European stock markets started 2017 on a positive note with the Euro-Stoxx 50 Index closing 0.6% higher on the first trading day for the year. Italian Stocks led the way with a 1.73% gain, while the DAX and CAC40 ended up 1.0% and 0.4% respectively. The UK, Swiss and US equity markets were closed yesterday for the New Years Holiday. Meanwhile, overnight the Chinese 50 Year Bond market was suspended after falling over 10% which was its total downside limit and this is affecting the major Bond markets this morning which are all opening to the downside.
To mark my 1225th 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 day. 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 25 points on Friday to finish December with a gain of 1351 points, having made 1971 points in December and 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 US Dollar has started the New Year on a strong footing as it outperformed all G10 Currencies, barring the Canadian Dollar. The Japanese Yen has been the underperformer, down 0.5%, and trading at 117.75 this morning. The Euro has also been one of the weaker currencies as it trades at 1.0460 this morning as it reverses its ”flash dash” seen on the last trading day of 2016 which saw the Euro jump to 1.0653 from 1.0490.
Looking back over 2016, the Australian Dollar ended the year at 0.7208, almost 1 cent below where it started (0.7303). In 2016, the Australian Dollar traded to a high of 0.7835 and a low of 0.6830. Interestingly however this 10 cent range was well below the average 14 cent yearly range seen since the floating exchange rate regime that has been in place since 1983. Excluding the volatile GFC years from 2007/2009, the average yearly trading range is 12.5 cent, so even on this measure 2016 was a subdued year for the Australian Dollar.
In Equity Markets, the US markets were the star performers with the Dow Jones closing 2016 with a 13.4% gain while the S&P ended the year with a 9.5% gain. Meanwhile the DAX gained 6.9%, the Nikkei was 0.4% while the Shanghai Composite closed 2016 with a loss of 12.3%. Brexit really affected the Irish Stock market which bucked the European trend with a 4% loss for 2016.
On the economic front, China released its PMI data for December on Sunday with both the Manufacturing and Non-Manufacturing Indices printing below their November readings. The Manufacturing PMI fell to 51.4 from 51.7 and the Non-Manufacturing PMI fell to 54.5 from 54.7.
In other news, the FT reports that China has tightened FX controls on citizens in anticipation of renewed downward pressure on the Renminbi in the new year. China’s capital controls will limit individuals to buying no more than $50,000 each year in foreign currency, a quota which reset on January 1.
This morning on the economic front we have German Unemployment at 8.55 am. This is followed at 9.30 am by UK Markit PMI Manufacturing and German CPI at 1.00 pm. Next we have US Markit Manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have Construction Spending and ISM Manufacturing.
March S&P 500
2016 was a year of surprises and this theme continued on Friday when the S&P closed lower despite all the European markets ending the year with a positive trading session. Unfortunately after the S&P hit my 2239 average buy level I was stopped out of this trade at 2232 before the market hit a low of 2227.75. I know some of you used my 5 Handle Rule to to re-buy the S&P and if you did this and held the trade over the weekend this resulted in a nice gain with the S&P trading at 2249 this morning on the back of the stronger European Markets which were opened yesterday. Despite the weakness of the US markets in the last week of trading I still expect the S&P to hit my long-term target at 2300/2334 before we may finally see a sell extreme that lasts for more than a few days. This may well come after Trump takes office on January 20 which is less than three weeks away. Today the S&P is opening with a strong ”Gap” to the upside as the market closed on Friday at 2233.50. I will be a buyer on any dip lower to 2229/2235 with a 2224 stop. I will still be a very strong buyer on any dip lower to 2212/2219 with the same 2206 stop. My only interest in selling the S&P is on a rally higher to 2263/2269 with a 2274 stop.
EUR/USD
The Euro has traded in a larger range since I posted last Friday on very weak volume with the Euro hitting a high at 1.0653 before opening lower on Sunday Evening in Asia and that theme continued through yesterday’s trading session. This move lower in the Euro saw the market hit my 1.0470 buy level. This morning I have bought some more Euro here at 1.0425 which now puts me long at an average rate of 1.0447. I will leave stop unchanged at 1.0395 on this position. If I am stopped out of this trade I will be a more aggressive buyer on any further dip lower to 1.0330/1.0365 with a 1.0290 stop. Given the weak sentiment towards the Euro I still do not want to be short the market at this time.
March Dollar Index.
No change as I am still a seller on any rally higher to 103.10/103.45 with a 103.80 stop.
March DAX
The DAX started off 2017 where it left off in 2016 as it finished yesterday with a 1% gain as the market easily broke its next resistance at 11,600. Despite the overbought conditions it is pointless in trying to pick a top in this market which has now risen 800 points since it broke its previous strong resistance at 10800/10850 less than four weeks ago. This latter area will now act as strong support in the event that we do see a major correction over the coming weeks. Today, downside is likely to be limited and if we do see the market trading lower I will be a buyer on any dip to 11490/11550 with a 11440 stop. If the DAX can break the 11680 resistance level then the next target is 11780/11820 which is the summer 2015 high.
March FTSE
The FTSE finished 2016 on the strong side as the market made new all-time closing highs and this theme is continuing this morning in severely overbought conditions. The FTSE is testing its 10 year trendline at 7140/7150 as I write this commentary with the market trading outside the top of its Bollinger Band and at the top of its Williams Index. Given the significance of this trendline and the fact that the FTSE is so overbought I will be a small seller from 7150/7190 with a 7225 stop. I do not want to be long the FTSE at this time despite the positive price action.
Dow Rolling Contract
The Dow is reversing last Friday’s sell-off in some style this morning with the market trading nearly 200 points higher than last week’s low print. I am still flat the Dow and today I will continue to look to sell the market on any further rally higher to 20020/20080 with a 20140 stop. I still do not want to be long the Dow at this time even though I expect higher prices the risk/reward in buying the market here is not worth it.
March BUND
My Bund plan worked well with the Bund hitting my 164.90 sell level yesterday morning before trading lower to my 164.60 T/P level and I am now flat. Today I will again look to sell the Bund on any rally higher to 164.85/165.15 with a 165.40 tight stop.
Gold Rolling Contract
My Gold plan also worked well with the market hitting my 1150 buy level late on Friday before trading to a 1158 high overnight and this rally has enabled me to cover this position at my revised 1156.50 T/P level and I am now flat. Today I will again look to buy Gold on any dip lower to 1138/1145 with a 1131 stop.
Silver Rolling Contract
No change as I am still long Silver at an average rate of 16.08 with the same 15.35 stop.
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