Markets yesterday initially took the lead from a lower than expected print on US core CPI for November, missing the 0.2%/1.8% consensus by a tenth, at 0.1%/1.7%. Stocks rallied, the US Dollar faded as did Treasury yields. The Euro rose when the Fed announced its expected hike in Fed Funds by ¼% to 1.25- 1.50%. It’s higher still at 1.1830 this morning. The other big news was the likely reconciliation between the US Senate and the House on tax reform. “Sources” suggest they have agreed on a 21% corporate tax rate, a start in 2018, and a cut in the top US personal income tax rate to 35% from 39.5%. With Republicans now to have one less Senator and the new Democrats senator to take his seat apparently from late December, there is now an urgency to get the tax legislation passed.
To mark my 1475th 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. This offer is open to both new and existing members and 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 80 points yesterday and is now ahead by 669 points for December, having made 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 FOMC hiked Interest Rates as expected, lifting the target range of Fed funds by 0.25% to 1.25-1.50%. There were two dissenters – Kashkari and Evans. The Fed’s statement was re-crafted to reflect the latest economic developments, in part from a little more colour around the Hurricane effects, though still a positive reflection on the economy and low inflation.
There was no downgrading of the Fed’s median of the individual FOMC member’s Fed Funds projections that continue to project three more rate rises next year and another two in 2019. Growth forecasts were actually revised up and the Unemployment forecasts revised down. Fed Chair Yellen outlined in her press conference that the tax cuts were a factor supporting the FOMC’s growth forecasts (with all the timing and magnitude uncertainties). She also said she expected tax reform to lift aggregate demand (potentially inflationary) but could also lift aggregate supply, the capex expensing provisions lowering the cost of capital and lifting investment.
She was quizzed – as she has for some time – on the low inflation story. The Fed continues to expect that the factors holding down inflation this year will not be repeated next year, though they are “monitoring inflation developments closely” and have a symmetric view on policy. She said that the continuing low earnings story may well be evidence that there is still some slack in the labour market. This was Chair Yellen’s last press conference, she will be leaving her professional home for the past two decades.
Notwithstanding no deviation in the Fed’s own rate projections, the US Dollar and Treasury yields have continued to decay in the aftermath of the Statement and her presser. Two year Treasury yields have eased a further 4bps and the BBDXY is down another 0.4%. The data will continue to drive markets.
In late news on Brexit, UK MPs have voted against a Government bill now to give Parliament the guarantee of a vote on the final Brexit deal struck. This means that any deal struck across the table won’t likely be the final deal. Little Sterling reaction so far on this further uncertainty.
This morning on the Economic Front we have German and Euro-Zone Manufacturing and Services/Composite PMI at 8.30 am and 9.00 am respectively. At 9.30 am we have UK Retail Sales and this is followed at 12.00 pm by the Bank of England Rate announcement. Next at 12.45 pm we have the ECB Rate decision followed by a press conference with ECB President at 1.30 pm, with the ECB under focus for their latest forecasts for growth and inflation and whether they have tweaked them higher, for growth at least. Also at 1.30 pm we have the latest US Weekly Jobless Claims and Retail Sales. Finally we have the Manufacturing and Services PMI and Business Inventories at 2.45 pm and 3.00 pm respectively.
Remember too that the three day EC Summit is due to get underway this morning in Brussels, offering the potential for Pound sensitive Brexit-related news stories.
March S&P 500
I have now rolled to the March Contract which trades at a small 2.5 Handle Premium to the December Contract which expires tomorrow.
Yesterday my December S&P plan worked well with the market trading higher to my revised 2675 sell level shortly after Yellen started her press conference with a 2675.50 new all-time high before selling off to a 2663 low print which enabled me to cover this position at my 2670 T/P level and I am now flat. With the December Expiration tomorrow I would expect any dips to be bought as the market eyes my 2680/2700 target level over the coming days. Today I will now raise my buy level in the March Contract to 2654/2661 with a 2648 stop. Meanwhile I will continue to be a seller on any further rally to 2681/2693 with a 2702 wider stop.
EUR/USD
Yet again the buy on dip strategy for the Euro is paying dividends with the Euro trading higher to my 1.1765 T/P level on my latest 1.1750 long position ahead of the FOMC Statement. Unfortunately the Euro continued to rally after Yellen’s press conference and currently trades at 1.1830. With the ECB Meeting and Dragi press conference to follow I will now stay flat until we see what the ECB has to say. If the Euro dips I will now look to buy the market from 1.1690/1.1750 with a 1.1645 stop.
March Dollar Index
I have now rolled to the March Contract.
The Dollar has strong support from 92.15/92.60 and today I will be a buyer on any dip to this area with a 91.85 tight stop.
March DAX
I have now rolled to the March Contract which trades at a seven point Discount to the December Contract.
The DAX continues to trade heavy as we wait for the ECB announcement at 12.45 pm. I am still flat and I will now lower my buy level to 12940/13000 with a 12880 stop. Despite the weak price action I am not comfortable in going short especially with the December Contract expiring tomorrow.
March FTSE
I have now rolled to the March Contract which trades at a hefty 56 point Discount to the December Contract
Overnight the December Contract just missed my 7455 buy level and I am still flat. With the March Contract trading at such a lower price in comparison to the December Contract and Cash FTSE it is difficult to be short the market. With this in mind and the fact that the FTSE has strong support at 7370 I will now be a buyer on any dip lower to 7350/7385 with a 7320 stop. With Sterling strong the FTSE is opening lower this morning.
Dow Rolling Contract
As I mentioned yesterday to stay flat the Dow until we got the FOMC Statement and Yellen press conference out of the way. Before we got this news the Dow has rallied into my sell range and I subsequently emailed my Platinum Members to raise their sell level which did not get filled and I am still flat. If you did sell the Dow at my initial 24630 sell level or higher then you should have been fine as the market traded to an overnight low at 24585 thus providing a reasonable gain. There is no doubt we are in the latter stages of this mega nine year rally and once we get the December Quadruple Expiration out of the way tomorrow there will be two weeks of trading left for this year. This could be a volatile period given huge gains witnessed so far in 2017 as traders may want to take their gains ahead of a new tax year. Today my only interest in selling the Dow is in front of the next resistance level at 24760/24830 with a 24900 stop. With 25000 just above here there is a strong possibility that the market tests this level first before finally selling off. I still do not want to be long the Dow at this time.
March NASDAQ
I have now rolled to the March Contract which trades at a small 17 point premium to the December Contract.
The NASDAQ continues to lag both the Dow and S&P as the FANG stocks remain under pressure. I am still flat and today my buy level will be from 6330/6365 with a 6295 stop.
March BUND
No change as I am still a seller on any rally higher to 163.75/164.05 with the same 164.35 stop.
Gold Rolling Contract
Even though Gold rallied on the back of the weaker US Dollar yesterday I still do not trust this market. Gold needs to break and close over 1270 for me to raise my buy level. Therefore I will leave my buy level unchanged from 1226/1234 with the same 1219 stop.
Silver Rolling Contract
Finally Silver rallied to my 15.90 T/P level on my latest long 15.75 position and I am now flat. Today I will again look to buy Silver on any dip lower to 15.55/15.95 with a 15.20 stop. If I am taken long I will have a T/P level at 16.20.
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