The market’s knee jerk reaction to “no” outcome from the Italian referendum saw the Euro fall back by over a big figure for an hour or so, but that was it. Well at least the polls were right this time! And so the Italian people have voted “no” to the constitutional referendum to streamline passing legislation and PM Renzi has, as promised, fallen on his political sword. After initially dropping, the Euro stabilised before rebounding strongly to post a large upside Key Day Reversal. Italian politics is Italian politics after all.
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 131 points yesterday and is now ahead by 556 points for December having made 1971 points in November 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.
Italian Bonds have not performed materially different from German Bunds yesterday, but the Milan SE has dipped 0.21% against a 0.56% rise in the Eurostoxx 600 index. (Banca Monte dei Paschi di Siena shares closed down another 4.21%.) Adding a little more European political news, French PM Valls threw his hat into the Presidential ring to bolster the chances of the left, standing for “an independent France”. The market will certainly be focused on those elections, set for April/May next year.
The economic data reads from the US were strong. While the Fed’s composite (and Yellen favourite) Labour Market Conditions Index change for November rose a stronger than expected 1.5 points (+0.2 expected), it was a stronger than expected 57.2 print on the Non-Manufacturing ISM for November that caught the market’s eye as perhaps the final piece of top tier data ahead of next week’s FOMC sealing the deal. It was the strongest reading on services for 13 months with the Employment component at 58.2 was within 2 points of its 60.2 all-time high.
While the print was undoubtedly strong, the US Dollar has overall lost a lot of ground over the past 24 hours, though this looks to be mostly Euro-inspired. The Treasury market continues to fully price in a hike next week, but added a little more into the front of the US curve, the 2y Treasury up a net 2.4 bps yielding 1.12%. 10s also closing a little higher in net terms.
Three Fed speakers have been on the wires yesterday, the erstwhile and cautious NY Fed’s Bill Dudley saying that he favours somewhat tighter policy over time, noting that it is premature to make judgments about 2017. One interesting comment he made though was it would be important for fiscal and monetary policy to be aligned going forward. This is clearly something the Fed is beginning to address. While it’s early days as far as knowing the magnitude of what President-elect Trump’s fiscal policy, Charles Evans also said that with unemployment at 4.6% and an expectation that the economy will be strong, you don’t need explicit stimulus from the government. Put that one into the memory banks for 2017. Evans currently does not have a vote on the FOMC, but does next year.
Speaking from a not dissimilar hymn book just before the New York close last night, “one-and-done” Fed President James Bullard (a voter this year, not next) said that Trump’s policies could impact his low rate views, his point being that “new policies brewing in Washington may have some impact on the low-safe-real-rate regime” if they’re aimed at improving productivity growth in medium term. So also not averse to the idea of more tightening that might follow fiscal stimulus.
This morning on the economic front we have German Construction PMI at 8.30 am, followed by Euro-Zone GDP at 10.00 am. At 1.30 pm we have US Trade Balance, Unit Labour Costs and Non-Farm Productivity. Finally at 3.00 pm we have Factory Orders and the IBD/TIPP Economic Optimism Survey.
December S&P 500
Unfortunately the S&P just took off as I posted yesterday with the market not giving us a chance to buy. Yet again on a weak political situation the Central Banks have stepped in to buy the markets implying everything is rosy. This theme of buying the dip has worked consistently over the past two years apart from the odd hiccup, but if shorts do not cover their positions quickly they will have to scramble. Yesterday the S&P with its large move has left another ”Open Gap” from Friday’s close at 2189 to yesterday’s Chicago low at 2198. The McClellan Oscillator improved noticeably to close with a positive 70 print. Today I will move my buy level higher to 2187/2193 with a 2182 stop. Again if I am taken long and subsequently stopped out of this position I will use my ”5 Handle Rule’ to go long again with a stop below whatever new low is printed. I still do not want to be short the S&P preferring to sell the Dow instead.
EUR/USD
The Euro had a large upside Key Day Reversal after juts missing my 1.0600 buy level with a 1.0623 low print before trading to a 1.0798 high print. The Daily Sentiment Index was warning of this move and had again proved what an important trading signal this is. I emailed my Platinum Members to buy the Euro on any dip below 1.0750 and I bought the market at 1.0740. I have now lowered my T/P level on this position to 1.0785 with a 1.0695 tight stop. I have posted a copy of update 5 to my Platinum Members at the end of this commentary to give my Premium Members an idea of how valuable this Platinum Service is. If I mange to T/P on this long Euro position I will again look to buy the market on any dip lower to 1.0710/1.0745 with a 1.0670 stop.
December Dollar Index
The Dollar posted a large Downside Key Day Reversal as it broke back below the March 23, 2015 high at 100.65. As a result in the same update 5 I emailed my Platinum Members to go short the Dollar at 100.30 which hit overnight. Subsequently I emailed them again to T/P on this position at 100.10 and I am now flat. Today I will again look to sell the Dollar on any rally higher to 100.40/100.70 with a 101.10 stop.
December DAX
My DAX plan worked well with the market hitting my 10640 buy level before rallying 75 points. Unfortunately as I was long the FTSE sat the same time I emailed my Platinum Members to exit this position for a small gain at 10650 and I am now flat. The main reason I cut my DAX position too early was on the back of the stronger Euro. Today I will again look to buy the DAX on any dip lower to 10560/10620 with a 10510 tight stop. I still do not want to be short the DAX at this time.
December FTSE
My FTSE plan worked well with the market trading lower to my 6730 buy level before bouncing which enabled me to cover this position at my revised 6751 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 6660/6690 with a 6630 stop. Despite the stronger Sterling I do not want to be short the FTSE at this time.
Dow Rolling Contract
Incredibly the Dow has gained over 1200 points over the last month, but nearly half of this advance has been produced by just three stocks, Goldman Sachs, United Health and Caterpillar. I must say I was shocked when I read that report from CNBC.com. I am still flat the Dow and today I will now lower my sell level slightly to 19300/19370 with a 19430 stop. I still do not want to be long the Dow at this time.
December BUND
My Bund plan worked well with the market trading lower to my 159.95 buy level before bouncing 80 points, and this rally enabled me to cover this position at my 160.25 T/P level and I am now flat. Today I will again look to buy the Bund on any dip lower to 159.60/159.95 with a 159.25 stop. Again if I am taken long and stopped out of this position I will be an aggressive buyer on any dip lower to 158.70/159.00 which is where the important 5 year trend line crosses with a 158.40 tight stop.
Gold Rolling Contract
My Gold plan worked well with the market trading lower to my 1158 buy level before rallying to a 1176 high print overnight. Unfortunately I covered my long position too early at 1163 and I am now flat. It is interesting that since Silver made its intraday low at 16.15 last month, Gold has made five new lows, all of them unconfirmed by Silver. With the DSI still in single digits it is only a matter of time before Gold rallies. Today I will again look to buy Gold on any dip lower 1158/1165 with a 1151 tight stop.
Silver Rolling Contract
No change as I am still long Silver from yesterday morning at 16.60. I will now lower my T/P level on this trade to 16.80 and if I manage to cover this position at this level I will again look to buy Silver on any dip lower to 16.30/16.70 with a 15.95 stop.
Copy of ”Update 5” emailed to my Platinum Members at 6.00 pm yesterday.
Hi Everyone
The reason that I have been so stubborn in relation the the EUR/USD was the fact that we could not break the March 23, 2015 low at 1.0462 while the Dollar Index did break its 100.65 high at the time two weeks ago creating a huge bearish negative divergence.
Today we have now witnessed a massive upside Key Day Reversal for the Euro with the Euro breaking the previous strong resistance at 1.0700/1.0730. As a result I will now look to buy the Euro on any dip lower to 1.0710/1.0750 with a 1.0665 stop. If I am taken long I will have a T/P level at 1.0825.
The Dollar has broken the key 100.65 support level with an equally large Downside Key Day Reversal and I will now lower my sell level to 100.30/100.60 with a 100.95 stop. In my opinion this is a key move for the Euro today and I believe that the Dollar’s strength is now finished or there may be one look at parity but either way the easy money for Dollar bulls is now over. Yet again the Daily Sentiment Index shows what a valuable technical signal it is.
I am still long Silver at 16.65 having now unfortunately cut my Gold position too early. I will again look to buy Gold on any dip lower to 1159/1167 with a 1152 stop. If I am taken long I will have a T/P level at 1178.
Have a nice evening
Bryan
Recent Comments