On the last day of what has been an extraordinary month for volatility in equity markets, the Global Stock Indices have rallied in size, kicked off in Asia yesterday on hopes of a Trump-Xi trade ‘’great deal’’, and given a further push from a market looking for good news from Facebook that released after the US markets closed on Tuesday. Remember too that with the capitulation in stocks last month, funds likely had to rebalance their portfolios at the end of the month to lift their exposure to equities, that exposure restrained by lower prices. The FAANG stocks closed up in size last night, the FAANG Index by 3.59%, limiting the loss for October to 7.21% and for the Nasdaq to a decline of 9.20%, up 2.01% by the close. The S&P 500 is up 1.09% and down 6.94% for the month. European Equities had an equally positive finish to the month. Meanwhile we saw some Sterling short-covering rally spurred by UK Brexit Secretary Raab letter claiming a deal will be done by Nov 21; EU mood music also supportive.
To mark my 1700th 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 was flat again yesterday and closed the month of October with a gain of 2094 points, 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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Currencies
The USD has only made small incremental net gains on a DXY/BBDXY basis. Notwithstanding the risk-on rally in size, the AUD remains below 0.71, trading at 0.7077 this morning and not able to recapture 0.71 again, though it did briefly spike to 0.71, only to relent. Yesterday’s headline CPI had a soft edge to it, headline CPI missing by a tenth, and annual underlying CPI still at 1.8%, June quarter annual growth also revised down by a tenth. That was immediately followed by softer than expected China PMIs, the AUD pulling back as a result from earlier near-0.71 levels.
Despite the de facto risk on mood of markets, the AUD has failed to regain a 71 handle, likely held back by some continued volatility in the USD/CNY(CNH) testing higher, the market testing the nerves of the Chinese monetary authorities that have drawn a line in the sand at 7. USD/CNH is trading at just below 6.98 this morning. There are signs the Chinese authorities are taking steps to tighten liquidity in the offshore CNH market (making it more expensive to short the CNH) by increasing bill sales.
The big currency mover has been Sterling, Cable up 0.51% on a short-covering rally from hopes of a Brexit deal as the 11th hour approaches. (Haven’t we heard that refrain before?) This time it was a letter from UK Brexit Secretary to the UK cross-bench Parliamentary Committee on exit from the EU that a deal will likely be done by November 21, Raab saying he would be happy to then appear before the Committee. There was a departmental clarification that there is ‘’no set date for negotiations to conclude’’, but this news was enough to flush out some Sterling shorts. Whether a deal can be done, perhaps the backstop of a temporary customs union for the UK to essentially kick the can down the road further – thus avoiding a physical border in Ireland and satisfy all sides, only time will tell. If there is one done, then there could be quite some rally.
Economics
Data released yesterday was largely taken in its stride and not having a large market impact. There was a reminder of potential investor wage inflation nerves being frayed ahead of tomorrow’s Non-Farm Payrolls with a bounce-back in the US Employment Cost Index for Q3 that rose a stronger than expected 0.8%/2.8%, the market expecting 0.6%. The upside surprise came from wages and salaries that rose 0.9% after 0.5%, reversing what was an unexpectedly low print in Q2. Nothing too much to alarm investors that wage inflation is racing away, but this measure is increasing towards 3%, the ECI at 2.8% in Q3 in annual terms, wages and salaries up 2.9%. It is onward now to average hourly earnings tomorrow afternoon.
The EC CPI release for Oct was in line with expectations, headline CPI at 2.2% and the core CPI back up to 1.1% from 0.9%. The EUR was largely unmoved overall, drifting off somewhat, after initially lifting earlier in the session.
Bonds/Treasury Refunding Announcement
With equities back in the ascendancy, for the day anyway, it is not surprising that bond yields have pushed back up, but to a rather modest extent, and also not frightened by another increase in the US Treasury’s Quarterly refunding announcement, the largest since 2009!, nor to the extent of end-month rebalancing selling of bonds back into equities. The 10 year US Treasury is up 2.65bps to 3.1492%.
Commodities
The story for the hard commodities in Asia yesterday and overnight has been mixed to softer. LME base metals lost some ground, copper down 0.66%, oil is softer, as is gold. The bulks were mixed yesterday, Dalian iron ore little changed as was steel rebar futures.
This morning on the Economic Front we have UK Manufacturing PMI at 9.30 am and this is followed at 12.00 pm by the Bank of England Rate Announcement. The BoE will give its Quarterly Inflation Report while Governor Carney will host a press conference after the announcement. Next at 1.30 pm we have the US Weekly Jobless Claims followed by Manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have Construction Spending and the ISM Manufacturing.
December S&P 500
The JP Morgan Report that I shared with all members over the past 48 hours was key to yesterday’s massive rally in the US Indices although the shine was taken off the S&P with its late 30 Handle fade from its 2737 late afternoon high print. I am still flat as the S&P never came close to my buy level as I wanted to protect the excellent gains made for October in what turned out to be the most volatile month ever for the S&P in points terms. Today I will move my buy level higher to 2680/2692 with a 2672 stop. I still expect the S&P to challenge its 200 Day Moving Average at 2766. If this happens I will be a seller from 2760/2772 with a 2780 tight stop.
EUR/USD
Late in yesterday’s session the Euro traded lower to my 1.1315 buy level. The DSI for the Euro has fallen to just 8% bulls meaning a Euro rally is imminent. The Euro has so far held the August low of 1.13 but only just as I go to press. I will add to this position on any further move lower to 1.1275 with the same 1.1255 stop.
December Dollar Index
The Dollar also rallied small yesterday with the market trading higher to my 96.95 sell level. I am still short and I will now lower my stop on this position to 97.40. The DSI has now reached an unsustainable 95% so in my opinion it is only a matter of time before we see renewed selling in the Dollar.
December DAX
The DAX managed to close above the key 11400 resistance level and pivot point which is key for the bulls to have any chance of bringing this market back from a further aggressive sell-off. I am still flat the DAX and reluctant to chase this market higher. Today I will only raise my buy level to 11170/11250 with a 11095 stop.
December FTSE
I am still flat the FTSE which closed just below the key 7100/7150 resistance area as we wait for the Bank of England at 12.00 pm. Today I will now raise my buy level to 6960/7020 with a 6910 stop.
Dow Rolling Contract
Incredibly the Dow rose a massive 1200 points off its late spike low on Monday evening in just over 36 hours. Thankfully we had no sell levels in this market and I am still flat. Today I will now raise my buy level to 24700/24880 with a 24580 stop. I still do not want to be short the market at this time.
December NASDAQ
I am still flat the market which never even came close to my buy level. Today I will raise my buy level to 6790/6850 with a 6755 stop. If the NASDAQ can break and close over 7090 over the coming days then we can be more confident of a sustainable bottom in the market. Otherwise we may test last Monday’s 6500 low ahead of the Mid-Term Elections on Tuesday.
December BUND
No Change as I am still a seller on any rally higher to 160.85/161.25 with the same 161.55 stop.
Gold Rolling Contract
As Silver hit my buy level I emailed my Platinum Members to lower their Gold buy level to 1198/1207 with a lower 1189 stop. I will leave my buy level unchanged at this new level with a 1213 T/P level if executed. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Silver traded lower to my 14.29 buy level. I am still long with the same 13.55 stop and a now lower 14.40 T/P level.
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