Much of the anticipation for markets for the past week or so has surrounded whether, after the larger than expected gain in average hourly earnings, the CPI would present a similar picture of emerging US inflation. And it did. Headline and core CPI came in stronger than expected, headline by three tenths and the core by a tenth. Higher energy prices in January was an important element of the headline story on the back of higher oil prices, gasoline prices up 5.7%. But the Core CPI that leaves out food and energy inflation rose 0.3% m/m for steady annual growth of 1.8% (last January was also 0.3%) against expectations of a 0.2% increase. Apparel prices rose 1.7%, plus more elsewhere. Adding more to the upside surprise, unrounded the core CPI was 0.347% m/m, within a whisker then of being 0.4%, optically a larger overshoot. So it was a higher print.
To mark my 1525th 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 118 points yesterday and is now ahead by 1359 points for February having made 879 points in January, 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.
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notifications.
This print gave the US Dollar an initial shot in the arm sending it higher by around 0.5%, US Treasury yields too as the market moved to price in a confirmed March 21 FOMC further hike and the US/global reflation trade. For the USD though, just as quickly as it spiked higher it then immediately started to reverse course as the market absorbed a much weaker than expected US Retail Sales report for January. Retail sales fell 0.3% when the market was expecting a gain of 0.2% for the month after December’s 0.4% gain. Not only did the print for January miss the mark, but there was a sizeable downward revision, December’s previously reported 0.4% gain revised away. It was a similar story for the various ‘’underlying’’ measures of Retail Sales, the control group measure used to compile those elements of consumption in GDP also flat after a now-reported -0.2% for December. In the wake of the Retail Sales report, the Atlanta Fed revised down its estimate for Q1 GDP from 4.0% to 3.2%.
The market has in the wash up embraced the reflation trade with some gusto and not like the wobbles evident afternoon-Farm Payrolls. While the USD reversed course mid-session, US Treasury yields did not, jumping after simultaneous release of CPI and Retail Sales, and making further incremental gains higher. The US 10y Treasury was trading at 2.82% just before the data was released, it jumped to 2.88% and through the NY morning session has increased further to over 2.9%, to the highest yields this year with the big 3% now in sight. Yesterday, the market was pricing in 73 bps of Fed rises by the time of the December 19 FOMC; that has now been bumped up to over 80 bps, the market and the Fed ‘’dots’’ now in rare alignment.
The reflation trade saw bond yields higher, commodity prices also supported. Part of this stems from the fade in the USD, but underlying prices have pushed on further. WTI is up 2.8% to $60.81, gold +2% to $1356.60 and the LMEX base metals index up 2.36%, copper up 2.50% to $7,163/t. (In thin pre-Lunar Year trade, iron ore was higher in China yesterday too.)
The surprise is that equities are moving higher along for the reflation/higher yields ride while the VIX is down below 20. Equities also closed higher in Europe after some mid-session short-lived jitters. Into the last hour, US equities closed near their highs and have the Futures Market have moved higher again overnight as if nothing happened last week. The Bloomberg spot dollar index is down 0.68%. The Euro has also made a similar overall gain, coming also with the confirmation of a solid but as-expected print of Eurozone Q4 GDP at 0.6%/2.7% and Industrial Production in December finishing the year up a strong 5.2%. Those reports had little impact. It was all about the US Dollar.
This morning on the Economic Front we have Euro-Zone Trade Balance at 10.00 am and this is followed by US Empire Manufacturing, Initial Jobless Claims, Philly Fed Business Outlook and PPI at 1.30 pm which will be closely watched after yesterday’s higher CPI. Next we have Industrial Production and Capacity Utilisation at 2.15 pm. Finally we have NAHB Housing Market Index and the TIC Flows at 3.00 pm and 9.00 pm respectively.
March S&P 500
Another wild trading session for the S&P which immediately dropped through my buy level and stop after the release of the US CPI to a low of 2627 before incredibly rallying to my 2700 sell level very late in the session. We now have to keep a close eye on both CPI and PPI as inflation data is now up there with Non-Farm Payrolls as the three most important releases each month. After the S&P hit my 2700 sell level the market quickly dropped to a low at 2694 and I used this sell-off to cover my short position at 2698 and I am now flat. This morning the S&P is trading higher at 2710 as yet again anyone shorting the market is getting slammed. It looks like it will not be long before the S&P trades to my target level at 2755/2775. Given the extent of the rally off last Friday’s 2531 low print I have no doubt that the Fed are buying the market. The key question now is at what level does the 10 Year Bond Rate finally crack the stock market as we are very close to a 3% yield. However you have to respect the rebound in the S&P and today I will be a buyer on any dip lower to 2675/2685 with a 2668 stop. The next resistance level for the S&P is from 2722/2732 and today I will be a seller in this area with a 2738 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller on any further rally to 2755/2775 with a 2783 stop.
EUR/USD
My Euro plan worked well yesterday with the Euro trading the whole of my 1.2280/1.2320 buy level for an average long position at 1.2300 with a low of 1.2276. Unfortunately I thought the US Dollar would rally on the back of the higher Bond Yields and covered this position at my revised 1.2325 T/P level and I am now flat. Thankfully we had no sell levels in the Euro which is now trading at 1.2500 this morning. There is no doubt the renewed weakness in the Dollar is helping the US stock markets. The Euro has initial resistance at the 1.2537 recent high ahead of stronger resistance from 1.2580/1.2620 where I will be a seller with a 1.2655 stop. The Euro is overbought and I am reluctant to chase this market higher and today I will only raise my buy level to 1.2380/1.2420 with a 1.2350 stop.
March Dollar Index
The Dollar traded the whole of my buy range late overnight and I am now long at an average rate of 88.75. I will leave my stop unchanged at 88.30 and I will now lower my T/P level on this position to 89.05.
March DAX
Yesterday was a frustrating session with the DAX trading the whole of my buy range and stop within a few minutes of the CPI being released without giving me the chance to buy the market before the market reversed to rally almost 400 points. I am still flat and today I will now raise my buy level to 12250/12320 with a 12195 stop. I still do not want to be a seller of the DAX at this time.
March FTSE
My FTSE plan worked well with the market trading lower to my 7096 buy level before rallying over 100 points. Unfortunately I covered this long position at my revised 7125 T/P level and I am now flat. The FTSE has very strong resistance from 7275/7320 and today I will be a seller in this area with a 7350 tight stop. I will also be a buyer on any dip lower to 7100/7140 with a 7070 stop which is just below yesterday’s low print.
Dow Rolling Contract
The Dow also traded through my buy level and stop yesterday without giving me a chance to buy the market. The Dow subsequently made a low at 24312 before incredibly rallying to my 25010 sell level this morning. As I want to be flat ahead on the important PPI data at 1.30 pm I emailed my Platinum Members to cover any short position at 24989 or better and go flat. The Dow has strong resistance from 25170/25270 and today I will be a seller in this area with a 25350 stop. The Dow has strong support from 24620/24720 and today I will be a buyer in this area with a wider 24525 stop. I am trading in smaller stake size with wider stops to allow forn the volatility.
March NASDAQ
I am still flat the NASDAQ which just like the other US Indices did not given me a chance to buy yesterday before rallying strongly. It is annoying to have the correct view and not be able to get on board with the NASDAQ now trading a sizeable 300 points off yesterday’s low print. Today I will now be a buyer of the market on any dip lower to 6580/6630 with a 6530 stop.
March BUND
My Bund plan worked well with the Bund trading lower to my 157.80 buy level before rallying to my revised 158.02 T/P level and I am now flat. The Bund has strong support from 156.95/157.35 and today I will be a buyer in this area with a 156.60 stop. Despite the negative price action I still do not want to be short the market at this time.
Gold Rolling Contract
Frustratingly Gold just missed my 1315 buy level with a 1317 low before rallying back above 1356 this morning. There is no doubt the weaker US Dollar and higher inflation is a big help to Gold at this time. Today I will now raise my buy level to 1330/1340 with a 1323 stop.
Silver Rolling Contract
Silver missed my 16.35 buy level with a 16.37 low print before rallying to 17.00 this morning. This is frustrating but even though this is a huge move higher I still do not trust this market. Silver has major resistance from 17.40/17.80 which we need to break and close over for a couple of days for me to turn bullish. Today I will now raise my buy level to 16.35/16.75 with a 16.10 tight stop.
Recent Comments