The final trading day of 2017 featured similar themes to the preceding week. Year-end flows and lower liquidity remained a key feature of markets. US equity Indices fell around 0.5% on Friday, with all major sectors in the red. The S&P ended the last trading session of the year with a very late sell-off which helped generate a large Downside Key Day Reversal. Over the full year, the S&P 500 gained 19%.
To mark my 1500th 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 in this offer can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 28 points on Friday to finish December with a gain of 946 points, having made 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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The USD Index fell 0.3% and losses were broad-based relative to G10 peers. The EUR and GBP were among the strongest performers, rallying around 0.5% in the final day of the year. EUR/USD hit a high of 1.2026 and is just shy of the September 2017 high (1.2092) – at the time the ECB acknowledged the impact of the higher exchange rate on the inflation outlook. The EUR ended 2017 the strongest among G10 currencies with a 14% gain.
The AUD/USD hit a high of 0.7825 (now 0.7808), maintaining its solid late 2017 momentum and closing the year up 8%. In addition to broad USD weakness, the AUD is being supported by stronger commodity prices. The Bloomberg commodity index closed 0.4% higher, marking an 11th straight day of gains. While metal prices (especially Copper), had been leading commodity gains last week, these consolidated on Friday, but remain near mid-2013 highs. Oil pushed high again on Friday with WTI closing above $60/brl for the first time since mid-2015.
Finally US Treasury yields are down around 2bp across the curve. Weaker stocks and month end duration extensions supported bonds (Bloomberg/Barclays index extends 0.07 years). The 10y yield is at 2.41% – 3bp lower over 2017 year and the 62bp annual range (2.01% to 2.63%) is among the tightest seen in the last 20 years. The 2 year yield closed 2017 at 1.88% – 70bp higher over the year as the Fed delivered multiple rate hikes.
This morning on the Economic Front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. The only US data of note is Manufacturing PMI which will be released at 2.45 pm as we wait for the US Payroll data on Friday.
March S&P 500
Very late in Friday’s trading session the S&P traded lower to my initial 2683 buy level before trading sideways. After the Cash S&P closed at 9.00 pm the S&P got slammed with the second buy level at 2677 also getting hit before I was stopped out of this position at 2672 and I am now flat. I doubt many of you would have taken the trade given the fact that it was so late in the evening especially ahead of a long-weekend. I flew to Florida on Friday afternoon and unfortunately the plane had no internet service and I was unable to do an updated email which was frustrating as I would have cut any long position earlier. As I mentioned in my abbreviated Daily Commentary above the S&P had a large Downside Key Day Reversal off a new 2698.25 all-time high. There is no doubt that the US Economy and Markets are growing but the benefits of this growth are not evenly distributed. Now the Fed is slowly reversing its stimulus measures, both by raising short-term rates and by letting its Bond portfolio shrink as it matures. Both of these measures have a tightening effect on the economy that is not growing remotely as well as it has in past recoveries. So why is the Fed doing it? Because the FOMC Members fear inflation will take hold if they do nothing. I think they are probably wrong on this as I fear the Federal Reserve tighten too much too soon. Further their Quantitative Tightening, which is what it really is, is going to reduce M2 Money Growth from its current 4% to less than 2%. The S&P has strong support at 2652 and today I will be an aggressive buyer on any further dip lower to 2650/2658 with a 2643 stop. In light of Friday’s KDR I will now lower my sell level to 2688/2696 with a 2702 stop.
EUR/USD
It is frustrating as I have had the correct view on the Euro for the past number of weeks but I have been unable to get a long position on board as one short position after another gets stopped out. Today I will now raise my buy level slightly to 1.1895/1.1945 with a 1.1860 stop. Given how overbought the Euro is trading I am reluctant to chase this market higher and prefer to wait for a pull-back before going long.
March Dollar Index
Just after I sent my first updated email on Friday the Dollar traded lower to my 92.00 buy level. I am still long and will only add to this position on any subsequent move lower to 91.50 with a 91.20 stop. I will now lower my T/P level on this position to 92.20 and if my second buy level is filled I will then lower my T/P level to 91.80.
March DAX
My DAX plan worked well as after the market traded lower to my initial 12895 buy level I emailed my Platinum Members to exit and long position at my revised 12918 T/P level or higher and I am now flat. As I mentioned on Friday the 12700 is now key support for the DAX as a break and close below here is bearish perhaps signalling and end to this incredible 8 year bull market. With this in mind I will now look to buy the DAX on any dip lower to 12670/12730 with a 12625 tight stop. Given how close we are to this support level I still do not want to be short the DAX at this time.
March FTSE
I am still flat the FTSE which closed at new all-time highs on Friday in what was a short trading session ahead of the long weekend. I do not want to chase this market higher especially after the late sell-off in the US Markets and I will leave my buy level unchanged from 7480/7520 with the same 7450 stop.
Dow Rolling Contract
My Dow plan worked well on Friday with the market trading lower to my 24700 buy level on the close before re-opening above my T/P level at 24770 and I am now flat. Friday’s late sell-off was a surprise but despite the KDR for both the S&P and NASDAQ the Dow held in. Today I will again look to buy the Dow on any dip lower to 24580/24650 with a 24535 tight stop. I still do not want to be a seller of the Dow at this time.
March NASDAQ
Late on Friday the NASDAQ which had been weak all day traded lower to my 6400 buy level. Shortly after the US Markets re-opened last night I emailed my Platinum Members to exit any long position at my revised 6415 T/P level and I am now flat. The NASDAQ has strong support at 6350 and today I will be a small buyer on any dip lower to 6310/6350 with a 6275 stop. Even though Friday’s price action was decidedly bearish I still do not want to be short the NASDAQ at this time especially as it is the first trading session of 2018 which is seasonally a bullish session.
March BUND
I am still flat the Bund and I am going to stay flat as I want to see how the market reacts to the first trading session of the year.
Gold Rolling Contract
For the fourth consecutive December both Gold and Silver have put in a meaningful low with Gold closing over the key 1300 pivot level. I am still flat and today I will now raise my buy level to 1277/1285 with a 1270 stop.
Silver Rolling Contract
Silver traded to a high of 17.15 on Friday before having a late sell-off. Silver is overbought and today I will leave my buy level unchanged from 16.45/16.75 with the same 16.10 stop.
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