USD Indices have made new highs with Sterling and EUR leading the G10 declines amid increasing concerns Prime Minister May won’t be able to get her Brexit deal through Parliament while Italian budget uncertainty has also weighed on the Euro. US equities have started the new week under pressure with tech shares again leading the declines and sentiment has not been helped by the Trump administration’s plans to introduce intellectual property (IP) retaliation measures against China. Oil prices jumps first on OPEC news and then fall hard on a President Trump tweet. AUD has drifted below 72c, while the Euro has closed at its lowest level in 18 months at 1.1225 in New York.
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For anyone following my Platinum Service it lost 50 points yesterday and is now ahead by 351 points for November, having made 2094 points in October,1276 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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Currencies
Yesterday Sterling opened lower and continued to drift down over the course of the day and night. There have again been conflicting reports on whether UK and EU negotiators are close to agreeing a deal to present to the UK cabinet. The FT reported that the main aspects of a draft text were ready to present to the UK cabinet on Tuesday. However, the Guardian reported that the UK had all but given up on a special EU Summit in late November, as the two sides remain deadlocked on several key issues (most notably the Irish border). EU and UK negotiators need to agree a deal by the end of Wednesday, for sign-off by the UK cabinet, to allow time for a November EU Summit.
So given the above Sterling is the weakest G10 currency, down 0.90% on the day to 1.2850. The weakness in the Pound has spilled over into the EUR, which continues to trade as a ‘’low-beta’’ GBP. The EUR broke through support at 1.13 and now trades at 1.1238, its lowest level since June 2017. Italian concerns have also weighed on the EUR. Italy needs to present a revised Budget to the European Commission by the end of today, although Deputy PM Salvini warned that ‘’the budget does not change because the EU sends us letters.’’ The European Commission could, in theory, impose financial sanctions on Italy if it believes the budget breaches the fiscal rules of the bloc.
The flip-side of the weakness in Sterling and EUR has been USD strength. The major USD Indices are up between 0.4% and 0.6%, and have made 18 month highs. DXY now trades at 97.54 and BBDXY is at 1213.
AUD has drifted below 72c and is down 0.48% compared to levels this time yesterday. The Aussie remains at the mercy of market sentiment at the moment, weakness in equities is one factor, but political tension is another. Thus it is hard to see the AUD trading back above 73c until sentiment improves. Either way development in the UK and Europe are likely to be important this week.
Equities
US equity markets have come under renewed downward pressure, with chunky falls across the major benchmark Indices. The S&P500 closed down 1.97% a full 60 Handles from where we were trading when I posted yesterday morning, while the NASDAQ has again led the way lower, down 2.80%. Apple shares are down more than 4% on the day, and over 16% from the recent peak, after some of its suppliers forecast slowing demand (recall Apple said at its last earnings report that it would no longer supply iPhone unit sales, which some analysts interpreted as an attempt to move attention away from slowing iPhone demand). And a Wall Street Journal report that the Trump administration was planning to use export controls, indictments and other tools in retaliation for alleged Chinese intellectual property theft did not help sentiment either. The parliamentary math is looking increasingly difficult for Theresa May to pass any prospective deal, which increases the likelihood of either new elections or, possibly, even a second referendum.
Bonds
The US bond market was closed, although Treasury bond futures indicated a 2bp fall in the 10 year rate to around 3.16%. In Europe 10UK Gilts closed 3.8bps lower to 1.45% amid Brexit uncertainty and 10y Bunds closed 1bps lower to 0.39%.
Commodities
Oil prices initially rose on Monday in response to Saudi Arabia’s announcement over the weekend that it would reduce its oil production by 500,000 barrels per day next month. Brent Crude was up 1.6% and West Texas Intermediate was up 1.2%, but then later in yesterday’s session prices collapsed following President Trump’s tweet criticising of the Saudi Plan. Trump tweeted ‘’Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!’’
Reaction to the Tweet has seen oil prices collapse with WTI now 2% lower on the day while Brent is down 1.42%. Commodities in general also had a bad day, with iron ore down 0.41% , copper 0.50% and Aluminium 0.61%. Meanwhile Silver closed near a three year low at 13.98.
This morning on the Economic Front we already had the release of the final German CPI which came in as expected with a +0.2% print. At 9.30 am we have UK Unemployment and Average Earnings. This is followed at 10.00 am by German and Euro-Zone ZEW Survey. Finally at 11.00 pm we have the US NFIB Small Business Optimism.
Later this afternoon the Fed’s Kashkari is speaking at 3.00 pm
December S&P 500
When I posted yesterday morning the S&P was trading without any pressure at a price of 2788. To think that just below the close the market had fallen 65 Handles from here is incredible on what turned out to be a brutal trading session for traders with liquidity a problem due to the US Banks being closed for the Veterans Day Holiday. After the S&P hit my buy level at 2770 I emailed my Platinum Members to exit any long position at 2774 and I am still flat. I did not trade the S&P again yesterday which was a good decision as it turned out. It is incredible but all ‘’Open Gap’s’’ in the S&P always get filled. The S&P has very strong support from 2703/2718 and this area must hold or we could well see a further acceleration lower to the October lows. Today I will be a buyer on any dip to this area with a 2692 stop. Given the volatility I am only trading in small size.
EUR/USD
It took a while but finally the Euro traded lower to my 1.1220 buy level before rallying earlier this morning to my 1.1250 T/P level and I am now flat. The Euro is oversold with the Daily Sentiment Index closing at just 11% bulls last night. Today I will again look to buy the market on any dip lower to 1.1160/1.1210 with a 1.1135 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 1.1060/1.1105 with a 1.1025 stop.
December Dollar Index
I am still flat the Dollar. The Dollar has strong resistance from 97.90/98.30 and today I will be a seller on any rally to this area with a 98.65 stop. Given how overbought the Dollar is trading I do not want to be long the market at this time.
December DAX
Shortly after I posted yesterday morning the DAX traded lower to my 11410 buy level before rallying to my 12450 T/P level and I am still flat. Subsequently the DAX got hit hard with the market trading below 11300 into the New York close. The DAX ended yesterday with a Downside Key Day Reversal as the previous 11400/11600 support area got taken out with ease. Today I will be a small seller on any further rally to 11550/11620 with a 11680 tight stop. The DAX has support from 11030/11110 and today I will be a buyer on any dip to this area with a 10970 stop.
December FTSE
After the FTSE traded lower to my 7065 buy level, I added to this position last night at a price of 7025 for a now average long position of 7045. The main reason that I added to this position is the ongoing weakness in Sterling. I will leave my stop unchanged at 6995 while lower my T/P level on this trade to 7075. If any of these levels are hit I will be back with a new update for my Platinum Members.
Dow Rolling Contract
Last Thursday the Dow made an intra-day high of 26280. Yesterday morning when I woke up the Dow was trading just below 26100. Shortly after I posted the Dow nosedived to hit an overnight low of 25300 which is almost 1000 points in three trading sessions which is incredible. If it was not for the Dow yesterday would have been a very profitable trading session. After I had exited my S&P and NASDAQ long positions I lowered my Dow buy level to an average price of 25720 before getting stopped out of this position a 25550 and I am still flat. This morning the Dow has rebounded 250 points off its overnight low in what looks like another desperate measure by the bulls to hold the market. The Dow has strong support from 25150/25320 and today I will be a buyer on any dip to this area with a 24995 stop. Ahead of Fed Chair Powell’s speech tomorrow I do not want to be short the market at this time.
December NASDAQ
After the NASDAQ hit my 6990 buy level I emailed my Platinum Members to exit any long NASDAQ position at 7000 and I am still flat as yet again the weakness in the FANG stocks really hit the market for all of yesterday’s session. The NASDAQ has support from 6770/6830 and today I will be a buyer on any dip to this area with a 6725 stop.
December BUND
No change as I am still a small seller on any rally higher to 160.70/161.20 with the same 161.55 stop.
Gold Rolling Contract
I am still long Gold from late Friday at 1209 with the same breakeven exit level. I will continue to add to this position on any further move lower to 1193 with the same 1187 stop. If my second buy level is hit I will then lower my T/P level to 1202. Yesterday the DSI for Gold closed at 11% while the Managed Money Accounts (speculators) remain net-short 37,486 Futures Contracts which they have done for most of the past three months.
Silver Rolling Contract
No change as I am still long the market at 14.20 with the same 13.55 wider stop and 14.35 T/P level. The DSI closed last night in single digits with a 9% print and if any of the above levels are hit I will be back with a new update for my Platinum Members.
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