The rally in US equities continued yesterday with the S&P500 as forecast hitting a new record high of 2196, and ending 0.6% higher on the day. The move in equities was dominated by energy stocks (up 2.0%) with the oil price up by around 4.5%. It was not only US equities that were buoyed by the higher oil price, but so too were European equities. The DAX was up 0.2% and Eurostox was up 0.4%. Otherwise it was a fairly quiet trading session for the markets, with little data flow.
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 session. 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 150 points yesterday and is now ahead by 1481 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 higher oil price followed comments by a number of OPEC officials indicating a formal agreement on an oil production cap was likely at the upcoming November 30 meeting (there is tentative agreement to a cap output at between 32.5-33 mb/d with production currently at 33.8mb/d). Iran also revealed that through a production cap, OPEC is hoping the oil would move into US$55-60 a barrel range. Russia also chimed in with President Putin stating “We will do everything that our partners from OPEC are expecting. To freeze crude production is not an issue for us”. Of course OPEC has been on the verge of an agreement many times and the current agreement provides exemptions for Iran, Libya and Nigeria with Iraq also making soundings to some sort of exemption.
In FX space, it was a story of slight US Dollar weakness with the US Dollar Index down 0.2% across the board. Amongst the currencies, the British Pound was the outperformer, surging 1% following comments by Prime Minister May that implied she was looking for a soft Brexit. PM May said there were issues that “need to be looked at” and that she did not want “a cliff edge” Brexit; indications of infrastructure spending in the upcoming UK budget may also have helped. Oil-linked currencies also outperformed with the CAD and NOK up 0.5% and 0.3%. The Aussie moved pretty much in line with US Dollar weakness, up 0.2%.
Bond Yields were slightly lower, with US Treasury yields down 2.3 bps to 2.33%. Bund Yields were broadly unchanged at 0.27%. Comments by the US Fed’s Vice-Chair Fischer had minimal impact on markets and largely reinforced comments from Dudley and Yellen last week. For me there were two key takeaway points: Fischer downplayed the recent move in yields stating “forty basis points is a lot, but it’s not unusual”; and provided tacit support to expected fiscal spending stating “certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges”, But importantly implicitly supported market assertions that policies could be inflationary, noting the US was “very close to full employment”.
ECB President Draghi also hit wires, though again there was little market reaction. Draghi said the ECB had not yet seen consistent strength in underlying price dynamics and that he was committed to substantial monetary accommodation. His colleague Couere was also on the wires stating “we will scale back monetary stimulus, but not yet”.
In commodities, iron ore has come of its shine down 3.4% to US$70.3, while coal prices were unchanged with Coking at US$299.5 and thermal at US$105.1.
Finally, an update to the French Presidential Elections that will be held in April-May 2017. The parties at the moment are choosing their candidates with the Republican centre right holding its first primary with Sarkozy knocked out. That leaves Juppe and Fillon in a run-off next Sunday. Most polls put a Republican candidate as likely to win the French Presidency against the Euro-scepic National Front’s Le Pen, though markets will be paying close attention given they have been wrong-footed by Brexit and the US Election (recent polls put Le Pen’s support in the 25-30% range).
This morning on the economic front we have UK Public Finances and CPI at 9.30 am. The only Euro-Zone data is Consumer Confidence at 3.00 pm. At the same time we have US Existing Home Sales and the Richmond Fed Manufacturing Index.
December S&P 500
My S&P plan worked really well with the market trading lower to my 2180 buy level shortly after I posted yesterday morning before finally rallying and closing at new all-time highs. This rally has continued overnight with the S&P currently trading at 2201. The rally yesterday saw the market hit my 2185 T/P level and I am still flat. Yesterday’s breath and volume measures were solid with the McClellan Oscillator rising sharply to close at +137. As I keep saying anyone who went into the US Election short the equity market, long Bonds and Gold have been destroyed as none of the above markets are giving anyone the wrong way round the chance to exit these positions without taking a lot of pain. As I have been saying consistently for the past few months my S&P target is still 2300/2340 and as we approach the bullish period of the year, there is no reason why the S&P cannot reach these levels before year-end. Today I will again look to buy the S&P on any dip lower to 2190/2196 with a 2185 stop. I still do not want to be short the S&P at this time.
EUR/USD
My Euro plan worked well with the Euro hitting my 1.0615 buy level shortly after lunch before having a nice rally to 1.0650 which enabled me to cover this long position at my revised 1.0635 T/P level and I am now flat. The Daily Sentiment Index for the Euro continues to fall hitting 6% which is the lowest reading since November 23, 2015. As a result I still believe that prices are nearing a short term low and that the start of a rally will relieve the high degree of pessimism. As a result I will again look to buy the Euro on any dip lower to 1.0590/1.0620 with a 1.0555 stop which is just below last Friday’s 1.0569 low print.
December Dollar Index
The Dollar just missed my 100.60 buy level before rallying strongly and I am still flat. Today I will again look to buy the Dollar on any dip lower to 100.25/100.55 with a 99.90 tight stop. My Only interest in selling the Dollar is still on a rally higher to 101.70/102.10 with the same 102.50 stop.
December DAX
My DAX plan also worked well with the market trading lower to my 10585 buy level after I posted before rallying strongly which enabled me to cover this position at my 10645 T/P level and I am now flat. The DAX has opened higher this morning as it takes its lead from the US Indices. Today I will again look to buy the DAX on any dip lower to 10595/10655 with a 10550 stop which is juts below yesterday’s low print. Remember the DAX needs to break and close over its strong resistance area from 10800/10850, a break and close above this level targets 11,160.
December FTSE
Shortly after I posted yesterday morning the FTSE traded lower to my 6750 buy level before following the DAX higher which enabled me to cover this position at my 6780 T/P level and I am now flat. The renewed strength in Sterling is weighing on the FTSE but despite the negative price action, I still would not be short the FTSE. Today I will again look to buy the market on any dip lower to 6755/6785 with a 6730 tight stop.
Dow Rolling Contract
Unfortunately the Dow just missed my 18810 buy level with a 18857 low print before rallying strongly and I am still flat. Today I will raise my buy level to 18870/18930 with a 18820 stop. I will also raise my sell level slightly to 19120/19190 with a 19250 tight stop.
December BUND
The Bund also missed my 160.35 buy level with a 160.49 low print before rallying into the close and I am still flat. As I still expect the US Bond market to rally from here as mentioned at length is yesterday’s commentary I will now raise my buy level for the Bund to 160.60/160.90 with a tight 160.30 stop. Naturally I still do not want to be short the Bund at this time.
Gold Rolling Contract
The DSI for Gold still remains in single digits, as traders remain pessimistic towards the yellow metal’s ability to rally. In my opinion it is only a matter of time before Gold rallies especially if the US Dollar can finally weaken following ts 5% rally since Trump was elected President. I am still flat Gold and today I will now raise my buy level to 1200/1208 with a 1193 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.95 which rallied overnight but so far has missed my 17.10 T/P level with a 16.90 high print. Again if I mange to exit this long Silver position at 17.10, I will again look to by the market on any dip lower to 16.55/16.95 with the same 16.25 stop, which is the same stop that I will leave on my current long position.
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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