Both European and US Equity Markets have begun the new week in a positive mood with main European and US equity Indices showing gains above 1%, a rebound in oil prices has been one factor for the good vibes while positive Italian budget sound bites have also helped. Barring JPY weakness, currency moves have been fairly muted with the USD a tad stronger supported by higher UST yields.
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For anyone following my Platinum Service it made 70 points yesterday and is now ahead by 1453 points for November, having made 2094 points in October, 1279 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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Equities
IT, financials and consumer discretionary shares have led the rebound in US equities, while the energy sector also had a good day. The S&P500 closed up by 1.55%, NASDAQ is +1.78% and the Dow is 1.38%.
Amazon has been one of the big performers yesterday, up over 3% reflecting the positive vibes within retailers after Thanksgiving sales. According to the Wall Street Journal, Amazon is expected to account for nearly a fifth of holiday sales this year. GM shares jumped over 7%, after the company announced plans to cut more than 14,000 salaried staff and factory workers and close seven factories worldwide by the end of next year. According to Bloomberg, the company is downsizing as U.S. demand slides from a record in 2016 while sales in China – GM’s other profit centre – are also in a slump.
Currencies
USD Indices are a tad stronger with DXY +0.11% and BBDXY +0.18%. A closer look at G10 currencies shows that USD strength within the majors has been primarily driven by JPY weakness (USD/JPY -0.55%) weighted down by the uplift in DM equities and higher UST yields. NOK is up 0.18%, reflecting the improvement in oil prices.
The AUD story over the past 24hrs has been one of Hero to Zero. The improvement in risk appetite that began during our APAC session yesterday initially boosted the AUD to the top of the G10 leader board with the pair trading to an intra-day high of 0.7276 early in the evening session. All these gains were latter reverse despite gains in European and US equities. Hard to pinpoint the catalyst other than suggest a somewhat belated reaction to the decline in iron prices which began during yesterday’s APAC session . Iron ore prices opened the week under pressure amid reports of lower steel prices in China, weakening profitability at mills. Based on Friday night closing level both the Dalian Futures and Singapore futures are down close to 7%.
Prospect of an Italian budget compromise with the government reportedly mulling a reduction to the 2019 deficit goal to 2-2.1% from 2.4%, initially helped the Euro, boosting the pair to an early morning high of 1.1380, but then the pair drifted lower over the course of the session and now currently trades at 1.1320.
There was little impact from ECB President Draghi’s comments to the European Parliament, in which he reaffirmed that the ECB expects to end its QE programme at the end of the year, despite the recent softening in European growth. Draghi said the slow-down in growth was normal, as the expansion matured. The ECB president acknowledged that ‘’measures of underlying inflation’’ continue to be ‘’muted’’, but stressed that there are indications that the economy will strengthen. The President then noted that the Governing Council continues to anticipate an end to net asset purchases by the end of 2018 with the caveat of upcoming data confirming the ECB’s medium term inflation outlook. Other Fed officials were also speaking last yesterday and worth highlighting ECB Lautenschlaeger remarks that the ECB could raise rates in Summer or Fall of 2019 – so a little pushing out of the rate hike guidance perhaps?
Bonds
A 14bps rally in 10y Italian BTPS is the rates highlight from yesterday’s trading session. Hints of a budget compromise the catalyst here. That said as it is often the case while three appears to be some willingness to reduce the 2019 deficit to 2.1% from the planned 2.4%, it is still unclear whether this will be enough to satisfy the EU Commission demands. In addition as one commentator noted, reducing the headline defict number is a lot easier than negotiating cuts to individual programmes. Both Five star and League have made big expenditure promises, now we have to see whether the alliance can reach an internal compromise.
UST yields are up between 2 and 3bps along the curve with the 30y tenor lagging the move up only 1bps. The 10y rate now trades at 3.06% and the 2 year rates sits at 2.835%.
Commodities
Oil prices are again the big movers in commodities with Brent +2.76% and WTI +2.16%. Commentaries from OPEC members appear to have been the catalyst for the rebound with Ecuador the latest member to express support to an OPEC production cut at the upcoming meeting.
Copper (-0.56%), lead (-1.27%) and zinc (-1.27%) have joined iron ore as the underperformers at the start of this week.
Economics
Germany: Small miss on overall IFO, with Business Climate 102.0 against expectations of 102.3. However, Current Assessment was better at 105.4 against 105.3 expected.
This morning on the Economic Front we have no data of note due form the UK or the Euro-Zone. This afternoon at 2.00 pm we have the US FHFA House Price Index and this is followed at 3.00 pm by the Conference Board Consumer Confidence.
Also this afternoon Fed Vice Chair Clarida is speaking in New York. Clarida’s speech title is ‘’Data dependence and US monetary Policy’’.
Finally and also at 3.00 pm the ECB’s Nouy and Costa speak at a conference in Lisbon, while the Fed’s Bostic. Evans and George are speaking on a panel at 7.30 pm.
December S&P 500
Earlier this morning Bloomberg incorrectly reported that a deal had been agreed between Trump and Xi ahead of this weekend’s G20 Meeting. As a result the S&P spiked higher to my 2681 sell level before quickly reversing this move to hit my 2674 T/P level and I am now flat. After the worst Thanksgiving Week in history for the S&P it was good to see a large ‘Open Gap’ that held for yesterday’s session. There is no doubt with Trump placing so much emphasis on the stock market that he has to get an agreement with Xi when they meet this weekend or else we could see this market turn even more sour very quickly. Today I will now raise my buy level to 2633/2645 with a 2624 stop. The S&P has massive resistance from 2685/2700 and today I will be a small seller on any further rally to 2692/2703 with a 2710 stop.
EUR/USD
Earlier this morning the Euro finally traded lower to my 1.1320 buy level. I will now add to this position on any further move lower to 1.1270 with a tight 1.1249 stop. I will also lower my T/P level to 1.1340 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
December Dollar Index
As I am long the Euro I did not sell the Dollar as yet and I am still flat. Given how overbought the Dollar is trading coupled with the fact that sentiment is near extreme levels it is only a matter of time before we see a reversal in the Dollar. There is no doubt that we are due a tweet from Trump as he wants a weaker Dollar to make the US more competitive. Today I will raise my Dollar sell level to 97.45/97.85 with a 98.20 tight stop.
December DAX
I am still flat the DAX as the market never came near yesterday’s buy level. Thankfully we had no sell levels in this market. Today I will now raise my buy level to 11150/11220 with a 11095 stop.
December FTSE
Sterling has been hit hard overnight with Cable trading close to its recent lows. This weakness in the Pound if maintained should help the FTSE to recover some of this month’s losses. Today I will now raise my buy level to 6940/6980 with a 6905 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Frustratingly the Dow just missed my 24780 sell level with a 24760 high print before the market fell nearly 200 points and I am still flat. Today I will raise my sell level slightly to 24850/25050 with the same 25120 stop. My only interest in buying the Dow is still on a plunge lower to 23900/24100 with the same 23750 wider stop.
December NASDAQ
I am still flat the NASDAQ and today I am not going to chase the market higher. Therefore I will leave my 6470/6530 buy range unchanged with the same 6420 stop.
December BUND
This morning the Bund is trading above 161 and I am still flat. The insanely low yield for the Bund is an indication of how weak the Euro-Zone economies are at this time. The Bund has strong resistance from 161.50/161.90 and I will be a seller on any further rally to this area with a 162.25 stop.
Gold Rolling Contract
Gold just cannot break above the key 1230 resistance area despite sentiment near record lows. I am still flat and as I am still long Silver I will now lower my Gold buy level to 1200/1210 with a 1193 stop.
Silver Rolling Contract
Unfortunately Silver just missed my 14.50 T/P level on my latest 14.30 long position before selling off on the back of the stronger Dollar. Today I will now lower my T/P level on this position to 14.40 with the same 13.75 stop
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