatility. The fact that Trump is promising to spend money on infrastructure should be good for Silver going forward.
Following the success of the NFP Live Trading Day and Education Session in London on September 2, Paul Wallace and I are bringing this event to Dublin for the December NFP day on Friday December 2nd. If anyone is interested in attending this event the details are on the following link:
https://www.eventbrite.com/e/live-nfp-trading-day-dublin-tickets-28159689389
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