Friday’s US Payrolls Report, did nothing to arrest the rise in Treasury yields and where 10s came within kissing distance of 3.25% for a 17bps rise on the week. Upward revisions to July and August payrolls of 87k more than offset the headline miss of 134k and the Unemployment rate fell to its lowest level since the Vietnam War (December 1969 to be precise). So despite another ‘’goldilocks’’ employment report (average earnings growth is still contained at 2.8%) the combination of rising yields and the ongoing reverberations from Thursday’s Bloomberg Big Hack story kept US equities pressured. The IT sector again lead the charge lower and ensured that the NASDAQ fell twice as much as the S&P500 for the second day running to be the second worst performing major global index on the week (-3.2%) after the smaller-cap Russell 2000 (-3.8%) though perhaps only because China was shut?.
To mark my 1675th 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 146 points yesterday and is now ahead by 267 points for October, having made 1276 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
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A continuation of the ongoing short covering rally in Sterling meant that the dollar lost a bit of altitude in index terms while AUD and NZD remain very much under the cosh, both making new lows for this run lower.
Yesterday, the PBoC announced an across-the board 1% cut to Reserve Requirement Ratios (RRR) effective October 15th, a move will inject a net 750 billion yuan ($109.2 billion) in cash into the banking system by releasing a total of 1.2 trillion yuan in liquidity, with 450 billion yuan of that to offset maturing Medium-Term Lending Facility (MLF) loans. The PBoC claims The RRR cut would not create depreciation pressure on the yuan, saying the central bank would keep the foreign exchange markets stable. Let’s see.
Currencies
For the second day in succession, Sterling was the best performing G10 currency Friday as optimism toward striking a Brexit Withdrawal Agreement acceptable to both sides continues to drive short covering in all things GBP. The AUD and NZD lost further ground to again be the worst performing currencies, AUD to a low of 0.7043 (closed in NY at 0.7052) and NZD to a low of 0.6432 (closed at 0.6443). CAD outperformed both AUD and NZD but was still down on the day despite a consensus busting 63.3 jump in employment, impact softened by the full time/part split of -16.9k/80.2k.
Sterling strength, along with minor gains for JPY and EUR, ensured the DXY had a small down day and BBDXY a bigger one, the latter thanks to negative contributions from MXN, CAD and KRW in particular. KRW, THB and IDR against led losses for the ADXY and which was 0.1% lower on the day. The Antipodeans are the worst performing currencies on the week, Aussie down 2.38% and the Kiwi 2.66%. USD Indices are just over half a percent up and ADXY almost a percent lower.
Equities
Friday saw a repeat of Thursday’s IT sector led losses sparked in part by the Bloomberg ‘’Big Hack’’ report (in which respect note the US Department of Homeland security has been out saying it has no reason to disbelief the denials by Apple and Amazon that their computers had been compromised). The NASDAQ was -1.16% against -0.55% for the S&P with the IT sector down 1.3% within the S&P500. China was shut all week of course and there will be keener than normal interest in how Shanghai opens up this morning on the back of opposing forces weaker global stocks but Sunday’s RRR news.
Bonds
After some initially whippy bond price action immediately out of the payrolls report, Treasury yields continued their March higher, 10s to a high of 3.246% and ending the NY day at 2.2328%. 2s hit 2.8973% before settling at 2.885%: On the week, the significant bear-steepening theme was very much in evidence, with 2s +6.6bp, 5s +11.6bps, 10s +17.2bps and the 30 year up a heady 19.9bps.
Commodities
Another good day for iron ore and metallurgical coal to round out a strong week for both steel-making components (China production curbs not yet in evidence) while aluminium gave back some of the mid-week gains sparked by fears of a shutdown of the Norsk Hydro plant in Brazil. Copper had another down day to cap a down week and where sharply rising US bond yields look to be taking a toll.
WTI crude was flat and Brent lower Friday (following sharp falls in both on Thursday on reports from Saudi Arabia that OPEC could pump as much as another 1.3mn bpd if there is demand for it). Both crudes are still higher on the week, by 1.5% (WTI) and 1.75% (Brent).
Central Bank speak
NY Fed president John Williams on Friday reiterated his view that the U.S. is enjoying a ‘’Goldilocks’’ economy. The jobs data is ‘’a continuation of a strong U.S. economy’’ that shows ‘’good momentum going forward,’’ Mr. Williams said in an interview on Bloomberg’s television channel. ‘’This is a bit of a Goldilocks economy’’ where growth is strong and sustainable amid an absence of big upward inflation pressures.
The rock-bottom level of the Jobless rate will like fall further and go under 3.5% at some point next year, Mr. Williams said. But he is not worried that the super low Unemployment rate, which historically would be a significant factor that could push inflation up, is a problem. He said of the 3.7% jobless rate: ‘’It does not scare me at all. It is great for the American people.’’ Williams said the Fed has a ‘’ways to go’’ before its rate rises move from being stimulative of the economy to a level that is neutral.
Economic Data
US September Non-Farm Payrolls 134k (185k E)
August NFP revised to 270k from 201k, July revised to 165k from 147k (net +87k)
US September Unemployment rate 3.7% – lowest since 1969 (3.8%E, 3.9%P)
US September Average Hourly Earnings 0.3% m/m (0.3%E, 0.3%P revised from 0.4%)
US September Average Hourly Earnings 2.8% y/y (2.8%E, 2.9%P)
US September underemployment rate 7.4% from 7.4%
US September participation rate 62.7% (62.7%E, 62.7%P)
US August Trade Balance -$53.2bn (-53.6bn E, -50.0P revised from -50.16bn)
This morning on the Economic Front we have German Industrial Production at 8.00 am. With the US Markets closed for the Columbus Day Holiday there is no US Data. Finally the Fed’s Bullard is speaking in Singapore at 10.30 am.
December S&P 500
Another wild trading session for the S&P which started strong before getting hit hard to test its 50 Day Moving Average at 2880 before turning around to rally over 25 Handles off the low. When the markets started to turn lower I emailed my Platinum Members to lower their S&P buy level to 2892 before exiting this position at 2895. Subsequently I emailed my Platinum Members to be a more aggressive buyer at 2879 before exiting this long position too early at 2883 and I am now flat. Last week the S&P had a Key Downside Week Reversal which is rare and a worry. So far we had a nice bounce off the 50 Day Moving Average but this KWR could be a game changer and has to be respected. Today I will look to sell the S&P on any rally higher to 2910/2920 with a 2926 stop. Given the importance of the 50 Day Moving Average I will be a buyer on any dip lower to 2868/2875 with a 2861 tight stop.
EUR/USD
I am still flat the Euro and today I will now raise my buy level slightly to 1.1410/1.1450 with a 1.1370 stop.
December Dollar Index
No change as I am still a seller on any rally higher to 95.90/96.30 with the same 96.65 stop.
December DAX
My DAX plan worked well with the market trading lower to my 12130 buy level before rallying to my revised 12158 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the DAX on any dip lower to 11880/11950 with a 11820 tight stop. Given how oversold the DAX is trading I still do not want to be short the market at this time.
December FTSE
After the FTSE traded lower to my 7330 buy level I emailed my Platinum Members to exit any long position at 7345 as I wanted to be flat into the NFP data and I am now flat. The rebound in Sterling had the FTSE on the defensive for most of Friday afternoon. The FTSE has good support from 7190/7230 and today I will be a buyer on any dip to this area with a 7155 stop.
Dow Rolling Contract
I did not like the price action in the Dow on Friday and after the market traded lower to my initial 26500 buy level I emailed my Platinum Members to exit any long position at 26510 and I am now flat. The next support level for the Dow is at 26220 which must hold or else we may see an acceleration lower to the next major support level from 25700/25875 where I will be an aggressive buyer with a 25550 stop. For today I will be a small buyer on any dip lower to 26150/26250 with a 26080 tight stop.
December NASDAQ
My NASDAQ plan did not work well on Friday. As so many of my Indices hit at the same time I waited to buy the NASDAQ at the bottom of my range at 7400 before quickly being stopped out of this trade at 7365 and I am now flat. The 7400 is a pivot point for the market. If the NASDAQ leaves a buy extreme off this level then this is bullish for a move higher for 7500 and 7590. On the other hand if the market builds value below 7400 it is bearish for 7335, 7260 and possibly 7150. For now I am going to stay on the sidelines to see how this plays out.
December BUND
My Bund plan worked well with the market trading lower to my 157.40 buy level late on Friday before rallying to my revised 157.68 T/P level this morning and I am now flat. Today I will again look to buy the Bund on any dip lower to 156.90/157.30 with a 156.55 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1178/1186 with a 1171 stop.
Silver Rolling Contract
My rush of blood to the head when I bought Silver last week at 14.87 is certainly proving costly. I am still long with the same 14.38 stop. I will now look to exit this trade on any move higher to 14.70 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
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