European equities did open weaker on the back of sizeable losses in Asia-Pacific equities, but managed to rally as the morning session progressed to close up for the day, the E600 European index up 0.1%, the FTSE by 0.48% and the DAX by 0.78%. It has been a choppier session in the US, with only Bank of America among the main names to release their results yesterday with headline EPS beating the consensus, but their stock closed down 1.9%. The tech sector has been under-performing in the US, not surprising perhaps because of lofty valuations and tech-related US-China trade tensions. The Nasdaq has closed down 0.88% and the FANG stocks down 1.14% in a weak close to proceedings. One hour before the Dow closed the market was trading at 25450 only to lose over 200 points into the close. Meanwhile the VIX closed basically unchanged at 21.23.
To mark my 1700th 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 65 points yesterday and is now ahead by 936 points for October, having made 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 and Economics
The NZD has been leading the mini-charge against the USD ahead of the Q3 CPI this morning and a market that, according to the latest Chicago futures report, revealed speculative positions at record shorts. For the USD, US Retail Sales for September missed the market consensus, headline sales barely growing (+0.1% against the 0.6% consensus), but on further inspection it was evident that the main culprit was a 1.8% decline in food service establishment spending, quite possibly the dislocation from Hurricane Florence. (More in October from Michael?)
The Atlanta Fed trimmed their Q3 GDPNow estimate from 4.2% to 4.0% on now-assumed 3.3% growth in consumer spending, down from their previous 3.6% estimate. Still handy growth overall nevertheless, even if supported by tax cuts. The USD took the numbers in its stride, dipping slightly on the release (as did bond yields) before stabilising.
Also released yesterday was the September month and full-year Budget deficit figures for the US, the full-year 2018 FY deficit coming in at 779bn, up from 666bn for FY17 and the largest since 2012. Receipts managed to eke out a 0.4% gain despite tax cuts, while outlays rose 3.2% as the fiscal boost plays through.
Commodities and bonds
President Trump spoke with the Saudi King on a phone call, who strongly denied his government was behind the killing of the journalist. This led Trump to suggest that it might have been ‘’rogue killers’’ and he sent Secretary of State Pompeo to investigate further. This has taken some heat out of oil prices, which opened higher, but have lost some grip since. Whatever the truth on Kashoggi, oil prices have subsequently softened, well off intra-day highs. Base metals eased, though gold rose. Bond yields have closed close to flat
This morning on the Economic Front we have German Import Prices at 7.00 am and this is followed at 9.30 am by UK Unemployment and Average Earnings. Next we have the German and Euro-Zone ZEW Survey at 10.00 am. At 2.15 pm we have US Industrial Production and Capacity Utilization. Finally at 3.00 pm we have the NAHB Housing Market Index and the JOLTS Job Openings.
December S&P 500
The S&P had a wild trading session getting hit after I posted early yesterday morning before rallying to an intra-day high above 2775 one hour before the Cash Market closed only to get hit hard into the close with the S&P closing below its 200 Day Moving Average. Meanwhile The VIX closed unchanged. The VIX closed above its upper Bollinger Band on Friday October 5. This indicates an extremely overbought condition for the VIX – which usually coincides with an extremely oversold condition for the stock market. Regular readers know that the VIX generates broad market buy signals when it first closes above its upper Bollinger Band, and then closes below it. For the first time since the crash of 1987, the VIX closed above its upper Bollinger Band for five straight days. During that five day period, the S&P lost more than 27% of its value. The ensuing VIX buy signal helped the market recover about 40% of that decline in just a few days. But the bounce quickly ran out of steam and the market dropped back to retest its lows. That is when we got a more sustainable rally.
Of course last week’s decline did not come close to the sort of damage caused by the crash of 1987. At Thursday’s low of 2710, the S&P was only down about 7% for the week. But we can still use the pattern from 1987 as a roadmap for what to expect the current VIX signal plays out. If this is replicated I am looking for the S&P to top out between 2805/2830 before the market retests last week’s 2710 low. That is when we will have a better setup for a rally heading into the end of the year. I am still looking for new highs either into year-end or early first Quarter 2019 before we have the real sell-off in the market. Today I will lower my buy level slightly to 2705/2720 with a 2692 stop. My only interest in selling the S&P is still on a rally higher to 2810/2825 with the same 2833 stop.
EUR/USD
I am still flat the Euro and I will not chase the market higher at this time. I will leave my 1.1450/1.1490 buy level unchanged with the same 1.1415 stop.
December Dollar Index
The Dollar again traded sideways and I am still flat. I will also leave my sell level unchanged from 95.30/95.70 with the same 96.05 tight stop.
December DAX
I am still flat the DAX which reversed earlier losses to close higher. Today I will raise my buy level slightly to 11340/11410 with a higher 11285 stop. I still do not want to be short the DAX at this time.
December FTSE
My FTSE plan worked well with the market trading lower to my 6935 buy level shortly after the European Markets opened before rallying to my 6965 T/P level and I am now flat. The FTSE is severely oversold after selling off for most of the past three weeks. Today I will again look to buy the market on any dip lower to 6900/6940 with a 6865 stop. Just like the DAX above I still do not want to be short the market at this time.
Dow Rolling Contract
Frustratingly the Dow just missed my initial 25110 buy level with a 25120 low print before rallying over 350 points and I am still flat. However the Dow had a weak close which is a worry but so far the market is just holding above its 200 Day Moving Average which comes in at 25144. However given the number of tests of this key MA, the odds are that one sell-off will break this key area and test last Thursday’s low of 24898 before we see a more sustainable rally. Interestingly, despite the late sell-off in the US Indices the McClellan Oscillator improved to close with a reading of -159 while the Fear & Greed Index closed unchanged with an Extreme Reading of 11. Today I will now lower my buy level to 24750/24950 with a 24620 stop. Despite the negative price action 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 7090 buy level shortly after the European Markets opened before rallying to my 7125 T/P level and I am now flat. Just like the Dow and S&P, the NASDAQ also had a weak close which is a worry. The NASDAQ has strong support from 6935/6985 which must hold or else we could see a further acceleration to the downside. Today I will be a buyer on any dip to this area with a tight 6890 stop.
December BUND
I am still flat the Bund which continues to hold in. Today I will again raise my buy level to 157.40/157.80 with a 157.10 stop.
Gold Rolling Contract
Gold had a nice up-day yesterday as the market continues to build value above the key 1212 support level. I am still flat and I will now raise my buy level to 1202/1214 with a 1194 stop.
Silver Rolling Contract
Silver is finding it difficult to follow the price of Gold higher which is a worry. I am still flat the market and today I will now raise my buy level to 14.20/14.60 with a higher 13.80 stop.
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