Well Winston Peters might be milking it as negotiations to form a new New Zealand Government drag interminably on, but he clearly does need a host to live. The NZD sits close to the bottom of the G10 scoreboard this morning, weighed down not just by ongoing domestic political uncertainty, but also forecast downgrades to Fonterra’s milk pay-out for the current season. BNZ reduced its projection from $6.75 to $6.30. The Japanese Yen has piped NZD for the G10 wooden spoon yesterday, USD/JPY up 0.60% to ¥112.89 having earlier in the day traded up to its best level in almost two weeks at just above ¥113. Higher US Treasury yields are the proximate cause, with 10-year notes adding about 4ps to 2.34% and about 6bps higher than where they ended last week. This has not sufficed to lift the US dollar in overall terms though with the DXY index finishing in NY -0.1% on modest gains for the CAD, EUR and GBP. The AUD sits virtually unchanged on this time yesterday at 0.7847.
To mark my 1450th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 72 points yesterday and is now ahead by 297 points for October having made 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
The Canadian Dollar – but not the Mexican peso – looks to have been helped by suggestions that negotiations on reforming NAFTA could drag on until well into next year. Sterling got a minor lift from slightly higher than expected growth in average earnings in yesterday’s labour market report (2.2% against an expected 2.1%) which at the margin is seen playing in favour of the Bank of England raising rates before year-end.
As for EUR, source reports suggesting that the ECB might slash its bond buying to as little as €20bn per month from January (from €60bn now) seemed to support. The counterargument against EUR strength here is that this would allow the ECB to maintain QE for longer and in doing so further delay the process of lifting Interest Rates off their current -0.4% floor (remember the ECB has said rates will not rise until well after its Asset Purchase Programme (APP) has been completed).
The highlight of Fed speak yesterday came from NY Fed President Bill Dudley (who has always been in sync. with the big hitters on the Fed Board). He said the Fed is ‘on path’ to achieve its 2017 rate forecast and to achieve three rate hikes in 2018. He says the real question is how far the so-called neutral rate will rise. This cuts to the heart of the current excitement about whether if John Taylor gets the nod to lead the Fed, Interest rates would necessarily be higher than otherwise. The original specification of Taylor’s rule assumed a 2% neutral real rate. Janet Yellen currently thinks it’s close to zero – hence policy is deemed properly calibrated – but will rise over time. I continue to believe that the ‘right’ trade will be to fade whatever short term volatility Trump’s pick for Fed chair produces. Reports as we got to press suggest the announcement could be ‘in coming days’ with Trump due to interview Fed Chair Janet Yellen this afternoon.
This morning on the Economic Front we have UK Retail Sales at 9.30 am. We have no Euro-Zone data of note due today, while at 1.30 pm we have the US Weekly Jobless Claims and the Philly Fed Business Outlook. Finally we have the Bloomberg Consumer Comfort Index and the Leading Index at 2.45 pm and 3.00 pm respectively.
December S&P 500
It is a very long time since I have seen the Dow rise 170 points from Tuesday’s close when both the S&P and NASDAQ hardly moved. IBM was responsible for most of yesterday’s move higher in the Dow on what turned out to be one of the most frustrating trading sessions in many months. The S&P missed my initial 2563 sell level with a 2562.25 high print before selling off and despite the Dow continuing to move higher for most of yesterday the S&P traded sideways and I am still flat. Given the huge rise in the Dow I would expect to see the S&P play some catch up and today I will now move my sell level higher to 2566/2572 with a 2577 stop. I will also raise my buy level to 2545/2551 with a 2540 stop. Incredibly just as I post this commentary the McClellan Oscillator print was just released and it weakened to close at -32 despite the Dow rallying 170 points. I have never seen this kind of negative price action before.
EUR/USD
I am still flat the Euro and today I will now raise my sell level slightly to 1.1840/1.1875 with a 1.1905 stop. Meanwhile I am now going to chase the Euro higher and will leave my buy range unchanged from 1.1675/1.1710 with the same 1.1645 stop.
December Dollar Index
I am still flat the Dollar which has traded in a narrow trading range all week. We may well see some Dollar movement later on any leaks emanating from the Trump/Yellen meeting this afternoon. If I were in Janet Yellen’s shoes I would walk away in February with my reputation held high as there is no doubt the next Fed Chair will be dealing with a recession and a stock market crash and I would not like to be facing Trump under those circumstances. Today I will lower my buy level slightly to 92.45/92.75 with a 92.15 stop.
December DAX
The DAX continues to inch higher in what is a severely overbought market. The DAX has strong resistance from 13165/13210 and today I will be a seller on any move higher to this area with a 13255 stop. Meanwhile I will still only look to buy the market on any dip lower to 12880/12930 with a 12835 stop.
December FTSE
The FTSE looks tired but despite the market trading overbought I still do not want to be short. Today I will leave my buy level unchanged from 7425/7460 with the same 7395 stop.
Dow Rolling Contract
If it was not for IBM, the Dow would have closed more or less flat yesterday as IBM rose $13 or 9% after better earnings. This helped push the Dow to its 51st record close so far this year. The Investors Intelligence Advisors Survey is now at a 30 year high with most sentiment readings already exceeding the dot com bubble in early 2000. No matter the path of least resistance is still to the upside as my Dow plan failed miserably yesterday. After the Dow traded higher to my second sell level at 23085 which had me short at an average rate of 23051, I was subsequently stopped out of this position at 23135 and I am now flat. The Dow has now risen nearly 8000 points since Trump got elected 11 months ago in what has been one of the most incredible moves ever for the Dow. Volume has fallen on each new high but no matter the market keeps rallying. We have not had a 10% correction for nearly 2 years which is insane as the Central Banks continue to control all markets. Today I will now move my buy level higher to 22795/22865 with a 22740 stop. The next resistance for the Dow is at 23250 and today I will again be a small seller on any further rally to 23220/23290 with a 23340 stop.
December NASDAQ
Normally the NASDAQ is one of the most volatile contracts that you can trade but since I started writing on the NASDAQ last Monday the market has hardly moved. Today I will continue to be a buyer only on any dip lower to 5995/6035 with a 5960 stop. Meanwhile in light of yesterday’s aggressive move higher for the Dow I will now move my NASDAQ sell level higher to 6180/6230 with a 6265 stop.
December BUND
The BUND just missed my 162.10 buy level with a 162.12 low print ahead of last night’s close. With the market opening at 7.00 am which after today’s commentary will have been posted I will now lower my buy level slightly to 161.55/161.90 with a 161.25 stop.
Gold Rolling Contract
Gold just missed my 1274 buy level with a 1276.50 low print before having a small rally into the New York close and I am still flat. There is still no concrete evidence that the Gold sell-off is over despite the market rallying strongly off its October 6, low at 1260.50 as sentiment still remains elevated. Today I will only be interested in buying Gold on any dip lower to 1262/1269 with a 1255 stop.
Silver Rolling Contract
Just as I posted last night Silver traded higher to my 17.10 T/P level on my latest long 16.98 position and I am now flat. I am still wary that Silver is not finished with the downside as the DSI reading is still at a high level. Today I will continue to be a buyer of Silver on any dip lower to 16.40/16.80 with a 16.10 stop.
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