Yesterday’s trading session has been a tale of two halves, a dull affair ahead of Trump’s press conference and a volatile session post. At his first press conference as president-elect Donald Trump acknowledged for the first time that he believes Russia was behind cyber-attacks aimed at influencing the election, he criticised intelligence officials for leaking unsubstantiated allegations against him and the media for reporting “fake new” and “phoney stuff. Trump also disclosed plans to step down from all positions at the Trump organization with the businesses placed into a trust overseen by an independent ethics officer and managed by Trump’s adult sons (question marks still remain on whether all conflicts of interest have been eliminated). But more importantly for markets, the lack of detail on his stimulus plan along with his remarks on the drug industry and reaffirmation of his intention to build a wall along the Mexican border triggered some volatile moves across asset classes.
To mark my 1250th 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 ope 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 245 points yesterday and is now ahead by 641 points for January having made 1351 points in December, 1971 in November and 1582 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.
There have been winners and losers post Trump’s press conference. US Stocks have traded in and out of positive territory reflecting gains in energy shares as oil staged a small rally while Pharmaceutical and Biotech shares tumbled after the president elected called for “new bidding procedures” for the drug industry. Trump said “We’re the largest buyer of drugs in the world and yet we don’t bid properly and we’re going to save billions of dollars.” The lack of detail on Trump’s fiscal stimulus and trade policies triggered a rally in US treasuries and weighted on the US Dollar, however in the last hour of New York trading we saw a small reversal on these initial moves. 10Y UST rallied from 2.394% to 2.326% post Trump press conference, but now they have climbed all the way back to 2.366%. Meanwhile the Dollar I-ndex (BBDXY) dropped 1.46% in the first two hours after Trump began to speak, but now it has recovered over half a percent to be down 0.6% on the day.
Looking at currencies in more detail, all G10 pairs have recorded gains against the USD with the AUD leading the way, up 0.94%. The AUD continues to be the best G10 performer year to date, benefiting from USD weakness, a decline of concerns over CNY instability and although commodities performance has been mixed, gains in gold and iron ore have more than offset the softness in coal prices. The AUD is currently trading at 0.7480 which is near the overnight high. NZD has also performed well, +0.84% and after reaching an overnight high of 0.7105 it is currently trading at 0.7097. GBP is +0.25% after touching a three month low of 1.2036 and the EUR is currently trading at 1.0635 after reaching a low of 1.0454.Last night Governor Carney noted that the EU faces a greater financial stability danger than Britain if the country leaves the bloc abruptly.
In EM currencies, The Mexican Peso touched a new record high of 22.038 as Trump made it clear that he is not softening his stance on Mexico, suggesting he still intends to build a wall and impose border tax on companies looking to invest abroad at the expense of domestic jobs. Meanwhile the Turkish Lira (TRY) has come under renewed pressure (- 2.5%) after the November’s current account figures showed a $590m deterioration in the deficit.
In other news, NY Fed’s Dudley said that “greater trustworthiness will make it easier for the financial industry to perform its role in supporting economic activity and rising living standards”.
This morning on the economic front we have the Euro-Zone Industrial Production at 9.00 am and this is followed at 10.00 am by the latest ECB Minutes from the December meeting and no doubt they will reignite the discussion on whether less can be more or more can be less. The Minutes may also reveal to what extent the decision to extend the Bond buying programme to the end of 2017 while at the same time reduce the Monthly Bond purchases from €80bn to €60bn (starting from April) was a compromise (likely) or a unanimous decision. AT 1.30 pm we have the US Import Price and the Weekly Jobless Claims.
There are no other major data releases in the US, but we have no less than five Fed speakers on the roster. Fed Harker (hawk and voter) speaks on the outlook for the economy in Pennsylvania, Fed’s Evans (dove, voter) and Lockhart (centrist, non-voter) take part in a panel in Florida, Fed Bullard (centrist, non- voter) speaks to the Forecasters Club of New York and Fed Kaplan (Hawk, voter) speaks at the Dallas Regional Chamber. All five are expected to take questions from their respective audiences.
March S&P 500
My S&P plan worked well with the market trading lower to my 2255 buy level before mounting a strong rally into the close at 2270. As I had so much risk on board going into the Trump press conference which thankfully worked out I emailed my Platinum Members to exit this long S&P position at 2259.50 and I am now flat. There is no doubt that the S&P has strong support at the 2249/2255 area and today I will again look to buy the market here with a 2244 stop. My only interest in selling the S&P is still on a rally higher to 2285/2291 with the same 2296 stop. Despite the fact that both Pharmaceutical and Biotech shares were hammered following the Trump press conference, the McClellan Oscillator closed stronger with a +78 print. This suggests that sooner rather than later the stock market is going to follow the NASDAQ higher and make new all-time highs which the NASDAQ did again yesterday.
EUR/USD
You needed a lot of patience yesterday but after the Euro traded lower to my average buy level at 1.0490, the Euro made a subsequent low at 1.0454 before rallying nearly 200 points on what was a strong Key Day Upside Reversal. The Dollar Index also had a downside Key Day Reversal and this follows last week’s rare US Dollar Index downside Key Week Reversal. These moves are game changers and we could well have seen the top in the US Dollar/bottom o f the Euro at 103.85 and 103.41 respectively last Tuesday January 3rd. Remember the Euro has fallen from a high of 1.60 and is due a massive correction higher. The ECB Minutes from last month’s ECB Meeting will be interesting as there is no doubt that the Bundesbank do not want to see the Euro trade lower from here especially after the strong inflation data reported from Germany for December. As long as the Euro can remain over yesterday’s 1.0454 low print I will continue to be a buyer of the Euro on dips. Today I will again look to buy the Euro from 1.0560/1.0600 with a 1.0525 stop. A break and close above the strong resistance at 1.0670 will had to the bullish case and will then target the December high at 1.0874 which occurred on the day of the above mentioned ECB Meeting last month.
March Dollar Index
Wow what can you say about the Dollar which just got hammered yesterday and is now trading 200 points lower from its pre-Trump press conference high at 103.00. As I had so many open positions on board I waited to sell the Dollar which I did at the top of my sell range at 102.75. I emailed my Platinum Members to T/P on this position at 102.30 and to sell the Dollar again on any rally higher to 102.65 which the market did with a subsequent 102.73 high print. I covered this position last night on the re-open of the Dollar Index at 101.75 and I am now flat. There is no doubt that the Dollar has got very strong resistance from 102.60/103.85 and as long as the Dollar can remain below 103.85 I will continue to sell rallies. The US Dollar has rallied over 40% off its 70.00 low from a few years ago and is due a massive rally to correct this aberration. The fair value for the US Dollar is probably close to 90 Today I will again look to sell the Dollar on any rally higher to 101.50/101.90 with a 102.30 stop.
March DAX
The low volatility in the DAX will not last forever and with the Euro strengthening I would expect the DAX to start to roll-over to the downside. Today I will look to sell the market on any rally higher to 11670/11720 with a 11765 stop. I will still continue to look to buy the DAX in small size on any dip lower to 11420/11475 with a 11375 stop.
March FTSE
It took a while buy finally the FTSE traded higher to my average sell level at 7250 before following the S&P lower and this sell-off enabled me to cover my short position at my revised 7215 T/P level and I am now flat. With Cable (GBP/USD) having an upside Key Day Reversal yesterday we may finally start to see some profit taking in the FTSE especially with the market severely overbought. Today I will again look to sell the market on any rally higher to 7235/7265 with a 7290 tight stop. My only interest in buying the FTSE is on a dip lower to 7110/7145 with a 7075 stop. The FTSE should initially have good support at the 7140 10 year trendline which should lead to a decent rally before selling off again. A break and close below 7110 will be at least short-term bearish.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 19730/19790 with the same 19670 stop. Keep an eye on the US Dollar because in contrast to previous times when the Dollar sold off it was bullish for the Dow but given what has happened since Trump’s election victory we may well see the Dow get hit hard on a much weaker US Dollar. I will also leave my sell level unchanged at 20040/20100 with a the same 20150 stop.
March BUND.
As expected the BUND has continued to rally strongly as indicated by the weak Daily Sentiment Index reading for December. I am still flat and today I will now raise my buy level to 163.20/163.65 with a 162.85 stop which is just below yesterday’s 162.91 low print.
Gold Rolling Contract
Unfortunately Gold just missed my 1175 buy level with a 1176.60 low print before rallying strongly. This rally has continued overnight with Gold currently trading at 1203. Gold has now rallied over $80 off its December 1123 low print again proving what an unbelievable signal that the DSI is. The fact that Gold managed to close over 1187 is bullish and today I will raise my buy level to 1180/11880 with a 1173 stop.
Silver Rolling Contract
Initially Silver sold off to a low at 16.50 and this sell-off enabled me to buy more Silver at 16.55 to add to my already long 16.75 position. I am now long at an average rate of 16.65 and although Silver is weaker than Gold I still expect the market to rally from here and I will leave my T/P level unchanged at 17.05. A break and close over 17.30 will be very bullish for Silver.
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