The US Treasury led bonds sell off has continued yesterday after the market re-opened following the Veterans Day Holiday on Friday, buoyed by investors’ expectations of higher US growth and higher inflation under a Donald Trump US presidency. For now expectations of higher growth appear to be outweighing any concerns of equity valuation effects from higher Bond Yields, the key question now however is how much further can this Bond sell off go before we start to see some destabilising effects across markets. In December last year the Fed lifted the Funds rate by 25bps and the rise in US Treasury yields that followed coupled with a stronger US Dollar triggered a China equity led sell off in January. Hence is probably worth watching how EM markets cope with the rise in UST yields this time around.
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 contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 82 points yesterday on what was probably my busiest trading day since I started this Service over 18 months ago and is now ahead by 1009 points for November having made 1582 points in October. The previous four months saw gains of 1142, 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.
The selloff in US Treasury Yields extended for a sixth consecutive day. On November 4, 10y UST were trading at 1.77%, now they are 45bps higher at 2.22%. Volatility has also remained elevated,10y UST trading n a 12bps. 10y Bunds and Gilts have followed the move in UST yields, closing the day at 1.5 and 4bps higher respectively.
The move higher in US Yields has also seen a repricing of Fed rate hike expectations with the market now assigning a 95% probability to a December hike, up from 83% on Friday. Another hike is now more than fully priced next year. The US Dollar has benefited from the rise in Fed hike expectations with the DXY index back above the 100 mark for the first time this year. The BoJ’s yield curve control policy has helped the deprecation of the Yen amid the rise in core global yield ( JPY -1.30% overnight) and the Euro has broken below the 1.08 mark as concerns over Europe’s political stability intensify with the Italian referendum and Austrian election due in just under three weeks.
Meanwhile commodity linked currencies have coped relatively well. NZD is down 0.36% and trading just below the 72c mark with initial impressions suggesting yesterday’s earthquake is unlikely to be as damaging as the 2011 Canterbury earthquakes .The CAD is -0.10% supported by a mini rally in oil prices over the past few hours and the AUD is the star performer, little changed at 0.7546. Other commodities have taken a breather with iron ore down 2.6%, steam coal -4.1% and gold -0.4%.
ECB Constancio cautioned on Monday that a Trump presidency could mean higher US growth, but Europe and emerging countries could actually suffer from protectionism in the US.
This morning on the economic front we already had the release of German GDP which came in slightly weaker at 0.2% versus 0.3% expected. At 9.30 am we have UK CPI, PPI, and the House Price Index. This is followed at 10.00 am by Euro-Zone Trade Balance and GDP while at the same time we have both the German and Euro-Zone ZEW Survey Current Situation/Expectations. Next we have US Retail Sales, Empire Manufacturing and Import Prices. Finally we have Business Inventories at 3.00 pm.
In what must be one of the busies day’s for economic releases in a very long time we have a host of speakers from the various Central Banks.
ECB’s Lautenschlaeger at 8.30 am and Bundesbank’s Dombret at 2.00 pm.
The Fed’s Fischer and Kaplan both speak at 6.30 pm
The Bank of England’s Carney at 10.00 am.
Finally ex ECB President Trichet speaks at 3.45 pm at the European Finance Minister’s Meeting in Frankfurt.
December S&P 500
My S&P plan worked well yesterday with the market hitting my average buy level at 2160 before having a nice rally to 2168 which enabled me to cover this position at my revised 2165 T/P level. Subsequently I emailed my Platinum Members to re-buy the S&P at 2156 and we covered this position for a small gain at 2160 and I am now flat. Meanwhile the Dow made a new all-time high at 18,934 while the S&P’s Cash high remains at 2182 from last Thursday which is still below the summer high at 2193. As long as the S&P stays below this key 2193 level we still have the potential for negative divergence but to me it is only a mater of time before we break higher. The momentum is still with the bulls but worryingly following the confirmed Hindenburg Omen last Thursday the McClellan Oscillator again only rose slightly to close at +22 last night. Today I will again look to buy the S&P on any dip lower to 2155/2161 with a 2149 stop. Given the fact that I believe the S&P will make new highs I do not want to be short the market at this time.
EUR/USD
Thankfully by the time you got to read my Daily Commentary yesterday morning the Euro was trading well below my 1.0790 buy level before unfortunately stopping me out of this trade at 1.0730. The Euro is extremely oversold, trading outside the bottom of its Daily Bollinger Band and at the bottom of its Williams Index. For these reasons I emailed my Platinum Members after I was stopped out of my initial trade to re-buy the Euro at 1.0715 with a 1.0775 T/P level which was filled earlier this morning. Today I have bought the Euro again at 1.0770 with a wider 1.0695 stop.
December Dollar Index
Unfortunately just as I posted yesterday morning I was stopped out of my short 98.40 position at 98.85 and I am now flat. The Dollar closed over 100 for the first time since last December with the key level to watch at 100.56 which is the high from the post ECB Meeting last December form which we had a significant Key Day Reversal. Given the significance of this pivot point I will again look to sell the Dollar on any rally higher to 100.25/100.65 with a 100.90 stop. Remember a break and close over 100.56 followed by the Euro breaking and closing below 1.05 will very bullish for the Dollar.
December DAX
After the DAX traded lower to my 10680 buy level I emailed my Platinum Members to exit this position at 10705 as I had so many open positions at the same time and I am now flat. Surprisingly the DAX is struggling to break higher especially with the Euro been so weak. Today I will again look to buy the DAX on any dip lower to 10580/10640 with a 10525 stop. Remember the DAX needs to break and close over 10850 for the market to open up my higher target level at 11,160. For this reason I still do not want to be short the DAX at this time despite the heavy price action.
December FTSE
The FTSE also traded lower to my revised 6735 buy level before eventually hitting my 6760 T/P level and I am still flat. This morning the FTSE is trading higher at 6790 and today I will again look to buy the market on any dip lower to 6725/6755 with a 6695 stop. Despite the FTSE struggling to trade higher I still do not want to be short the market especially ahead of Bank of England Governor Carney who speaks at the Treasury Select Committee at 10.00 am.
Dow Rolling Contract
Unfortunately the Dow just missed my 18790 buy level with a 18816 low print before rallying 100 points and I am still flat. Today I will raise my buy level slightly to 18750/17830 with a 18710 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 18670 with a 18610 tight stop. My only interest in attempting to short the Dow is on a rally higher to 19075/19140 with a 19200 stop.
December BUND
My Bund plan worked well with the market hitting my 159.30 buy level before having a nice 100 point rally. As so many of my call’s hit yesterday I emailed my Platinum Members to exit this position at 159.75 and I am now flat. Today I will again look to buy the Bund on any dip lower to 159.35/159.75 with a 159.05 stop which is just below yesterday’s low print. Given how oversold the Bund is trading I do not want to be short the market at this time.
Gold Rolling Contract.
Unfortunately Gold just missed my 1210 buy level before rallying strongly yesterday afternoon and I am still flat. The Daily Sentiment Index reading for Friday’s close dropped to just 7% bulls which is its lowest reading since the 5% reading on October 4 which led to a near $100 rally into last Wednesday’s post Trump high print. Gold has very strong support from 1205/1210 and today I will raise my buy level slightly to 1208/1216 with a 1199 stop.
Silver Rolling Contract
Silver has now fallen over 10% since its last Friday morning high for an incredible move lower. Unfortunately I was stopped out of my long 17.65 position at 16.80. Given how oversold Silver was trading plus the low DSI reading I emailed my Platinum Members to re-buy the market at 16.75 and this position was cut this morning at 17.02 as I want to be on the same page as my Premium Members. Yesterday’s move lower looks like an acceleration which is generally an ending of a sharp move and for this reason I have bought Silver again at 16.95 with a 16.25 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
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