Despite a stellar US Non-Manufacturing ISM, there were only modest market moves over the past 24 hours. The US dollar fell (DXY -0.1%), Equities were mixed (S&P500 +0.1%; EuroStoxx -0.3%), while Bond Yields were flat (US 10yrs +0.4bps). It seems markets are treading water ahead of Non-Farm Payrolls tomorrow given more than usual uncertainty over the numbers due to possible hurricane effects.
To mark my 1425th 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 made 12 points yesterday and is now ahead by 102 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.
Yesterday’s US Non-Manufacturing ISM shot the lights out, printing at 59.8 and well above the consensus of 55.5 (55.3 previously). The Index is now at its highest since August 2005 and is a sign that the US economy is recovering quickly from hurricane-related disruptions. Strength in the ISM is consistent with GDP growth in excess of 4%. For me the most interesting bit of the report was the Prices Paid Sub-index which rose 8.4 points to 66.3 with prices for materials and services rising. Will this lead to a pick-up in US inflation – time will tell, but it is evident there has been a global upswing in prices paid according to recent surveys.
ADP Payrolls was in line with expectations, up 135k in September. That overall is also suggestive of only a modest impact from hurricane damage (some reports estimate ADP would have been 175k without hurricane damage). Of course ADP is far from infallible and the market consensus for the more important Payrolls on Friday is 80k.
Moves in FX were fairly tight. There was very slight US dollar weakness with the DXY -0.1% while the Euro rose (0.2%), along with the Yen (+0.1%) and Kiwi (+0.1%). Outperforming slightly was the Aussie with the AUD/USD up 0.3% to 0.7860. The key for the Aussie today will be Retail Sales and whether this prints at or below consensus.
Moves in Bonds were fairly muted. US Treasury yields rose 0.4 bps to 2.33% while German Bund yields fell 1.0bps to 0.45%. Market pricing for a US Fed rate hike in December remains at around +70% while 2 rate hikes are priced by the end of 2018 compared to the Fed dot points of four. On the next Fed Chair, it is now seen as a two-horse race between Warsh (seen as more hawkish) and Powell (seen as slightly dovish and willing to accommodate a relaxation in financial regulation).
There was more action in the European periphery where Spanish 10-year yields have risen 17.8bps since the Catalonian Referendum. A pro-independence lawmaker tweeted Catalonia would declare independence following a parliamentary session on Monday, confirmed later by the Catalan president. It is unclear how this will unfold. Spain’s central government has said the Spanish state is indissolvable while the constitutional court has declared the referendum invalid. For Euro watchers, the key here is that even if Catalonia secedes, it still wants to stay in the EU and that is probably why there has been little reaction in the Euro or German Bunds to date.
This morning on the Economic Front we have no data of note from the UK ahead of the ECB Minutes from the last Monetary Policy Meeting in September at 12.30 pm. The Minutes may garner some attention this month for details on the “very preliminary” discussions held on tapering last meeting. Personally I think a taper is likely to be announced at the October meeting. This is followed at 1.30 pm by US Weekly Jobless Claims and the Trade Balance. Finally we have the Bloomberg Consumer Comfort Index and Factory Orders at 2.45 pm and 3.00 pm respectively.
There are also five Fed speakers with Powell, Williams, Harker and George. Powell and Williams are the ones to watch – Williams as he is seen to be close to the centre of gravity in the FOMC, and Powell for any potential views given he is a front runner to lead the Fed following the end of Yellen’s term.
December S&P 500
The S&P closed at yet another all-time high but interestingly yesterday’s rise was accompanied by more NYSE stocks that closed lower versus higher as shown by the McClellan Oscillator which fell 30 points to close with a +62 print. This should not be happening with the three main US Indices at all-time highs. Volume has collapsed with this latest rally as traders fear a major correction but are waiting for a break to go short. The CNN Greed & Fear Index closed at its highest level in many years at 91 showing Extreme Greed. However until we get a sell extreme this market will continue to squeeze any short positions. With Non-Farm Payrolls tomorrow I cannot see much change to the recent scenario of tight sideways/higher ranges. Today I will leave my sell level unchanged from 2542/2550 with the same 2556 stop. I must say I am very tempted to start initiating a small short position given all of the above and adding into the trade if the market keeps rallying, but for now I will wait until we get the NFP tomorrow. I will now raise my buy level slightly to 2515/2521 with a 2509 stop.
EUR/USD
I am still flat the Euro which traded in a narrow range yesterday as we wait for more clarity from today’s ECB Minutes and tomorrow’s NFP data. Today I will leave my sell level unchanged from 1.1830/1.1875 with the same 1.1910 stop. Given the importance of the 1.1660 support level I will also leave my buy range unchanged from 1.1640/1.1680 with a 1.1610 stop.
December Dollar Index
I am still flat the Dollar which again just missed my 93.00 buy level with a 93.09 low print. Today I will now raise my buy level to 92.75/93.10 with a 92.45 stop.
December DAX
Unfortunately the DAX just missed my 12870 buy level with a 12885 low print before rallying 100 points and I am still flat. Given how overbought the DAX is trading I am reluctant to chase this market higher and today I will leave my buy level unchanged from 12820/12870 with the same 12780 stop.
December FTSE
Having traded sideways for most of the past four months we are finally seeing the FTSE rallying with the market again closing over its 100 DAY Moving Average at 7380 which is positive. I am still flat and despite this development I am reluctant to chase this market higher especially with the US Markets so severely overbought. Today I will leave my buy level unchanged from 7360/7395 with a 7325 stop. 7480/7520 is strong resistance for the FTSE and today I will be a small seller in this area with a 7555 tight stop.
Dow Rolling Contract
The Dow is long overdue a correction before the market re-groups following whatever new low is made in this sell-off over the coming weeks. This potential low ahead will be followed by one more rally before we finally see the end of this nine year bull market. This is how I see the market trading over the next couple of months and is why I will be an aggressive buyer on any dip lower to the 21850/21930 strong support during the next sell-off. Yesterday the Dow closed higher for the sixth straight session but with the CNN Greed & Fear Index at such extreme levels it is only a matter of time before we finally get this long overdue initial correction. I am still flat the Dow and today I will now lower my sell level to 22725/22785 with a 22840 stop. The Dow has initial support at 22300 and today I will be a buyer on any sell-off to 22350/22440 with a 22280 stop.
December BUND
My Bund plan worked well yesterday with the Bund trading higher to my 161.80 sell level before having a large sell-off. For anyone still short the Bund I would cover your position here ahead of today’s ECB Minutes. Unfortunately as I have lost my edge in the Bund over the recent weeks I emailed my Platinum Members to exit their short Bund position at 161.68 and I am still flat. Today I will be a buyer of the Bund on any further move lower to 160.40/160.75 with a 160.10 stop. I will also look to sell the Bund from 161.60/161.95 with a 162.20 stop.
Gold Rolling Contract
Although Gold spiked to 1282 yesterday, nothing has changed in my forecast. The huge decline from the September 8, high at 1357 will continue until sentiment becomes sufficiently pessimistic to support a sustained rise. Today I will continue to be a buyer on any dip lower to 1259/1266 with a 1252 stop. Again if I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 1232/1245 with a 1225 stop.
Silver Rolling Contract
It was good that we exited any long Silver position yesterday ay 16.75. Thankfully for anyone who did not exit the market rallied to 16.90 after I posted before falling to a 16.53 low print. I am still flat and with the Daily Sentiment Index reading only at 34% Silver bulls I fear we need one more decent sell-off before we have a more tradeable bottom. Today I will now lower my buy level to 16.10/16.40 with a 15.90 stop. If Silver trades lower to 15.40/15.85 over the coming days I will be an aggressive buyer in this area with a 14.95 stop.
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