As widely expected, in what was Fed Chair Yellen’s last attendance in that role, the FOMC has voted unanimously (9-0) to keep the Fed Funds rate steady at a range of 1.25-1.50%. (As part of the changeover process, Jerome Powell was also formally elected as the new FOMC Chair.) Changes to the statement released by the FOMC were more in the nature of a time/new year refresher, taking out the previous references to the expected impacts of the hurricanes and confirming the still expected further gradual removal of monetary accommodation. The statement described ‘’gains in employment, household spending, and business fixed investment as solid’’ with the unemployment remaining low.
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For anyone following my Platinum Service it made 9 points yesterday to finish January with a gain of 879 points, having made 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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The Fed still expect that with this further gradual removal of accommodation (further hikes, reducing the size of their balance sheet), growth will be moderate with a labour market remaining strong. They continue to expect inflation this year to rise and then stabilise at around the 2% objective. There is no sense in this Statement that they have made any material changes to the forecasts released in December when they last hiked rates. The Fed continues to see near term risks as balanced and there was no push back from market expectations that has the March 21 Meeting as delivering the next lift in rates (still fully priced). Move along, nothing to see here was my takeaway.
US Treasury yields pushed a little higher in the lead up to the FOMC announcement while stocks had regained their composure, an OK-to-positive data set out of the US, and after the Quarterly US Treasury refunding announcement.
ADP Employment came in on the strong side of expectations for January, printing at 234K (expected 185K) ahead of tomorrow’s Non-Farm Payrolls. The ADP report has had a less than stellar job in heralding the headline payrolls print and in any case, it is as much going to be about what the payrolls report says about earnings and what that portends for US inflation and the Fed. The Q4 Employment Cost Index revealed only the very mildest acceleration in employment costs through last year, rising 2.6% y/y, up from 2.2% through 2016, buying time for the Fed with its gradual removal of monetary accommodation. The Chicago PMI came in at 65.7 (f/c 64.0) ahead of this afternoon’s National ISM.
Finally Euro-Zone CPI came in higher than expected leading to a small sell-off in German Bunds.
This morning on the Economic Front we have German, Euro-Zone and UK Markit Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 12.30 pm by US Challenger Job Cuts. At 1.30 pm we have the Weekly Jobless Claims and this is followed at 2.45 pm by the Bloomberg Consumer Comfort Index and US Manufacturing PMI. Finally at 3.00 pm we have Construction Spending and ISM Manufacturing.
March S&P 500
After Tuesday’s wild trading session yesterday was mild in comparison. I am still flat and today I will now look to sell the S&P on any rally higher to 2844/2852 with a 2858 tight stop. My only interest in buying the market is still on a dip lower to 2798/2808 with a 2792 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2777/2785 with a 2771 stop. The McClellan Oscillator improved slightly to close at -168 last night and I am watching this key signal closely in case we spike below – 250 which will then set up the next advance of the US stock market.
EUR/USD
Unfortunately the Euro just missed my 1.2490 sell level with a 1.2475 high print before selling off and I am still flat. Today I will now lower my sell level to 1.2480/1.2525 with a 1.2555 stop which is just above last Thursday’s 1.2537 high print. Meanwhile I will leave my buy level unchanged from 1.2280/1.2320 with a 1.2250 stop.
March Dollar Index
The Dollar just missed my 88.55 buy level with a 88.62 low print before rallying strongly and I am still flat. With the Daily Sentiment Index at just 8% bulls I am still a buyer on dips especially if we can hold last Thursday’s 88.15 low print. Today I will now raise my buy level slightly to 88.20/88.65 with a 87.85 stop.
March DAX
The DAX continues to hold the key 13100/13200 support level. I am still flat and I will now raise my buy level to 13100/13175 with a 13050 stop.
March FTSE
On the back of Capita shares falling 40% the FTSE traded heavy all day with the market eventually hitting my 7480 buy level. As I wanted to be flat ahead of the FOMC I covered my long position at my revised 7489 T/P level and I am now flat. The FTSE has strong support at 7450 and today I will again look to buy the market on any dip lower to 7410/7455 with a 7375 stop. Given the fact that we are at the beginning of a new month I do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow which traded stronger than the S&P yesterday which is no surprise given the fact that we had a two day 700 point sell-off. Today I will raise my buy level slightly to 25980/26060 with a 25920 stop. I still do not want to be short the Dow at this time.
March NASDAQ
The NASDAQ continues to be the least volatile of the main US Indices. I am still flat and reluctant to chase this market higher. For this reason I will leave my buy range unchanged from 6855/6895 with a 6820 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 6695/6735 with a 6660 stop.
March BUND
This morning the Bund has traded the whole of my 158.45/158.75 buy range and I am now long at an average rate of 158.60. The US Bond market is now oversold with a DSI reading at just 13% bulls which is the lowest bullish reading in over six years. This morning we are trading just below the 200 Week Moving Average and I am going to give this trade some room by lowering my stop on this position to 158.05. If I am stopped out of this trade I will be a more aggressive buyer on any further dip lower to 157.60/158.00 with a 157.30 stop.
Gold Rolling Contract
I am still flat Gold and today I will now lower my sell level slightly to 1360/1370 with a 1378 stop. I still do not to be long Gold at this time.
Silver Rolling Contract
No change as my only interest in buying Silver is on a dip lower to 16.55/16.90 with a 16.25 stop and a 17.10 T/P level if executed.
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