Friday witnessed a fairly quiet end to what was a quite volatile week with both US and European stock indices closing virtually unchanged, the US Dollar extending gains before giving back a little into the NY close and Treasury yields drooping to be lower on the week across the yield spectrum. In stocks, competing influences from new highs for Microsoft but earnings related hits for GE and Daimler, while the two big M&A stories (AT&T’s bid for Time Warner and BAT for Reynolds) saw the target company stocks up but the predators down. The net result was the S&P 500 closing – 0.01% on the day (for a 0.4% gain on the week), the Dow – 0.09% (flat on the week) and the NASDAQ +0.3% (+0.8%). The VIX finished the week at 13.34, down 0.4 on the day and down from 16.14 a week ago, a fall of 17%. Earlier European stock indices closed fairly flat.
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 they can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 35 points on Friday and is now ahead by 1065 points for October having made 1142 points in September. The previous three months saw gains of 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.
In US rates the bear-steepening theme of recent weeks has been modestly reversed over the course of last week. On Friday US 2-year notes ended 0.4bp higher but are 1.2bps lower on the week and 10s -2.1bps to be -6.3bps on the week. 10-year German Bunds were 0.3bp higher for -5.2bps on the week and UK Gilts +1.0bp to be -1.0bp on the week.
In FX, the US Dollar was stronger across the board in G10 currency land with the exception of USD/JPY, -0.14% to Y103.80. DXY +0.39% to 98.695 for a gain of 0.7% on the week and its highest close since 2 Feb. BBDXY was +0.29% for a 0.1% gain on the week and its strongest close since 7 March.
CAD and NOK were Friday’s worse performers despite stronger oil, CAD’s fortunes not helped by weaker than expected Retail Sales and CPI data and which followed Wednesday’s admission by Bank of Canada governor Stephen Poloz that the Bank came close to cutting rates at its latest meeting. EUR/USD held the break below 1.09 to closer -0.41% at 1.0884 with GBP/USD also lower but less so, -0.16% to 1.2234 after an intra-day move back below 1.22. AUD/USD spent some time sub-0.76 before closing -0.25% at 0.7608 (it’s re-opened a touch firmer. The NZD/USD fell by 0.5% to 0.7161.
In commodities, oil recouped a little of Thursday’s slippage, WTI +$0.40 to $50.85 and a gain of 50 cents on the week. Brent added $0.50 to $51.92 but is 3 cents down on the week. Gold added 30 cents to $1266. The LMEX index lost 0.24% while iron ore was 10 cents lower at 58.72.
The bigger Australian commodity news was coal, with both steaming and coking coal benchmarks making new cycle highs. Coking coal +$3 to $232 a tonne and steaming coal shipped from Newcastle +$1.50 to $92.80. The improvement in Australia’s term of trade and driven by the black stuff, thus continues.
This morning on the economic front we have German and Euro-Zone Manufacturing PMI and Services/Composite PMI at 8.30 am and 9.00 am respectively. This is followed at 11.00 am by UK CBI Trends. At 1.30 pm we have the Chicago Fed National Activity Index. Finally we have the US Manufacturing PMI at 2.45 pm.
The Fed’s Bullard and Evans will speak on Monetary Policy at 2.05 pm and 6.30 pm respectively.
December S&P 500
My S&P plan worked well on Friday with the S&P trading lower to my average buy level at 2125.50 with a 2123 low print before having a nice rally which enabled me to cover this position at my revised 2131 T/P level and I am now flat. Volatility has folded over the past week as shown by the VIX which fell 17% to 13. The Daily Sentiment Index for Volatility has fallen to just 14% meaning 86% of traders believe that volatility will remain low. This is the last week for October and still the market refuses to break lower, despite having every chance to do so. My own view is that the Fed are yet again winning this battle and to me it is still only a matter of time before we break to new highs. Today I will again look to buy the S&P on any dip lower to 2127/2132 with a 2122 stop which is just below last Friday’s low print.
EUR/USD
Unfortunately I was stopped out of my long 1.0930 Euro position from Thursday afternoon at my 1.0880 stop and I am now flat. Given how oversold the Euro is trading plus the fact that the Euro has strong support from 1.0810/1.0845 means that I will be a buyer in this area with a 1.0775 stop.
December Dollar Index
The Dollar traded higher to my 98.80 sell level late on Friday and as I wanted to be flat ahead of the weekend I emailed my Platinum Members to exit this position for a small gain at 98.65 and I am now flat. Given how overbought the Dollar is as we approach the key 100.50 resistance level from December 2015 I will again look to sell the Dollar on any rally higher to 98.95/99.35 with a 99.65 stop.
December DAX
The weaker Euro is helping the DAX to rally as the market closed the week over the key 10680 pivot point thus enhancing the prospects of the DAX breaking higher to its next resistance at 10800/10830. A break and close over 10830 will see the 11,000 level tested quickly putting the Bulls firmly in control. Today I will move my buy level higher to 10610/10660 with a 10560 stop.
December FTSE
The FTSE again just missed my buy level before firming into the close and I am still flat. Today I will raise my buy level slightly to 6930/6970 with a 6895 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
My Dow plan worked well with the Dow trading lower to my average buy level at 18060 before having a nice 120 point rally. As I wanted to make up for my Euro loss above I emailed my Platinum Members to cut this position too early at 18075 and I am still flat. Incredibly the Dow has traded in just a 400 point range from 18000/18400 since September 9th. For the Dow to get going again on the upside we need to see the McClellan Oscillator start to break out as yet again it closed in negative territory on Friday with a -15 reading. Today I will again look to buy the Dow on any dip lower to 18030/180900 with a 17970 tight stop.
December BUND
No change as I am still a small buyer on any dip lower to 163.55//163.85 with the same 163.20 stop.
Gold Rolling Contract
No change as I am still flat and will again look to buy the market on any dip lower to 1249/1256 with the same 1241 stop which is just below the October low print from two weeks ago.
Silver Rolling Contract
I am still long Silver from a few weeks back at 17.85. I now have this position too long and given the fact that we are having a nice trading month I will use any rally higher to 17.70 to exit this position for a small loss.
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