Following the decision by the FBI to clear Hillary Clinton on the classified Emails with a letter to Congress just before the US Markets opened last night the S&P subsequently opened 1.2% higher while the US Dollar rallied by 0.7% reversing losses sustained lat Friday. This is a very significant development and will obviously help Ms Clinton’s chances to become President in tomorrow’s Election.
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 session. This offer is open to both new and existing members and if anyone is interested you can contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 118 points on Friday and is now ahead by 311 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.
Modest Dollar strength and higher Treasury yields was the initial response to the US payrolls data but proved fleeting. After 44k of upwards revision to September and August the 161k October NFP headline was a bit better than the 173k consensus. Unemployment fell to 4.9% from 5.0% as expected. The standout feature of the report was the rise in annual average earnings to 2.8% – a new cycle high.
Pre-election ‘risk-off’ sentiment and flows dominated the remainder of Friday’s US session, albeit there was no specific election related headlines to steer markets. RealClear Politics poll-of-polls as of Friday night had Clinton 46.6/Trump 44.9 (meaning too close to call) and as of now, its 46.6/44.8 after three weekend polls, one of which (LA Times) has Trump 5 point ahead and one (NBC/WSJ) Clinton ahead by the same margin. Hillary was last seen heading to Michigan for an impromptu stop-over in an effort to shore up get poll standing (she leads there by 4-5 points in latest state polling). However with the FBI dramatically clearing Clinton last night we have no updated polls since this announcement.
Friday’s markets encompassed a 9th successive down day for the S&P – for the first time since 1980. After grinding out a 12 point gain in the post-payrolls morning session, the S&P gave it all back in the afternoon to finish 0.17% lower at 2085.18. The VIX added another 0.43 to 22.51, also its ninth successive rise and to the highest since the day of the ‘Brexit’ vote.
In US rates, mild bull flattening proved to be the order of the day after an initial +/-2bps jump in yields on the payrolls headlines. 2yr Treasuries ended 2.3bps lower at 0.785% and the 10-year -3.5bps at 1.78% .
In FX, most pairs moved in accordance with the US political risk playbook, the US Dollar softer overall with the DXY – 0.27% and the broader BBDXY -0.21%. USD/JPY was – a little surprisingly – also up (Y103.12, +0.14%). EUR/USD was +0.32% to 1.1141 and USD/CHF -0.56% to 0.9684, confirming themselves as likely beneficiaries in the event of a Trump victory, though USD/JPY will doubtless would be a big part of the reaction as well. Sterling continued to benefit from short covering in the wake of Thursday’s judicial ruling re triggering Article 50, GBP/USD +0.45% to 1.2517.
In commodities, oil was lower with WTI down another 60 cents to $44.07 and Brent -80 cents to $45.60. Gold gained another 41.20 to 1304.50 while iron ore was down 50 cents to $65.00. Coal continues to do no wrong, steaming coal +$2.15 to $108.65 and coking coal up another $3.50 to a new cycle high of $257.00.
Commenting after the US data, Fed vice chair Stanley Fischer said the economy could “to some extent exceed our employment and inflation targets,” in remarks that could be viewed as implying some tolerance for overshooting its goals to coax out more investment and hiring (and in keeping with Fed chair Yellen’s ‘high pressure economy’ remarks of a few weeks ago). At the same time he noted – seemingly with approval – that markets put the probability of a December hike at above 70%.
Dallas Fed President Robert Kaplan re-iterated a view that the Fed can afford to be patient in removing accommodation but that the Fed is making good progress towards its dual mandate, that the case for removing accommodation is strengthening and that some removal of accommodation would be appropriate.
Atlanta Fed President Dennis Lockhart told reporters on Friday that ‘There’s a relatively high bar, at least in pure economic terms, a relatively high bar to not moving in December,” but added that “There are other things that go on in the world that could give pause and I don’t completely rule them out,” he said, without providing specifics. We can all think of at least one thing he has in mind.
This morning on the economic front we already had the release of German Factory Orders which came in weaker at -0.6 versus +0.2 expected. At 9.30 am we have UK Halifax House Price Index and Euro-Zone Sentix Investor Confidence. This is followed at 10.00 am by Euro-Zone Retail Sales. Finally we have US Labour Market Conditions Index Change and Consumer Credit at 3.00 pm and 8.00 pm respectively.
December S&P 500
My S&P plan worked well on Friday with the market initially trading lower to my 2079 buy level after the NFP was released before rallying to 2094 only to sell-off into the close on nervousness ahead of tomorrow’s Presidential Election. This rally enabled me to cover my long position at my 2085 T/P level and I am now flat. As I mentioned in the economic commentary above Friday was the ninth consecutive lower close for the S&P, a streak that last occurred 36 years ago in 1980. However a closer look at the internals of the US stock market would have predicted a short snappy rally has seen overnight. Yet again the McClellan Oscillator is a fantastic technical signal. As mentioned on Friday the MO actually improved on Thursday despite the S&P sell-off and this trend continued on Friday with the MO closing 40 points better at -180 despite the late sell-off in the market. I think Hillary will win the election now as Trump has too many key States to win. This will give the market a short-term boost before selling returns. The S&P needs to break the key 2114/2118 resistance level before buyers can be comfortable in returning to the market. Today I will again look to buy the S&P on any dip lower to 2091/2097 with a 2085 stop. My only interest in selling the market is on a further rally higher to 2131/2138 with a 2143 stop.
EUR/USD
I am still flat the Euro which is trading lower after Friday’s late spike. The key support for the Euro is from 1.0970/1.1000 and today I will lower my buy level to 1.0990/1.1030 with a 1.0955 tight stop. I still do not want to be short the Euro at this time.
December Dollar Index
No change as I am still a seller on any rally higher to 98.15/98.45 with a lower 98.80 stop. Remember the Dollar has to break and close over the December 2015 high at 100.50 for me to turn bullish.
December DAX
My DAX plan worked well on Friday with the market trading lower to my 10210 buy level ahead of the NFP data. As I wanted to be flat ahead of this release I covered this position at my revised 10245 T/P level and I am now flat. Thankfully we had no sell levels across any of my Indices over the last few days as I was fearful of a large rally occurring ahead of tomorrow’s US Election. For anyone who held their DAX position over the weekend then you had a huge 200 point gain. Today my only interest in buying the DAX is on a dip lower to 10250/10310 with a 10200 stop. I still do not want to be short the DAX at this time.
December FTSE
Unfortunately I was stopped out of my long 6740 FTSE position at 6685 on Friday morning. Given how oversold the FTSE was trading and the fact that we were at the bottom of the Bollinger Band and Williams Index, I emailed my Platinum Members to re-buy the FTSE at 6650. This position was retained over the weekend and exited last night at 6705 and I am now flat. With Sterling opening weaker this morning the FTSE is again trading higher. Today I will look to buy the market on any dip lower to 6670/6710 with a 6625 wider stop.
Dow Rolling Contract
Unfortunately the Dow just missed my 17840 buy level with a 17880 low print on Friday and I am still flat. Thankfully with the huge rally that has ensued, we had no sell levels for this market. The rally over night puts the Dow back above the key 18000 resistance level which should now act as good support into tomorrow’s election. For this reason I will now raise my buy level to 17970/18040 with a 17920 stop.
December BUND
I am still flat the Bund and today I will now raise my buy level slightly to 161.35/161.75 with a 160.95 wider stop.
Gold Rolling Contract
As I am now long Silver I will reduce my Gold buy level to 1270/1277 with a 1263 stop.
Silver Rolling Contract
My Silver plan worked well on Friday with the market trading lower to my 18.20 buy level before having a nice rally which enabled me to cover this position at my revised 18.43 T/P level. With Silver opening lower last night I emailed my Platinum Members to re-buy the market at 18.16. I am still long with a wider 17.45 stop. The 17.90/18.20 area is crucial for Silver as a break and close over this level that holds for a few days should eventually lead to the next leg higher for Silver.
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