An early-day bounce in US stocks following New York Fed’s John Williams CNBC interview (see below) proves to be of the (very) dead cat variety The S&P closes down 2.06% (-7% on the week, -9.6% YTD). DJIA -1.81% (-9.2% YTD). NASDAQ -2.99% and -8.3% YTD but -21.7% versus 30th August 2018 highs and so in bear market terrain (>20% down from prior high). Meanwhile The VIX adds 1.73 to 30.1, to its highest (and first time above 30) since 9th February. A partial government shutdown commenced on Friday after the Senate failed to give President Trump his $5bn worth of wall funding. 420,000 government employees to work without pay, 380,000 furloughed (forced to take unpaid leave). Thursday is the absolute earliest that the shutdown could be resolved, but realistically it looks unlikely before the New Year.
To mark my 1725th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 300 points on Friday and is now ahead by 2755 points for December, having made 1541 points in November, 2094 points in October, 1279 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
Last Thursday’s resignation of the highly respected Defence Secretary Jim Mattis on fundamental differences with Trump, and who will now leave two months earlier than planned on Dec 31st, at Trump’s behest, follows the earlier resignation of John Kelly as Trump’s chief of staff. It provides more than enough fodder for perceptions of chaos and instability in the White House. At the same time, the government shutdown offers a true foretaste of what lies ahead once the new Congress in sworn in on January 3rd. The US debt ceiling is set to be re-imposed on March 1st 2019 and will almost certainly provide another flashpoint regarding Trump’s wall-funding (and other demands) assuming it has not been put to bed earlier. To this we now add Friday’s Bloomberg reports that Trump had been sounding out Fed officials on whether he could fire Fed Chairman Jay Powell (to which Treasury secretary Steve Mnuchin has taken to twitter to say Trump is not considering firing him even if he could and where the advice is reportedly that he cannot). .
John Williams – doubtless one of the three FOMC members we should listen to besides chair Powell and vice-chair Rich Clarida, arranged himself onto CNBC Friday morning to say the Fed was going into 2019 with ‘’its eyes wide open’’. Williams was at pains to point out how good the economic data looked to the Fed this week, but also stressed the significance of the tweaks to the language in the Fed statement. In particular, he wanted his audience to know that saying the Fed ‘’judges’’ (that some further gradual increases in rates, etc…..) is not the same as saying the Fed ‘’expects’’. He also stressed the insertion of ‘’some’’ in front of ‘’further’’ and the addition to the statement of the sentence about monitoring global economic and financial developments.
As an exercise in damage limitation, Williams’ interview was an abject failure, the S&P falling by more than 3.5% after initially rallying by some 1.5% immediately following the interview.
Currencies
In FX the DXY USD index added 0.7% to 96.96; EUR/USD was the biggest contributor to the gain (-0.65% to 1.1372) but AUD was the biggest G10 loser -0.95% to 0.7040 (and closing in NY pretty much on the lows). Sterling ended the week with one of its quietest trading sessions in many weeks
Economics
Meanwhile Economic data that played to the market’s slowdown fears came in the form of Durable Goods Orders, +0.8% against 1.6% expected and -4.3% previously. Ex-transport orders fell by 0.3% (+0.3%E) and capital goods order ex defence ex-aircraft – the better underlying measure – by a bigger 0.6% (+0.2%E).
Q3 US GDP was revised to 3.4% from 3.5% (3.5%E)
The November core PCE deflator printed 0.1% (0.148% unrounded) against 0.2% expected but yr/yr rose to 1.9% from 1.8% as expected.
Personal Income 0.2 (0.3%E) and Personal Consumption 0.4% (0.3%E)
On the bright side…..
The final University of Michigan Consumer Sentiment Index came in at 98.3 versus a preliminary 97.5 (and 97.5 expected). No sign here of stock markets negatively impacting sentiment. It might come January though.
And more importantly for Australia, China’s Central Economic Working Conference (CEWR) ended Friday with a commitment to ‘’stabilising aggregate demand’’ through ‘’countercyclical policy adjustments’’, pledging ‘’pro-active fiscal policy’’ and ‘’prudent monetary policy’’ (not ‘’prudent neutral’’ policy as previously stated.)
With European Markets closed today for the Christmas Holidays we have no UK or Euro-Zone Economic data. The US Markets are open for a half-day with the Chicago Fed National Activity Index the only data due and this will be released at 1.30 pm.
March S&P 500
Friday was one of the most volatile trading sessions of the year to date which is some achievement given what has already happened in this market over the past 10 weeks. Initially after I posted the S&P traded lower to my 2571 buy level before rallying to a rebound high of 2606 on the CNBC Interview with Williams. This move higher enabled me to cover my long position too early at 2578. Subsequently I emailed my Platinum Members to buy the S&P again at 2562 with a 2571 revised T/P level and I am now flat. The Dow and S&P had their worse trading weeks since 2008 with falls of 7%. The market is extremely oversold with the McClellan Oscillator closing at -300, while the Fear & Greed Index closed at one of its lowest reading in history with an Extreme Fear print of 3. On top of this the Daily Sentiment Index closed at just 8% bulls for the fourth consecutive trading session. Yesterday I spent a lot of time researching the S&P. The market made three tradeable lows of 2390 and 2410 between May and August 2017 and this area should now act as strong support. Obviously the partial shut-down of the government is hot helping and was responsible for the last 40 Handle sell-off in the market into Friday’s close. Today I will be a buyer on any further dip lower to 2385/2402 with a 2375 stop. As this is my last report until next Monday the next strong support levels below here are at 2300/2325 and 2220/2260 where I will be an aggressive buyer with a 2190 wider stop. The S&P has strong resistance at 2600 but given the time of year plus how oversold the market is trading I do not want to be short the S&P at this time. Remember everytime the MO prints anywhere near -300 the market subsequently has a ferocious rally.
EUR/USD
Contrary to my expectation the Euro got hit hard on Friday trading the whole of my buy range for a now average long position of 1.1397. I am still long and I will now lower my T/P level on this position to 1.1410 with a now higher 1.1345 stop.
March Dollar Index
The Dollar traded higher to my 96.50 sell level. I am still short and I will now raise my T/P level on this position to 96.25. Meanwhile I will lower my stop on this trade to 96.75.
March DAX
The official DAX Market is now closed until Thursday and I am still flat. The spreadbetting firms are still making market in the DAX. Overnight the DAX did trade into my buy range at 10480 before rallying 100 points. If you did take this trade I would take your gain and stand aside which I will do until I return next Monday.
March FTSE
My FTSE plan worked well with the market trading lower to my 6595 buy level before rallying to my 6625 T/P level and I am now flat. The FTSE closes at 12.30 pm today and will not re-open until Friday. As a result I will also stay flat the market.
Dow Rolling Contract
The Dow has traded in a 1000 point range since I posted last Friday. Shortly after I posted the market traded lower to my 22900 buy level before rallying over 350 points and this move higher enabled me to cover this position too early at 22950. I emailed my Platinum Members to buy the Dow again at an average rate of 22740 before thankfully emailing them to lower their T/P level to 22800. After this level was hit the Dow fell almost 500 points into the close. The Dow is now extremely oversold for all the reasons mentioned in my S&P Commentary above. As I am now closed until next Monday my only interest in buying the Dow is on a further plunge lower to 21890/22150 with a 24750 stop. If the market continues to crash during the week I will be an aggressive buyer from 19500/19950 with a 19150 wider stop.
March NASDAQ
The NASDAQ has traded the whole of Friday’s buy range for a now average long position at 6085. I am still long and I will now raise my stop on this position to 6005 while lowering my T/P level to 6150. If any of the above levels are hit I will be back with a new update for my Platinum Members.
March BUND
The BUND is closed today and as mentioned on Friday I will have no new update in this market until the New Year.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1235/1243 with the same 1228 stop.
Silver Rolling Contract
Shortly after I posted on Friday Silver traded lower to my 14.65 buy level. I am still long and I will now lower my T/P level on this position to 14.95 with the same 14.10 stop.
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