Last week, the relentless rise in US Bond Yields was continuing to drive the US Dollar upward, is starting to put downward pressure on most commodity prices and is also now unsettling the post-Trump victory global equity rally. The S&P lost 0.24% to 2,189.9 but this still leaves it 0.8% on the week and 4.6% higher since Trump’s victory. The Dow was -0.19% and just 0.1% up on the week with the NASDAQ – 0.23% but +1.6% on the week. Despite the S&P’s dip, the VIX closed lower at 12.88 (-0.47) and is 1.29 lower on the week.
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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 98 points on Friday and is now ahead by 1331 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.
US Treasury bond markets saw 2s +1.4bps to 1.062% (+14.5bps on the week) 5s +4.6bps to 1.783% (+22.5bps on the week). 10s +3.4bps to 2.338% and +18.7bps on the week. Bunds were -0.7bps to 0.272% after ECB President Draghi in a speech on Friday failed to offer any hint of post-March QE tapering. 10yr gilts added 4.5bps to 1.455% (+9.1bps on the week).
In FX, the US Dollar rally continues, DXY +0.43% to 101.32 and the broader BBDXY +0.47% – both new cycle highs. AUD/USD was Friday’s biggest G10 loser, -0.92% to 0.7338 followed by USD/JPY, +0.70% to Y110.89. EUR/USD was down 0.33% to 1.0591; GBP/USD -0.51% to 1.2354 and the NZD -0.2% to 0.7011.
In commodities, Gold was down a further $8.70 to $1,208, the LMEX index -0.82% and iron ore off $0.80 to $72.79 (and $7.02 lower on the week). Steaming coal shipped out of Newcastle lost $1.15 to $105.10 (and the recent high of $114.75) but coking coal managed to add another 40.75 to $299.50 and so yet another cycle high. Oil also a touch firmer, Brent +30 cents to $46.77 and $2 up on the week while WTI added 110 cents to $45.55 for a gain of $2.14 on the week.
There was no data of note on Friday save for slightly softer than expected Canadian CPI. Fed-speak was all on song with regards to the likelihood of a mid-December Quarter-point Fed rate hike.
St. Louis Federal Reserve President James Bullard said the debate is now shifting toward the Fed’s rate path in 2017 and how Trump’s policies on taxes, infrastructure, spending and regulation will affect growth, productivity and ultimately Fed policy. “Markets are currently putting a high probability on a December move by the FOMC. I’m leaning towards supporting that”, Bullard said.
NY Fed President Bill Dudley said Friday the post-U.S. election market reaction is not concerning in terms of planned interest rate rises, because the Bond sell-off and Dollar rise appears motivated by expectations of new policies out of Washington.
Kansas City Fed President Esther George (of late a dissenter in favour of immediate Fed tightening) said the U.S. economy would benefit from the Federal Reserve raising rates sooner rather than later.
Today on the economic front we have no data of note due from either the Euro-Zone or the UK, with the only US data being the Chicago Fed National Activity Index at 1.30 pm.
Meanwhile Fed Vice Chairman Fisher will speak in New York at 1.00 pm on ”Long Term Challenges For The US Economy”.
December S&P 500
My S&P plan worked well for those members who bought the market at my initial 2178 buy level as the market subsequently rallied to a 2186 high print. However I was trying to be too clever in waiting for a dip to 2176 which did not happen and I am still flat. With this being ThanksGiving Week in which the US stock market will be closed on Thursday and only open for a half day on Friday trading will get thinner as the week goes on. Traditionally this is a bullish week for stocks and it is only a matter of time before we take out the 2193 all-time highs for the S&P. Today I will again look to buy the S&P on any dip lower to 2174/2180 with a 2169 stop. I still do not want to be short the S&P at this time despite the slowing momentum.
EUR/USD
The Euro traded lower to my 1.0575 buy level on Friday before having a nice rally this morning to a 1.0630 high print so far. As I wanted to be flat over the weekend I covered this position at my revised 1.0595 T/P level and I am still flat. The move lower from the 1.1330 high on the morning of November 9 has resulted in traders turning deeply pessimistic, as shown by the Daily Sentiment Index. Just 7% of traders think the Euro will rally, which is the lowest percentage sine the 1.0524 low on December 3, 2015. With sentiment so low we should see the start of a counter trend bounce which may have started this morning. For these reasons I will now look to buy the Euro on any dip lower to 1.0585/1.0615 with a 1.0545 stop.
December Dollar Index
It is a similar situation for the Dollar Index, but in the opposite direction to the Euro. The Dollar index carried to 101.48 on Friday resulting in the DSI jumping to 91% Dollar bulls, which is the highest level since the March 2015 high at 100.65. The Dollar closed at a new 13 ½ year high and I will be extra vigilante for signs that the Dollar’s bullish potential is now over. However I have to respect the fact that the Dollar closed over its 100.56 December 2015 high print and today I will still be a small buyer on any dip lower to 100.30/100.60 with a 99.90 stop. The Dollar’s next resistance is from 101.80/102.15 and I will be a seller in this area with a 102.50 stop.
December DAX
I am still flat the DAX and today I will lower my buy level slightly to 10535/10595 especially as I believe it is only a matter of time before the Euro breaks higher. I still do not want to be short the DAX at this time.
December FTSE
My FTSE plan worked well with the market trading lower to my 6730 buy level before having a nice rally to 6790 which enabled me to cover this position at my 6760 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 6720/6750 with a 6690 tight stop.
Dow Rolling Contract
The Dow traded in a very narrow range all week which is to be expected after its huge post-Trump victory rally and I am still flat. The McClellan Oscillator fell 18 points on Friday to close with a positive 69 print. As mentioned in my S&P commentary above the market will loose a lot of liquidity as the week goes on with most traders finishing tomorrow for the week. Today I will raise my buy level slightly to 18740/18810 with a 18690 stop. My only interest in selling the Dow is still on a rally higher to 19075/19140 with the same 19200 stop.
December BUND
My long 160.12 Bund position worked well on Friday with the market which thankfully traded around my buy level for a while after I posted before rallying strongly. This rally enabled me to cover my position too early at my 160.40 T/P level and I am now flat. To give you an example of the destruction in the US Bond market, the Long Bond which is a 30 year Bond has fallen over 25 full points since July which in percentage points is a 47% move. This move lower sees the DSI hit 4%, an extreme in its historic range. A counter trend rally should start soon or may have started late Friday. For these reasons I will now look to buy the Bund again on any dip lower to 160.00/160.35 with a 159.60 stop.
Gold Rolling Contract
I am still flat Gold which is also due a counter trend rally given its extreme DSI reading. Today I will raise my buy level to 1195/1203 with a 1188 stop.
Silver Rolling Contract
No change as I am still long Silver from last week at 16.95 with the same 17.10 T/P level. If I manage to T/P on this position, I will again look to buy Silver on any dip lower to 16.50/16.95 with a 16.25 stop, which is the same stop that I have on my current long position. The DSI for Silver has dropped to its lowest level since July 2015 which resulted in a huge move higher.
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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