Last Friday’s US Retail Sales data failed to have a significant impact on markets. In contrast Janet Yellen’s speech in Boston did – primarily in the form of higher Treasury yields at the longer end of the curve and with that late-day support for U.S. dollar. NY Fed President Bill Dudley said he expects a rate rise this year on current forecasts. Though The Fed chair offered no fresh clues on near term policy decisions, Ms Yellen posed a lot of questions deemed worthy of further research, the one markets jumped on being the suggestion that running a ‘high pressure’ economy could boost labour market participation and ultimately lift the supply side potential of the U.S. economy.
Too 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 105 points on Friday and is now ahead by 719 points for October having made 1142 points in September, The previous three months saw gains of 182, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Headline and ex-autos Retail Sales came in as expected (0.6% and 0.5% respectively) but the Control Group measure that feeds directly into GDP estimates disappointed (up just 0.1%). The Atlanta Fed’s latest ‘GDPNow’ forecast was shaved to 1.9% from 2.1% after the sales data.
In stocks, the S&P500 ended virtually unchanged, +0.02% to 2132.98 while the Dow gained 0.22%. Some support came from Citigroup and JP Morgan, who both beat their earnings and revenue estimates. The VIX fell by 0.67 points or 3.42% to 16.12 to be 2.64 points or 20% higher on the week.
In US rates the bear steepening theme of recent weeks continued, US 2s +0.1bp to 0.837% (+0.5bp on the week), 10s +5.7bps (+8bps) and the 30-year 8.2bps to 2.559% (+10.8bps). Most of the moves up in the 10-30 year segment of the curve occurred after Yellen’s ‘high pressure economy’ comments. U.K. gilts continued their sell-off driven by expectations of significantly higher inflation arising from GBP’s fall, 10s +7.3bps to 1.097% (+12.8bps on the week).
In FX, the US Dollar was stronger again, with late NY day support coming off the back of the rise in longer dated Treasury yields post-Yellen’s speech. Leading the US Dollar higher was the fall in EUR/USD to below 1.10 (-0.76% on the day to 1.0972). AUD/USD was the world’s strongest currency Friday, +0.65% to 0.7618 and has pushed a little further ahead in early week trade.
In commodities, oil was down just 10 cents for both WTI and Brent, to $50.35 and $51.95 respectively. Gold lost $2 to $1,253, while iron ore was up 60 cents to $57.28 (China 62% fines import price) for a gain of $1.42 or 2.5% on the week.
The final Trump/Clinton presidential election debate takes place on Wednesday. http://projects.fivethirtyeight.com/ is currently ascribing Clinton an 86.2% change of winning versus 13.8% for Trump. RealClear politics poll-of poll average is currently 47.2/42,.2 in Clinton’s favour.
This morning on the economic front we have Euro-Zone CPI at 10.00 am. This is followed by US Empire Manufacturing at 1.30 pm. Finally we have Industrial Production and the Bloomberg Economic Expectations at 2.15 pm and 2.45 pm respectively.
December S&P 500
My S&P plan worked well on Friday with the market hitting my revised 2143 Sell level before having a near 20 Handle sell-off. As I wanted to be flat ahead of Ms Yellen’s speech I covered this position too early at 2139. The only good thing about covering my position, as soon as I emailed my Platinum Members the S&P was trading at 2134 before they got to read my updated email. Interestingly the McClellan Oscillator closed with a negative 150 reading on Friday implying the market is only 1/2 decent down day’s from putting in at least a temporary bottom. As I mentioned last week all my technical signals are on a ‘’Sell’’ which is very unusual. As we know from the huge rebound off the 2107.75 low print on Thursday where the main support is for the S&P. Today I will again look to buy the market on any dip lower to 2111/2117 with a 2106 stop. Remember a break and close below 2114 is at least short-term bearish and my well lead to an acceleration lower before the McClellan Oscillator signals a major bottom is at hand. Therefore this could be a very important week. My own view is still whatever low is put in this month will lead to a significant rally into year end. My only interest in selling the S&P is still on a rally higher to 2139/2145 with the same 2150 stop.
EUR/USD
The Euro traded lower to my 1.1002 buy level before having a small 25 point rally. As I wanted to be flat ahead of Yellen I cut this position for a small gain at 1.1015. Subsequently I emailed my Platinum Members to re-buy the Euro which I did shortly after the open last night at 1.0965. I am still long and I will leave my stop at 1.0915. The reason that I have bought the Euro again is the fact that we are trading outside the bottom of the Daily Bollinger Band and at the bottom of the Williams Index with a near -100 reading. On top of all of this, sentiment is awful towards the Euro. The Euro has support nearby at 1.0945 and at 1.0915 which is the post-Brexit low on June 24.
December Dollar Index
I am still short the Dollar at 97.50 with the same 98.10 stop which as I write this commentary is close to getting filled. Given how overbought the Dollar is trading, If I am stopped out of this position I will look to go short again on any further rally to 98.30/98.80 with a 99.25 tight stop.
December DAX
With Deutsche Bank announcing an incredible 10,000 job’s cut on Thursday the DAX has rallied over the past two trading sessions. I am still flat the DAX but I do not trust this market, especially as Deutsche Bank shares fell in the last 90 minutes of trading on Friday. Today my only interest in buying the DAX is still on a dip lower to 10310/10370 with a 10260 stop. Despite my nervousness with the DAX I still do not want to be short the market at this time.
December FTSE
I am still flat the FTSE and today I will again look to buy the market on any further dip lower to 6900/6930 with a 6870 stop.
Dow Rolling Contract
The Dow had a wild trading session on Friday as the market opened strongly before running into resistance followed by a near 200 point sell-off from its early high. Today I will leave my buy level unchanged at 17960/18020 with the same 17910 stop. Given how close the Dow is to long-term support from 17950/18000 I do not want to be short the market at this time.
December BUND
The Bund traded lower to my 163.30 buy level before having a 40 point rally. As I wanted to be flat ahead of the US Retail Sales data I cut this position for a small gain at 163.43 and I am now flat. Today I will again look to buy the Bund on any dip lower to 162.70/163.10 with a 162.45 stop which is just below the 162.60 spike low in September. Given how oversold the Bund is trading I do not want to be short the market at this time.
Gold Rolling Contract
My Gold plan worked well as after the market traded lower to my 1249 buy level I emailed my Platinum Members to exits this position at my revised 1253 T/P level and I am now flat. Given the ongoing low Daily Sentiment Index reading, I believe we are close to at least a temporary bottom in the precious metal. Today I will again look to buy the market on any dip lower to 1239/1246 with a 1233 stop.
Silver Rolling Contract
No change as I am still long Silver at 17.85 with the same 16.95 stop.
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