The market and UK political commentators have been widely touting the high likelihood that tomorrow’s Parliamentary vote on Brexit would not get passed and that reality has now been officially grasped by Prime Minister May. May has relented and postponed the vote and is headed back to Brussels. Yesterday was a very hectic Brexit day replete with a myriad of political and Brexit possibilities, with PM May still under real pressure. May has now admitted what everyone thought, that the bill was likely to be defeated by a ‘’significant margin’’, mainly due to MPs’ concerns about the Northern Irish backstop. She will meet EU leaders in Brussels on Thursday and hopes to extract some more concessions on the backstop. A European Commission spokeswoman said the EU was not willing to renegotiate the agreement, although Bloomberg reported that EU was prepared to publish a declaration over the backstop, clarifying the EU’s position. Such a declaration seems unlikely to convince enough MPs to vote for the deal however, given it would not be legally binding. May did not set a date for when the new vote might take place. The market is concerned that the postponement uses up valuable time before the 29th March exit date, and the risk of a no-deal scenario is growing.
To mark my 1725th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 415 points yesterday and is now ahead by 1217 points for December, having made 1541 points in November, 2094 points in October, 1279 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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However, the political situation in the UK is fluid and there remain a large number of permutations that could take place from here. Labour MP Chris Leslie said the party could table a vote of no confidence tomorrow, and while May would likely survive this, the threat of new elections and a Corbyn-led Labour government remains. A second referendum is also a growing possibility, despite May’s insistence that this was off the table. Meanwhile, the ECJ ruled that the UK could unilaterally withdraw its Article 50 request to leave the EU, which has given hope to Remain supporters that Brexit could yet be reversed. A second referendum appears to be one of the few ways to break the impasse in the divided UK parliament.
Currencies:
Sterling has, by a stretch, been the worst performer on the day, Cable reaching new lows for the year, EUR/GBP within sight of the same on the topside. Sterling traded to within sight of 1.25 and is only just above that level now, at 1.2555. The fact that given all the uncertainty, that Cable is down a modest 1% since 5pm yesterday (in my mind modest given the political situation) is a reminder to this writer of how much bad news is already priced into Sterling.
The Pound fell sharply after news that the vote would be delayed, and made an 18-month low against the USD. The GBP fell as much as 1.7% to just above 1.25, although it has since recovered some ground. UK gilt yields fell sharply in sympathy, with the 10 year rate down 7bps to 1.2% and the 30 year rate down 12bps.
Thanks to the decline in Sterling, and a bit more, the USD has made some ground overnight. First, it is no surprise that it has been a risk-off session. The Euro has also been heavy, as have the commodity currencies, especially the oil-centric commodity currencies (CAD and NOK) underperforming on renewed weakness in oil only a day on from the OPEC supply cut deal.
Equities
European stocks were in the red though interestingly, among the European main boards, the FTSE was one of the least-bad performers, down 0.83% against the Eurostoxx index that was down 1.87% with European 600 banks index down 2.66%. US equities were heavy in the first part of the session, but have recovered and have made it back in and out of positive territory in the last hour of trade, lead higher by the Nasdaq. Even Apple shares closed higher on the day after news that a Chinese court had ordered the company to stop selling older iPhone models.
Commodities
Oil is again back in the spotlight, both WTI and Brent down the best part of 3% (both down around $1.50-60/bbl), possibly as traders pare positions ahead of news on the implementation of actual rather than promised cuts. Wire stories are reporting news that oil exploration companies are still planning to boost spending in 2019. I will be paying close attention to US shale activity in coming months, to rig count numbers, production, inventories, as well as takeaway capacity. While US inventories are not back to 2015-early 2017 highs on the back of the first phase of the US shale production boost, they have been increasing on net in recent months.
Base metals were down on the LME, the LMEX index down 1.00%, copper down 0.91% to $6,089/tonne. Gold is down marginally, by 0.42%, more than accounted for by the uplift in the DXY. The bulk commodities are little changed overall, though Chinese rebar futures fell further yesterday.
Economics
Economic news has been rather limited and not absolutely top tier in terms of market sensitivity. What there has been has been on the soft side for the UK and Europe, but better for the US. UK Industrial Production in October dipped 0.6% against expectations of a 0.1% rise, while the Trade Deficit came in at -3.3bn in October, much wider than the -1.3bn consensus. Construction output dipped a smaller than expected 0.2% against expectations of a 0.5% fall. In Europe, the lesser-watched Sentix Investor Confidence Index for December took a beating, down from +8.8 to -0.3, back to European debt crisis levels amid trade tensions, Brexit, Italy budget jitters and unrest in France and Belgium.
The US released its Job Openings report for October (it lags payrolls for a month), again reflecting a still very strong labour market. Openings came in at 7.079m, up from a revised 6.96m. Even if not quite to the 7.1m consensus, it was still the second highest on record, with Openings still ahead of aggregate employment by over 1m. The quit rate, regarded as a measure of labour market health as people switch jobs, was down marginally from 2.4% to 2.3%, but still very high. Among job openings, manufacturers reported increases.
Bonds
Yesterday was a tale of two halves with bonds rallying in Europe, as initially they did in the US, before some equity rebound saw Treasury yields trading marginally higher for the day.
This morning on the Economic Front we have UK Employment and Average Earnings at 9.30 am. This is followed at 10.00 am by German and Euro-Zone ZEW Current Situation/Expectations. Next we have the US NFIB Small Business Optimism Survey. Finally at 1.30 pm we have PPI.
December S&P 500
It has taken time but finally all three of my US Indices hit my target buy levels in another volatile trading session before all three Indices rallied hard. After the S&P traded lower to my 2590 buy level I covered this position too early at 2610 and I am now flat. As long as we can hold yesterday’s 2585 spike low then I believe we should be able to mount a decent recovery off this low into year-end. The Fear & Greed Index has registered Extreme Fear for over six weeks now with this reading closing with a 9 print last night, This gives you a level of how oversold the US Indices have gotten over the past two months. Normally when the 9 Day Moving Average is 30 Handles away from current price the market is oversold or overbought. On Friday the S&P closed over 70 Handles away from this key MA while yesterday we closed 72 Handles lower than its current 2702 price level, after been nearly 110 Handles lower at one point. Today I will again look to buy the S&P on any dip lower to 2593/2618 with a wider 2573 stop. I have to use wider stops given the extreme volatility. I will still look to sell the S&P on any move higher to 2678/2693 with a 2705 stop.
EUR/USD
With so much going on in the equity markets I did not have much time to look at the EUR. The Euro did trade lower to my buy range and I emailed my Platinum Members that I had bought the market at a price of 1.1361. I am still long and I will now raise my stop on this position to 1.1329. I will now lower my T/P level on this position to 1.1391.
December Dollar Index
As I was already long the Euro I did not sell the Dollar which is currently trading at the start of my sell range. I am still flat and today my only interest in selling the Dollar is on a further rally to 97.50/97.90 with a 98.25 stop.
December DAX
My DAX plan worked well with the market trading lower to my 10620 buy level before rallying to my 10670 T/P level and I am now flat. The DAX is extremely oversold having fallen over 1000 points in the last few weeks with the market now trading outside the bottom of its Daily Bollinger Band. Today I will again look to buy the market on any further dip to 10570/10630 with the same 10515 stop.
December FTSE
The continued weakness in Sterling prevented the FTSE from hitting yesterday’s 6705 buy level before the market subsequently rallied over 100 points and I am still flat. Today I will now raise my buy level slightly to 6670/6710 with a higher 6635 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Another wild trading session yesterday with the Dow managing to rally late and close some 500 points off its low. My Dow plan worked well with the market trading lower to my 24170 buy level before rallying to my revised 24240 T/P level. Subsequently I emailed my Platinum Members to re-buy the Dow again at a price of 23975 before unfortunately covering this position too early at 24040 as I had too many open positions at that time and I am still flat. Today I will again look to buy the Dow on any dip lower to 24050/24250 with a 23940 stop. Given how oversold the Dow is trading I still do not want to be short the market at this time.
December NASDAQ
My NASDAQ plan worked well with the market trading lower to my 6540 buy level before rallying to my 6585 T/P level and I am still flat. Today I will again look to buy the market on any dip lower to 6560/6610 with a 6515 tight stop.
Gold Rolling Contract
No change as I am still a buyer from 1224/1232 with the same 1215 stop.
Silver Rolling Contract
For a change Silver slightly outperformed Gold yesterday. Thankfully Silver did trade lower to my initial 14.50 buy level. I am still long with a now higher 14.20 stop and the same 14.70 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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