The US equity markets closed up over 1% across the board in reaction to the Fed leaving Interest Rates on hold last evening. They left the Fed Funds Rate at 0.25%-0.50%, as nearly universally expected. The US Dollar is softer with the Bloomberg Spot Dollar Index closing down 0.66% as the Dollar started to weaken ahead of the Fed announcement. The AUD/USD was the best performer sitting at the top of the FX Leader Board, trading at 0.7650 this morning for a 1.1% rise in the past 24 hours. Close behind is a resurgent Yen, USD/JPY back down to 100.40 as the Yen rallied 1% after yesterday’s BOJ Meeting. Meanwhile Commodities are stronger, given a boost by a weaker US Dollar, as WTI closed up 3.47% to $45.48 and Gold by 1.48% to $1337.
Due to the number of members taking up my 2 Year Euro 2500 rate for my Platinum Service in recent months, this will be the last month that I am offering this special price which will now rise to Euro 2750 from next Thursday. If anyone is still interested in this original deal which has been in situ since January, can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 70 points yesterday and is now ahead by 532 points for September, having made 1782 points in August and 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2000 points.
The S&P closed up 1.1%, while 2 year US Treasury Yields are little changed reflecting a modest rally at the very front end and somewhat higher Yields thereafter, US 10 Year Treasuries closed down 3.5 basis points after another cut to the expected long runs Fed Funds Rate from FOMC members from 3% to a median of 2.75% within a range of 2.5%-3.25%, indicative of how the Fed is splitting and grappling with what the new normal and the neutral Fed Funds rate might look like.
The vote was split 7-3. All Fed Governors and Fed Presidents Dudley and Bullard voted to hold, while Fed Presidents George, Mester and Rosegren dissented, preferring to raise rates now. The median expectation of all FOMC members (including those that do not get a vote this year) is that there will be one hike this year and another two hikes next year, still more hawkish than current market pricing that has only 1.5 total hikes between now and then.
There was some downward revision to the median Fed Funds forecasts for 2017 and 2018 each by 0.5%, next year to 1.125% and for 2018 to a new mid-range forecast of 1.875%. Fed Chair Yellen also said in her press conference that the current stance is only moderately accommodative, so any small increases are needed to get to the neutral rate which has been officially trimmed again.
Ms Yellen acknowledged the case was stronger for an increase in the target rate at this meeting but that it was reasonable to wait to see more progress towards its objective. All code for data dependence but none to hidden pointing to a rate rise coming down the road.
Where to from here? She would not be specific on dates, but it seems she is setting the market up for the likelihood of a December hike, subject to a still growing economy, stable markets and overseas developments.
In other news, the OECD released an interim set of forecasts, with the most notable change being a cut to its 2017 UK forecast to 1%, down from 2% in June.
This morning on the economic front the ECB will publish its Economic Bulletin at 10.00 am. This is followed at 11.00 am by the UK CBI Trends Total Orders/Selling Price. At 1.30 pm we have the US Weekly Jobless Claims and the Chicago Fed National Activity Index. Next we have the FHFA House Price Index at 2.00 pm and the Bloomberg Consumer Comfort Index at 2.45 pm. At 3.00 pm we have the Euro-Zone Consumer Confidence and the US Existing Home Sales. Finally at 4.00pm we have the Kansas City Fed Manufacturing Index.
ECB President Dragi and UK Governor Carney are both speaking this afternoon at 2.00 pm and 6.00 pm respectively.
December S&P 500
Unfortunately the S&P just missed my 2130 buy level before eventually rallying strongly into the close after Yellen had finished her press conference. With the Swiss Central Bank as mentioned a few weeks ago allegedly holding $120bn of their reserves in the US stock market it is very difficult to be short the market especially with no sign of a rate rise as pension funds and mutual funds have no choice but to chase yield and buy stocks. There is no doubt that this will all end in tears but until we see some key levels broken in the S&P it is still a buy on dips scenario. As mentioned yesterday a break and close over 2157 will see me buy the market as I look for my 2200/2220 and possibly 2300 higher objectives. Today I will now move my buy level higher to 2145/2150 with a 2139 stop. The S&P should have good support at the 2145 pivot point. I still do not want to be short the market at this time.
EUR/USD
Even though I expected the Dollar to weaken I had to be prudent ahead of yesterday’s FOMC announcement and I cut my long 1.1165 Euro position at 1.1162 and I am still flat. As I keep saying nearly everyone that I read and listen to is short the Euro but just like the US stock market the Euro is still a buy on dips and is breaking higher as I write this commentary. Today I will now raise my buy level higher to 1.1170/1.1210 with a 1.1135 stop. Remember we have Dragi speaking at 2.00 pm who may well try and talk the Euro lower.
December Dollar Index
I still flat the Dollar and today I will now lower my sell level to 95.80/96.20 with a 96.50 stop.
December DAX
My DAX plan worked well yesterday with the market hitting my 10400 buy level before having a nice 100 point rally post the FOMC. As I wanted to be flat ahead of this announcement I emailed my Platinum Members to cut this position at 10400 and I am still flat. While hindsight is a great thing, I make no apologies for going into a major announcement flat because if you are on the wrong side of one of these events you can loose a lot of money. Today I will still be a seller on any rally higher to 10630/10680 with a 10725 stop. If the Euro continues to firm it will slow the progress of the DAX. I will also look to buy the DAX on any dip lower to 10400/10460 with a 10360 stop.
December FTSE
My FTSE plan also worked well with the market trading lower to my 6785 buy level before rallying higher which enabled me to cover this position at my revised 6808 T/P level and I am now flat. Today I will again look to buy the FTSE on any dip lower to 6770/6800 with a 6745 tight stop. I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow also traded lower to my 18120 buy level before rallying ahead of the FOMC. Again as I wanted to be flat I emailed my Platinum Members to exit this position at 18150 and I am now flat. For those members who kept this position or read my updated email late then you had a nice gain especially with the Dow trading at 18300 this morning. Another positive to take from yesterday’s trading session was the fact that the McClellan Oscillator closed with a positive reading of 36 from Tuesday’s -78 print. This is positive and showed some real buying power behind yesterday’s strong rally. Today I will again look to buy the Dow on any dip lower to 18170/18235 with a 18125 stop. Naturally I still do not want to be short the Dow at this time.
December BUND
The Bund has rallied strongly on the back of the non action from the Fed and I am still flat. Today I will now raise my sell level to 164.90/165.35 with a 165.75 stop.
Gold Rolling Contract
Gold is rallying as expected especially with the latest Daily Sentiment Index reading for Gold at just 11% bulls as mentioned on Tuesday. I am still flat Gold having taken a nice gain yesterday morning and today I will now raise my buy level to 1316/1324 with a 1307 stop which is just below Tuesday’s low print.
Silver Rolling Contract
Unfortunately Silver just missed my 19.30 buy level after I posted yesterday morning and I am still flat which is frustrating when you see how much Silver rallied yesterday. Today I will now move my buy level higher to 19.30/19.60 with a 18.95 stop.
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