The Dow again failed to break through the 20,000 mark , opening at 19,986 and spent the rest of the extremely quiet trading session trading sideways before drifting lower in the last 20 minutes of trading. So it is certainly feeling a lot like Christmas with equity volatility continuing to fall (the VIX made a new year to date low yesterday, touching 10.93 and now is back above 11), however while equity markets and most currencies are little changed, there are still a couple themes worth highlighting.
To mark my 1225th isuue 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 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 made 15 points yesterday and is now ahead by 1221 points for December having made 1971 points in November and 1582 points 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.
Yesterday the private sector deal to rescue Italy’s Monte dei Paschi di Siena failed to materialise and after Europe’s close Italy’s Parliament approved a €20bn bank support package. This in theory is good news, but under the new EU rules a government rescue means that equity and Junior Bond holders are now likely to suffer losses. Politically, allowing losses for retail investors is not desirable and while the government is expected to find ways to compensate them, uncertainty remains on whether under these circumstances a government aid is permitted by European laws. Another uncertainty is whether the €20bn rescue package will be enough with many analysts suggesting a minimum of €40bn is needed. No doubt investors will be watching how Italian bank shares open this morning.
The other interesting yesterday theme was the split decision by Sweden’s Central Bank to extend its QE programme. As expected the Riskbank left its policy rate unchanged and it extended its QE programme by another six months, however this outcome was only possible thanks to the intervention of Governor Ingves casting vote. News of the spilt decision saw the SEK gained 1.5% against the USD with the market treating the news as a signal of another Bank approaching the end of its QE programme. The jump in the SEK also helped other EU currencies perform with the NOK and EUR 0.37% stronger against the USD.
Moves in other currencies were fairly muted but generally softer against the USD. NZD spent a few second below the 69 mark and now trades at 0.6907 while the CAD is the biggest G10 loser, down 0.36% following the softer trading tone in oil.
This morning on the economic front the ECB will publish its latest Economic Bulletin at 10.00 am. This is followed at 1.30 pm by US GDP, Weekly Jobless Claims, Durable Goods Orders and the Chicago Fed National Activity Index. Next we have the FHFA House Price Index at 2.00 pm, while at 3.00 pm we have Leading Index and Personal Income/Spending which includes the very important PCE Deflator. Finally at 4.00 pm we have the Kansas Fed Manufacturing Index.
March S&P 500
Overnight the S&P has traded lower to my 2257 buy level. As I want to be flat ahead of the enormous amount of US economic data this afternoon I have just cut this position here at 2258.50 and I am now flat. I am very surprised that both the Dow and S&P have not pushed on higher despite the overbought conditions. However trading is very thin and I would expect volatility to pick up following the release of the clutch of data this afternoon. Today my only interest in buying the S&P is on a dip lower to 2242/2248 with a 2237 stop. I will still look to buy the S&P in an aggressive manner on any dip lower to 2212/2219 over the coming days with a 2206 stop. Despite the overbought condition of the S&P and the extremely low VIX I do not want to be short the market at this time.
EUR/USD
As expected the Euro is trading higher as indicated by the Daily Sentiment Index reading. With sentiment so extreme I still believe that near term bearish potential for the Euro is limited even if we do break Tuesday’s 1.0352 low. Today I will move my buy level higher to 1.0370/1.0410 with a 1.0335 stop.
March Dollar Index
I am still flat the Dollar which just missed my 103.45 sell level before trading lower. Today I will move my sell level lower to 103.25/103.60 with a 103.90 stop. With the Dollar trading near 14 year highs, the extreme level of Dollar optimism suggests that the bullish potential on this move from the Trump November 9 low is limited.
March DAX
I am still flat the DAX which continues to trade sideways to higher in extremely overbought conditions. As yet we do not have a sell signal and today I will continue to look to buy the market on any dip lower to 11300/11360 with a tight 11260 stop. Until we get a sell signal I still do not want to be short the DAX at this time.
March FTSE
I am still flat the FTSE and today I will lower my buy level slightly to 6895/6925 with a 6860 stop. Given the huge discount of the FTSE to the Cash Market I still do not want to be short the March Contract at this time.
Dow Rolling Contract
Incredibly the Dow has so far failed to break the key 20,000 round number resistance and I am still flat. Maybe with European markets closed next week we may see the Dow eventually crack 20K. Today I will lower my sell level slightly to 20040/20100 with a lower 20155 stop. I will still look to put on a more Macro sell level on any rally higher over the coming days to 20250/20400 with the same 20520 stop. Even though I still expect the Dow to rally, I do not want to be long the market for this move higher as the risk/reward is not worth it especially following last week’s Downside Key Day Reversal.
March BUND
No change as I am still a seller on any rally higher to 163.70/164.05 with the same 164.40 stop. I will also look to buy the Bund on any dip lower to 162.45/162.75 with a 162.10 stop.
Gold Rolling Contract
Gold did trade to my initial 1128 buy level overnight before having a small rally. I did not buy Gold myself and I am still flat. Looking at the longer term chart, Gold has strong support from 1114/1124 and today I will be a buyer in this area with a 1107 stop. If Gold does bottom here it will be the 78.6% retracement of the rally from last December to July this year.
Silver Rolling Contract
I am disappointed that Silver has not pushed on from here with the 5 day DSI at an all-time low of just 9.8% bulls. With sentiment so extreme I still expect Silver to rally. I am still long at an average buy level at 16.08 with the same 15.35 stop.
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