OPEC has by all accounts struck a production deal to limit its overall output to 32.5 million barrels (a drop of 1.2million barrels) and Russia will reportedly join in with a 600,000 barrel a day cut. Iran and Saudi Arabia are said to have agreed that Iran’s output can rise to 3.8mn barrels (an increase of 90,000 barrels) and Iraq has apparently agreed to curb production. All up, a supply agreement along these lines if honoured would reduce global oil supply by just under 2%. Full details are still awaited at time of writing. But for oil producing nations at least, the hope must be that the Ultravoxx’s line that “This means nothing to me, oh Vienna” doesn’t prove prophetic.
To mark my 1225th 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 205 points yesterday and to close November with a 1971 point gain 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.
Oil is currently up over $4 or more than 9%. Global market impact of the OPEC news has been electric and is most evident in US bond yields and global energy stocks. The S&P energy sector sub-index closed up just over 5% but the majority of others sector are down led by a 2.7% fall for utilities (higher heating and air conditioning bills on the way) and consumer discretionaries (higher petrol price coming to a gas station near you). This leaves the overall S&P500 closing down 0.27% led by a 1% fall in the NASDAQ.
US 10 year Treasury yields closed 10 8bps higher at 2.37% having been briefly back above 2.40%. Most of the move is attributed to higher inflation expectations/break-evens. Fed funds pricing for 2017 has lifted only very slightly, with 64bp of Fund rate increases prices between now and the end of next year. This is still below the Fed’s most recent median ‘dot plot’. That may well have to change and is a key factor beyond our expectation for further US Dollar strength next year if not before. The BBDXY Dollar Index closed 0.4% higher on Tuesday’s close.
US data has been helpful to the cause of higher Bond Yields and a higher US Dollar alongside oil. In particular the 216k rise reported by ADP for private employment in November removes much of the risk of a dramatically weaker than expected print for official Payrolls tomorrow. We also had a big jump in the Chicago PMI (57.2 from 50.6) but this will have been inflated by Boeing orders. The Fed’s preferred core PCE deflator measure of inflation meanwhile stuck at 1.7% as expected.
Oil aside, commodity prices are mostly weaker including another $14 drop in the gold price and $5.22 in iron ore, now back to $72 from above $80 earlier in the week. This has left the AUD as the second weakest G10 FX performer overnight, -1.27% to back below 0.74 (0.7390). The currency was already on the back foot yesterday after the weak building approvals data spared us a push back above 0.75.
USD/JPY was the biggest mover yesterday, fully consistent with the move in US-Japan yields spreads, making a new post-Trump election high of ¥114.70 overnight before drifting back and is currently trading at 113.95. CAD and NOK are, unsurprisingly, the only two currencies have gained against a generally stronger Dollar.
This morning on the economic front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Unemployment Rate. At 12.30 pm we have US Challenger Job Cuts followed by the Weekly Jobless Claims at 1.30 pm. Next we have US Manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have Construction Spending and ISM Manufacturing.
This afternoon the Fed’s Kaplan and Mester are speaking at different conferences.
December S&P 500
Unfortunately the S&P just missed my 2216 sell level with a 2213 high before reversing lower in what turned out to be a fairly dramatic trading session with 8 of my 9 market calls getting hit. The latest of these was the S&P which produced a negative candle yesterday to finally hit my 2195 buy level overnight. As I wanted to be flat ahead of my Daily Commentary, I emailed my Platinum Members to cut this position at 2198 and I am now flat. Normally I would send 2/3 updated emails on a Daily basis but yesterday I had to send 6 given the volatility. As I have consistently mentioned a Trump victory is the best news for markets in many years. The S&P has support at 2188 and strong support at 2182 and today I will again look to buy the market on any dip lower to 2182/2188 with a 2177 stop. Given the extent of yesterday’s reversal which just missed been a Key Day Reversal by 2 points I will now lower my sell level to 2210/2216 with a 2221 stop.
EUR/USD
My Euro plan worked well with the Euro hitting my 1.0590 buy level before bouncing which enabled me to cover this position at my revised 1.0610 T/P level. I emailed my Platinum Members to re-buy the Euro which I did at 1.0560 before also covering this position for a small gain at 1.0585 and I am now flat. As I had so many open positions at the one time this was the main reason for T/P early. Yesterday the Euro bottomed at 1.0551 which is just below the twice tested 1.0560 bottom from the previous two days but above the 1.0517 low print form last week. Remember we still have a large negative divergence versus the Dollar Index which remains well above its March 23, 2015 high at 100.65. However while the Euro holds above its equivalent low at 1.0462 it is difficult to be short especially given the single digit DSI reading. Today I will again look to buy the Euro on any dip lower to 1.0550/1.0590 with a 1.0510 stop.
December Dollar Index
My Dollar plan worked well with the Dollar trading higher to my 101.80 sell level before reversing lower to a 101.18 print overnight. This sell-off enabled me to cover my short position at my revised 101.50 T/P level and I am now flat. The Dollar is in the latter stages of the rally from the 95.95 low post the Trump victory. Today I will again look to sell the Dollar on any rally higher to 101.70/102.10 with a 102.40 stop.
December DAX
Yet again the DAX traded in a narrow range with the market finally hitting my 10570 buy level this morning. Thankfully the DAX has just bounced to hit my 10625 T/P level and I am now flat. The DAX has good support at 10470/10520 and today I will be a buyer in this area with a 10420 stop. I still do not want to be short the market at this time, especially ahead of the Italian Referendum on Sunday.
December FTSE
The FTSE was the only trade that did not hit yesterday. The FTSE chart is a mess. It is just erratic and directionless. Up for a day or two, down for a day or two, but stuck in a 150 point range of 6727/6873 for over three weeks. Today I will leave my buy level unchanged at 6715/6745 with a 6685 stop which is juts below the key 6700/6725 support level. Remember a break and close below 6690 is a sell signal.
Dow Rolling Contract
My Dow plan worked really well with the market trading higher to my 19215 sell level with a 19224 high print before reversing lower. Again as I had so many positions hit I covered my short position too early at 19185 and I am now flat. The Dow was the only US Index to close higher yesterday and today I will again look to sell the market on any rally higher to 19200/19270 with the same 19340 stop. Given how overbought the Dow is trading I do not want to be long the market at this time.
December BUND
My Bund plan did not work well yesterday as the market had a large downside Key Day Reversal with the Bund closing near its lows. Importantly the key 161.20/161.30 support level was easily broken. Today I will be a seller on any rally higher to 161.15/161.45 with a 161.70 stop. The key level to watch for the Bund on the longer term chart is the 5 year trend line support at 158.85/158.95 as a break and close below here will imply the whole bond bull market is over. Today my only interest in buying the Bund is on a dip lower to 159.50/160.00 with a 159.25 stop.
Gold Rolling Contract
Initially my Gold plan worked well but you had to be quick as after Gold traded lower to my 1180 buy level the market bounced to 1188 which enabled me to cover this position at my revised 1184.50 T/P level as outlined to my Platinum Members and I am now flat. Overnight Gold traded to a 1161 low before bouncing. Yesterday Bloomberg reported that precious metals Exchanged-Traded Funds experienced the largest redemptions among all asset classes tracked in November. So far, SPDR Gold Shares are experiencing an outflow of $2.22 billion, which is the largest monthly decline since 2013. These are conditions that one expects to see at or near a low, as investors capitulate to the prevailing trend. In my opinion Gold and Silver are near a tradeable low. Today I will again look to buy Gold on any dip lower to 1155/1165 with a 1147 stop.
Silver Rolling Contract
No change as I am still long at 16.65 with the same 16.85 T/P level and 16.20 stop which came close to getting filled overnight before following Gold 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 tomorrow Friday December 2nd from 10.00 am to 4.30 pm. This is a great chance to meet fellow traders with some travelling from London and Holland for this event. We only have a couple of places left and 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
Recent Comments