A full Senate vote to ratify the deal struck a last evening to re-open the US government took place overnight and passed, but does nothing more than kick the can two weeks down the road (until February 8). Avoiding a repetition of the last few days is contingent on a deal being strict on the fate of the so called ‘’Dreamers’’ satisfactory to both President Trump and enough Democrats such that the Senate will agree to a somewhat longer lasting funding bill. More significant will be what happens when the debt ceiling is hit, likely in March. It was the failure to lift this in a timely manner in 2011 that led to S&P expressing a loss of faith in the US’s ability to get its fiscal affairs in order and to a downgrading of the sovereign to AA+ from AAA.
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 lost 30 points yesterday but is still ahead by 179 points for the month of January, having made 946 points in December, 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 prospect of a shutdown did not faze US equity markets on Friday, but news of a deal to re-open the government has predictably been offered as an excuse for yet new record highs being chalked up by the S&P and NASDAQ. In truth, the better ‘’excuse’’ is the ongoing lifting of earnings expectations by stock market analysts, driven in large part by assessment of the tax deal and, in the case of many multinationals, ongoing slippage in the US dollar.
The IMF has been out with a global growth upgrade in front of the World Economic Forum about to kick off in Davos and which will hear the latest vintage of President Trump’s vision to Make America Great Again. What he, in conjunction with his Commerce Secretary Wilbur Ross, decide to do, or not do, vis- trade protection measures – specifically on steel and aluminium and where Commerce department findings are reportedly sitting on the President’s desk – has much more potential to move markets than anything that comes out of Davos itself
The IMF has lifted its 2018 global growth forecast by 0.2% to 3.9%, the upgrade is led by the US (a 0.4% lift to 2.7%) and Euro-Zone (+0.3% to 2.2%). The tax deal is largely responsible for the former, but the IMF sees the longer term impact of the deal as growth-negative. The IMF makes the familiar call for leaders to use the current upswing to ‘’mend the roof’’ and make growth more inclusive. It warns of risk to the growth outlook from, specifically, trade protectionism, geopolitics or a significant market correction, noting ‘’rich asset valuations and very compressed term premia’’. It also warns of risk that the Fed raises rates faster than expected leading to tighter financial conditions around the world.
The Australian government has already been out this morning praising the IMF’s revised global growth estimate, saying it supports its own optimism for stronger Australian growth.
One country not to feel the IMF’s love is Great Britain, which has suffered a small growth downgrade (unchanged at 1.5% in 2018 and -0.1%, also to 1.5%, for 2019). Brexit related woes are to blame of course. The FX market response is to push the pound to its best level since the referendum, now within a whisker of $1.40 against the US dollar. French President Macron’s comments about the possibility of a ‘’special deal’’ for Britain, during his weekend visit, are part of the story here.
Commodity markets have had a mixed day but are mostly stronger, with oil still benefiting from OPEC and Russia’s weekend commitment to hold its lower output level through 2018.
This morning on the Economic Front we have the UK Public Sector Borrow Requirement at 9.30 am and this is followed at 10.00 am by Euro-Zone ZEW Survey Current Situation/Expectations. At 11.00 am we have the UK CBI Trends. Finally at 3.00 pm we have the US Richmond Fed Manufacturing Index and the latest Euro-Zone Consumer Confidence Survey.
March S&P 500
The most unloved equity bull market in history continues to make one new all-time high after another almost every day. If the market was rallying in a steady fashion with intermittent pull-backs I would be more confident in this being sustained but the angle of the move higher since the close on December 29th at 2668 has been astonishing. Last September when the S&P was trading at 2400 I mentioned a target price of 2792 which is the 3rd Standard Deviation while the 4th Standard Deviation is at 3340. The way we are going it will not be long until we hit close to the 4th STD before we get an eventual crash as happened in Japan when the Nikkei rose from a price of 28,000 in late 1988 to over 39,000 on the last trading session of 1989 before eight months later be trading at sub-23,000. Incredibly the Nikkei is still trading 15,000 below it’s 1989 high despite this market rallying aggressively over the past six months. Yesterday my S&P plan did not work well as after the S&P traded higher to my average 2817 sell level I was stopped out of this position at 2828 and I am now flat. I did not expect the Senate to end the shut-down so quickly even though we only have a two-week extension. However as a trader we have to respect the price action and in light of the aggressive move higher this year I will now raise my buy level to 2805/2820 with a 2795 stop. The next resistance for the S&P is from 2858/2868 and today I will be a small seller in this area with a 2874 stop.
EUR/USD
The Euro again traded in a narrow range and I am still flat. Today I will leave my buy level unchanged from 1.2140/1.2190 with a 1.2095 stop. I still do not want to be short the Euro at this time as the path of least resistance for the Euro is still to the upside with a target price of 1.25 ahead of 1.28/1.30. This Thursday’s press conference with Dragi should be interesting given the extent of the Euro rise since the last ECB Meeting in December.
March Dollar Index
Finally the Dollar traded lower to my 90.10 buy level overnight before rallying to my revised 90.28 T/P level and I am now flat. I cannot emphasise the importance of the 89.60/90.00 support level as a break and close below here could well see an acceleration to the downside for the Dollar. Today I will again look to buy the market on any dip to this support level with a 89.25 stop.
March DAX
The DAX Futures market closes at 9.00 pm and does not re-open until 7.00 am. This morning on the re-open the DAX traded near the top of my sell range at 13580. I am still short but not comfortable with this position especially as the Euro is beginning to weaken as I post this commentary. Even though the DAX is severely overbought we have now made new all-time highs and for this reason I have now cut this short position here for a small gain at 13570 and I am now flat. I will now raise my buy level to 13410/13490 with a 13365 stop.
March FTSE
Unfortunately the FTSE just missed my 7625 buy level and I am still flat. Today I will now raise my buy level to 7605/7635 with a 7575 stop. Despite the strength in Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
There is just no stopping the Dow as one short position after another gets stopped out with the market making yet another impressive all-time high yesterday. There is no doubt the weakness of the US Dollar is really helping the Dow stocks and certainly preventing any sell-off in the market. Yesterday after the S&P hit my sell level I emailed my Platinum Members to raise their sell level in the Dow to 26150 before the market had a small 50 point sell-off. I covered this position at my revised 26138 T/P level and I went short again on the close at 26230 before covering this position as emailed to my Platinum Members for a small gain at 26190 and I am now flat. Incredibly the Dow is now trading over 110 points higher again this morning. The Dow has now rallied over 1600 points this month for a near 7% rally and is severely overbought as we patiently wait for a sell extreme of some significance to develop. Just look at Bitcoin which is now trading 50% lower in four weeks after a similar move higher. Today I will now move my buy level higher to 25810/25950 with a 25740 stop. I will still be a seller on any rally higher to 26550/26750 with a 26820 stop.
March NASDAQ
I have had the correct view in the NASDAQ but unfortunately I have not been able to get a long position on board and I am still flat. Today I will now raise my buy level to 6825/6865 with a tight 6790 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 6695/6735 with a 6660 stop.
March BUND
The Bund continues to trade above 160 albeit in a narrow range and I am still flat. Today I will now raise my buy level to 160.10/160.45 with a 159.75 stop. I still do not want to be short the Bund ahead of the ECB Meeting on Thursday.
Gold Rolling Contract
I still do not trust the Gold rally especially with sentiment levels so extreme. Today I will still be a buyer on any dip lower to 1306/1316 with the same 1298 stop.
Silver Rolling Contract
I have never seen such low volatility in Silver. I am still flat and will continue to be a buyer on any dip lower to 16.40/16.75 with the same 16.10 stop.
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