Another day on and Sterling has again been the star performer in the currency markets. Following on from Bank of England Governor Carney’s warning that the BoE might have to adjust policy in coming months, MPC member Gertjan Vlieghe – regarded as dovish untill now – said along the same lines that “the evolution of the data is increasingly suggesting that we are approaching the moment when the bank rate may need to rise,” in a speech at the Society of Business Economists in London. If the economy continues apace, “the appropriate time for a rise in the bank rate might be as early as in the coming months.” The Pound soared, up another 1.46%, trading at one stage over 1.36, before settling back into the 1.35s. However this morning Cable is back trading over 1.36.
To mark my 1425th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 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 59 points on Friday and is now ahead by 218 points for September, having made 1560 points in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this new Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
UK 10 year gilts up a net 8 bps for the session to 1.309%, up 32 bps last week. UK OIS markets lifted the priced-in probability of a move at the 2 November meeting (the next meeting) to a 64% chance, fully priced by Feb ’18 with another priced by September 18, six months out from Brexit.
US data was on the disappointing side of expectations, but with the rider that Hurricane Harvey had at least significantly affected Industrial production, Retail Sales likely less so. Retail sales for August disappointed, down 0.2% in headline terms, coming also with downward revisions. Both the “ex autos and gas” (-0.1%; +0.3%E) and the Control Group (-0.2%; +0.2%E) underlying measures also disappointed. These also came with adverse revisions and the Atlanta Fed revised down its estimate of GDPNow from 3.0% to 2.2%.
At least part of that cut in growth expectation came from the downside surprise in Industrial production for August that slumped 0.9%, the Fed attributing ¾% point of this fall to the effects of Harvey (e.g. oil production taken off line.) US Consumer Sentiment retained a strong reading for the preliminary September survey, printing at 95.3 against expectations of 95.0, coming also with a slight uptick in the 5-10 year inflation expectations to 2.6% from 2.5%. The Empire State Manufacturing Survey for September was similarly strong at 24.4 (18.0E).
The other out-performer Friday was the Euro on the back of hawkish comments from ECB member Lautenschlaeger who said that now is the time to start scaling back QE. She said that the conditions for inflation to pick up are “all in place”. As a counter – with the Euro opening somewhat lower this morning – was ECB Chief Economist Peter Praet. He said in press interview that it is “not yet” the time for the ECB to reduce monetary accommodation measures, though he reiterated that the decision on next year’s policy will be taken “this fall” (October 26 is the next ECB meeting. (Draghi is speaking on Thursday in Frankfurt.)
The DXY finished 0.27% lower and BBDXY -0.25%. So after lifting from a low of 91.0 last Friday week to a high on Thursday of 92.7, DXY’s 91.8 close means it gave back half of its Monday-Thursday rally.
This morning on the Economic Front we have Euro-Zone CPI at 10.00 am and this is followed at 3.00 pm by the NAHB Housing Market Index. Finally at 9.00 pm we have the Total Net TIC Flows.
This afternoon at 4.00 pm Bank of England Governor Mark Carney is speaking at the IMF and it will be interesting to see what he has to say after last week’s huge rise in Sterling.
December S&P 500
There is just no stopping this bull market which has now lasted well over nine years. One has no choice but to trade this market bullishly despite high P/E multiples, despite what I would call to be egregiously high Price/Book value ratios, despite the propensity on the part of the monetary authorities to begin their long awaited move away from QE toward something more constrictive as we have seen from comments from the Bank of England last week and finally despite a myriad of other concerns that make me believe that prices are extremely high and could very easily make their way substantially lower if some further untoward geo-political problems should arise. Even so with concerns on early Friday of yet another missile launch by North Korea the S&P still closed at yet another all-time high. As I have mentioned consistently over the past few months unless the S&P breaks the large 2390/2450 support area it is very difficult to be short. However a note of caution traditionally when we have a strong September for US equities as we are having now, October has turned out to be bearish. Today I will now move my buy level higher to 2487/2493 with a 2482 stop. My only interest in selling the S&P is on a move higher to 2516/2523 with a 2528 stop.
EUR/USD
I am still flat the Euro which has now moved its support level higher to 1.1870. This is another key week for the Euro with the FOMC Meeting on Wednesday followed by the Yellen press conference. On top of this we have Dragi speaking in Frankfurt on Thursday afternoon. I am still flat the Euro and today I will now move my buy level higher to 1.1850/1.1885 with a 1.1820 stop. I still do not want to be short the Euro at this time.
December Dollar Index
The Dollar traded lower to my 91.50 buy level on Friday afternoon. In the last few minutes the Dollar has just traded higher to my 91.80 T/P level and I am now flat. Today I will again look to buy the Dollar on any subsequent move lower to 91.05/91.45 with a 90.60 stop.
December DAX
Unfortunately the DAX again missed my 12440 buy level before rallying strongly this morning. Thankfully we have had no sell level in the DAX which has now risen over 600 points since making its 12030 low print less than two weeks ago. Today I will now raise my buy level to 12430/12490 with a 12380 stop. Despite the DAX trading severely overbought and at key resistance at 12600 I do not want to be short the market at this time.
December FTSE
The continued strength in Sterling saw the FTSE sell off again after I posted on Friday with the market stopping me out of my long 7265 position at 7210. Subsequently the FTSE sold off to trade the whole of my second 7170/7200 buy level which put me long again at 7185 with a more aggressive position. As I wanted to reduce my points lost for the FTSE I emailed my Platinum Members to exit this position at 7200 this morning and I am now flat. The FTSE is extremely oversold, trading outside the bottom of its Daily Bollinger Band and at the bottom of the Williams Index. Meanwhile Sterling is showing signs of tiring after its incredible move higher since last Thursday. For these reasons I will now look to buy the FTSE again from 7165/7200 with a 7135 stop.
Dow Rolling Contract
Yet again the Dow traded to my second sell level at 22250 before selling off small. Thankfully I emailed my Platinum Members to exit this second short position at 22239 before the market rallied late into the New York close. I am still short in tiny size from last Monday at 22030 and today I will again add to this position on any further move higher to 22400/22460 with a 22510 stop.
December BUND
Late on Friday the Bund traded lower to my 161.10 buy level before rallying back above 161.40. I used this rally to exit my long position at my revised 161.33 T/P level and I am now flat. This morning I will now lower my sell level in the BUND to 161.75/162.05 with a 162.35 stop. I do not want to be long the Bund at this time as I believe the time getting nearer to when we finally see this bond bubble starting to pop. If this happens we will witness one of the greatest bear markets of our life time.
Gold Rolling Contract
Overnight Gold traded lower to my 1314 buy level before rallying to my revised 1317.50 T/P level and I am now flat. Gold has huge support from 1299/1307 and today I will be a buyer in this area with a 1292 tight stop.
Silver Rolling Contract
No change as I am still long at 17.87 with the same 17.45 stop.
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