Well, price action yesterday is probably best described as choppy or turbulent. US equities have fluctuated between gains and losses amid mixed earnings results while in Europe equities have ended the day in negative territory with uncertainty surrounding the ECB bond buying programme a lingering concern. Meanwhile after steady gains since the beginning of the month, the US Dollar has lost a bit of ground despite the fact that US Bond Yields are higher and US data releases beat expectations. US equities were down at the open after Apple reported its first annual revenue decline in 15 years. Tech Stocks and the NASDAQ index traded heavy in response, but news that Boeing had raised its full year guidance boosted industrial stocks with the Dow Jones currently the only US equity index trading in positive territory.
To mark my 1200th issue 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 email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service yesterday it made 142 points and is now ahead by 1311 points for October having made 1142 points in September. The previous three months saw gains of 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.
Core Global Bond Yields are higher with European yields leading the way. 10y Bunds closed up by 5.5bps and 10y UK Gilts +6.3bps. The move higher in Bunds appears to have been triggered by a Reuters report suggesting the “ECB is almost certain to keep buying bonds beyond March”. The article, however, failed to provide more colour on whether or not bond purchases will be “tapered” after March. ECB tapering uncertainty remains a sensitive factor for both Bonds and equities in Europe. Yesterday’s remarks by Governor Carney re limits to the BoE’s tolerance for higher inflation also appear to have been a contributing factor for Gilts underperformance. US Treasury yields have also steadily risen in the past 24 hours with the move led by the back end of the curve amid better than expected data releases. US September trade data showed a reduction in the trade deficit from $59bn to $56bn prompting many economists to upgrade their Q3 GDP number.
In currencies, GBP sits at the top of the G10 leader board seemingly supported by the ramp up in UK Bond Yields following a pullback in expectations of further easing by the BoE. The AUD has erased all yesterday’s post CPI gains and is currently trading at 0.7643 , essentially unchanged over the past 24 hrs. Most economists noted that the strong headline inflation (at 0.7%q/q vs 0.5% exp.) should be helpful in reducing RBA concern of low inflationary expectations and may mark the broad low point for y/y headline inflation. Ahead of the CPI print the market was pricing a 15% chance of a rate cut by the RBA next week and 12bps of cuts over the coming 12 months. Now the probability of a rate cut next week sits at 5% and there are 9bps for the year ahead.
The Japanese Yen has lost a bit more ground against the US Dollar and continues to trade in the higher ¥104s. NZD is a little lower at 0.715 and the CAD has followed the move in oil, temporarily gaining some ground amid a surprise drop in US stock oil piles, but as oil resumed its downward trend, the CAD also lost ground against the USD.
This morning on the economic front we have Euro-Zone M3 Money Supply at 9.00 am. This is followed by UK GDP and Index of Services at 9.30 am, while at 11.00 am the CBI Retailing Reported Sales will be released. At 1.30 pm we have the US Weekly Jobless Claims and Durable Goods Orders. Finally we have the Bloomberg Consumer Comfort Index, Pending Home Sales and the Kansas City Fed Manufacturing Activity Index at 2.45 pm, 3.00 pm and 4.00 pm respectively.
December S&P 500
Yesterday was a very busy trading session with six of my nine calls getting executed – five at the one time. After the S&P hit my average buy level at 2128 we had a nice rally to 2140 but as I had so many ‘’Open’’ positions I emailed my Platinum Members to exit this position at 2132.50 and I am still flat. Interesting that given the low volatility over the past two months which has seen the Daily Sentiment Index reading for Volatility in the S&P drop to just 6%. In other words this means that 94% of traders think the VIX will remain sedate for the foreseeable future. This is the lowest since back-to-back 5% readings on July 17-20, 2015. To put this incredibly low VIX into perspective the S&P declined 15% over the following 25 trading days. I am not saying that history is going to repeat itself but with less than 10 days to the US Presidential Election the chances of a pick- up in volatility are increasing. The fact that the McClellan Oscillator has closed negative for the second consecutive trading session plus the fact that the S&P has again closed below its 100 Day Moving Average at 2138 makes me nervous as to what is lurking ahead. Even though the S&P has made a series of lower lows and lower highs since the 2193.81 high on August 15, defining the trend as down, the stocks that make up a large portion of portfolios are at new highs making traders believe that risk are negligent for a pick-up in market volatility. My own view is the market will hold in until we get the US Election out of the way on November 8 and that the Fed will do everything in their power to keep the stock market in check. Today I will again look to buy the S&P on any dip lower to 2120/2126 with a 2113 stop which is just below the key 2114/2118 support level. Despite my bearish concerns I still do not want to be short the S&P at this time.
EUR/USD
No change as I am still flat the Euro as I look for the market to rally especially give the low sentiment towards the Euro at this time. Today I will again raise my buy level to 1.0845/1.0875 with a 1.0815 stop.
December Dollar Index
No change as I am still a seller on any rally higher to 99.00/99.30 with the same 99.65 stop.
December DAX
My DAX plan worked well with the market hitting my 10640 buy level before having a nice rally over 10700 which enabled me to cover this long position at my revised 10685 T/P level and I am now flat. With the Euro finally starting to rally we may see the DAX underperform in the coming days. However the DAX did manage to close over the key 10680 support level. Today I will again look to buy the DAX on any dip lower to 10570/10625 with a 10520 tight stop. I still do not want to be short the DAX at this time.
December FTSE
The FTSE traded lower to my 6915 buy level. As I was not comfortable in the price action of the FTSE I emailed my Platinum Members to exit this position for a breakeven before the market rallied to a 6940 rebound high before again selling off into the 9.00 pm close. Today my only interest in buying the FTSE is on a further dip lower to 6840/6875 with a 6815 tight stop. My own view is Sterling will soon start to appreciate which will put pressure on the FTSE going forward.
Dow Rolling Contract
My Dow plan worked really well with the market hitting my 18065 buy level before rallying back over 18200. As we were having a decent trading day I covered this long position at a revised 18105 T/P level as I wanted to protect my gains already from yesterday and I am now flat. Today I will again look to buy the Dow on any dip lower to 18070/18135 with a 18010 wider stop. Given the bounce back in the Dow yesterday I do not want to be short the market at this time.
December BUND
The BUND had a weak trading session yesterday with the market eventually hitting my average buy level at 163.20. 35 Minutes before the market closed at 9.00 pm I emailed my Platinum Members to exit this position at 163,15 for a small loss as I did not like the way the US Bond markets were closing in New York and I am still flat. Today I will be a small seller on any rally higher to 163.60/164.00 with a 164.30 stop. Given the weakness of the Bund yesterday I do not want to be long the Bund at this time.
Gold Rolling Contract
No change as I am still flat Gold with the same buy level from 1249/1257 with a 1241 stop which is just below the October low print at 1242 made three weeks ago.
Silver Rolling Contract
After I posted early yesterday morning Silver traded lower to my average buy level at 17.50 before having a small rally which enabled me to cover this position at my revised 17.67 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 17.20/17.50 with a 16.85 stop.
Following the success of the NFP Live Trading Day and Education Session in London on September 2, Paul Wallace and I are bringing this event to Dublin for the December NFP day on Friday December 2nd. If anyone is interested in attending this event the details are on the following link:
https://www.eventbrite.com/e/live-nfp-trading-day-dublin-tickets-28159689389
Two more dates for your diary. On November 9th at 6.00 pm I am speaking in the offices of IG Index in Dublin on the impact of the US Election result for both Stock and Currency markets for the rest of 2016.
Tomorrow Friday October 28 IG are hosting a half day seminar which unfortunately I cannot speak at as I am in Florida until the following week. If anyone of my members would like to attend they can register on the following link:
https://www.ig.com/ie/trading-summit
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