The US Dollar fell 1% across the board after yesterday’s economic and corporate earnings news which has taken a significant toll on the greenback. US Retail Sales and Producer Prices both came in significantly weaker than expected (core PPI -0.3% on the month against +0.1% expected, with headline -0.5% vs. -0.2% expected). Retail sales were anywhere between 0.1% and 0.4% lower than expected in relation to headline (0.1%), ex-auto (-0.3%), ex autos and gas (0.0%) and the so called ‘control group’ (- 0.1%). The numbers are nominal not real so some attempt is being made to highlight stronger real spending, though the counterpoint is that this further highlights the fact inflation is moving away from, not towards, the Fed’s targets.
For anybody following my new Platinum Service it made 342 points yesterday and is now ahead by 902 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively. If you require more information on my Platinum Service please email me on bryan@tradernoble.com
The US retail sector has been pummelled after Wal-Mart issued a profits warning, blaming recent wage increases (and which have already been met with job-cuts) and an expected $15bn hit from the stronger US Dollar. The shares fell 10% with other retail stocks suffering similarly. This was after Wells Fargo and BoA both just beat their earnings and revenue estimates.
The Fed’s Beige Book meanwhile notes that while most districts report modest or moderate expansion, manufacturing was generally down since the last survey and wages growth mostly subdued. Post-retail sales, the Atlanta Fed has lowered its Q3 GDP estimate to just 0.9% from 1% (well below the Wall Street consensus). All this comes after Fed governor Daniel Tarullo yesterday joined his fellow Governor Lael Brainard in arguing what policy makers should be doing at present, i.e. sitting firmly on their hands.
The US dollar looks like remaining under pressure near term, with US 10 year Treasury yields back below 2% (1.98%) on what is the one year anniversary of the Bond Yield ’flash crash’ – also the day of weak retail sales data and when 10s went from 2.23% to 1.86% before bouncing. US equities after another volatile trading session closed firmly in the red.
The New Zealand dollar sits loud and proud atop the FX leader board, up 2.3% on the past 24 hours versus less than 1% for the AUD. The British Pound is the other very stronger performer yesterday, after the UK unemployment rate unexpectedly dropped from 5.5% to 5.4%.
European Markets are opening 0.5% higher after the Japanese Nikkei closed 1% higher to close over 18,000 despite the stronger Yen.
This morning on the economic front we have no data due to be released from either the UK or the Euro-Zone. At 1.30 pm we have the latest US Weekly Jobless Claims, CPI and the Empire State Manufacturing Index. Finally at 3.00 pm we have the Philly Fed Business Outlook which is expected to improve from -6 last month to -2
Later this afternoon the Fed’s Bullard and Dudley are due to speak on Monetary Policy.
December S&P 500
The S&P plan worked very well yesterday as shortly after lunch the market had a nice rally which enabled me to cover my long 1991 position at my 1998 T/P level as outlined earlier to my Platinum Members. Subsequently the S&P spiked higher to a 2002 high which enabled me to go short at my 2001 sell level before the market sold off which enabled me to cover this position at my 1996 T/P level and I am now flat. The S&P is rebounding hard this morning after last night’s weak close and a lot of this has to do with tomorrow’s October Options Expiration. The McClellan Oscillator got hit again closing with a positive reading of 90 from last Friday’s year high at +303. Yesterday’s move lower stopped at the 1985 minor support for the S&P and as I mentioned in yesterday’s commentary a break and close below here opens up the possibility of a move lower to the 1941/1960 level which is the ‘Open Gap’ following this month’s Non-Farm Payrolls. Today I will be a small seller on any further rally to 2005/2010 with a 2014 stop. I will also look to buy the S&P on any dip lower to 1979/1984 with a 1974 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 1943/1949 with a 1936 stop. For the S&P to turn ugly and retest the August 24th lows at 1830 we need to see the market break and close below 1925.
EUR/USD
As expected the move higher in the Euro continues as no Central Bank wants a strong currency at this time. Unfortunately the Euro just missed my 1.1380 buy level after I posted yesterday morning before trading 100 points higher and I am still flat. The Euro has key resistance at 1.15 and a break and close above here should see a test of the 38.2% retracement of the whole down move from two years ago at 1.18. Today I will leave my buy level unchanged at 1.1350/1.1380 especially after ECB Member Nowotny just said that more QE is necessary. if I am taken long I will have a stop at 1.1325. I still do not want to be short the Euro as in my opinion there is no chance of the Fed hiking Interest Rates at this time and as a result the Dollar is miss-priced and should be a lot weaker.
December Dollar Index
The Dollar has had a nasty fall over the past few weeks as the Emerging Market Currencies rebound strongly. The Dollar has major support at 92.62 and a break and close below here will be very bearish. I am still flat the Dollar and today I will use any sell-off to 92.80/93.20 to go long with a 92.40 stop. Given the move lower since the NFP on October 1st I do not want to be short the Dollar at this time.
December DAX
The DAX plan worked well yesterday as shortly after I posted the DAX rallied to my 10,000 sell level before having a nice sell-off which enabled me to T/P on this position at 9950 as outlined earlier to my Platinum Members and I am now flat. Today I will again be a small seller on any rally higher to 10080/10130 with a tight 10160 stop. I still do not want to be long the DAX at this time especially with the Euro Dollar trading back above 1.1450.
December FTSE
No change as I am still a buyer on any dip lower to 6170/6200 with a 6145 stop. I will also look to sell the FTSE on any rally higher to 6330/6360 with a 6380 stop.
Dow Rolling Contract
There is no doubt the strong Dollar over the past 12 months has had a huge effect on the earnings of the major Dow stocks as we have already witnessed by the results from Johnson&Johnson on Tuesday and then Wal-Mart which fell 10% yesterday after it reported. Yesterday my Dow plan worked well as after the US Markets opened the Dow traded lower to a 16960 low which enabled me to buy the market at my 16970 buy level before the market rallied to a high of 17040 which enabled me to cover this position too early at 17000. The main reason that I covered this long position is the fact that the 100 Day Moving Average has broken below the 200 Day Moving Average which in itself is a rare event and potentially very bearish. There is no doubt that the weakening Dollar over the past six weeks has seen the Dow outperform the other major US Indices. Today I will look to go short on any spike higher to 17120/17170 with a 17210 stop which is just above last Monday’s high print. Despite the positive price action over the past few weeks I do not want to be long the Dow at this time.
December BUND
The BUND traded higher to my 157.00 sell level after the release of the much weaker than expected US Retail Sales data. The BUND subsequently sold off to a 156.75 low but given the weak equity markets I decided to cover this position at 156.90 and I am now flat. Going forward the BUND has very strong support at 155.90 and strong resistance at 159.00. Today I will use any sell-off to 156.20/156.60 to buy the market with a 155.80 stop. If the BUND continues to rally over the coming week I will be a very aggressive seller from 158.70/159.20 with a 159.50 stop.
Gold Rolling Contract
My long 1171 Gold position taken early yesterday morning finally worked out but not before trading down to a 1164 low print before turning around on the back of the weaker US Inflation data which saw a $26 rally. This rally enabled me to T/P at my 1182 level as again outlined earlier to my Platinum Members and I am now flat. Over the past few months Gold tried 5/6 times to break the key 1150/1160 resistance level before finally closing above this level this week. Going forward Gold should have major support at this level and to me it is only a matter of time before we see Gold test its next major trend-line at 1310. Today I will be a small buyer on any dip lower to 1169/1176 with a 1159 stop.
Silver Rolling Contract
The move higher in Silver yesterday saw me T/P at 16.10 and I am now flat. Today I will again look to buy Silver on any dip lower to 15.80/16.05 with a 15.40 stop.
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