Commodities were front and centre of market attention yesterday, with Oil prices taking another sizeable hit, both WTI and Brent crude down between 5-6% in the wake of OPEC officially abandoning its 30mb target late last week. The price of Oil has made new lows for the year, and is at the lowest level since early 2009. Elsewhere in the commodity space, base metals also declined, as did Gold, while the price of Iron ore is down another $0.97, -2.42% to $US39.06/t with the Australian shipment of Iron ore continuing at a heady pace. Shipments out of Port Hedland were 37.3mt in November, up 2.2% from October and 8.5% from year earlier levels.
For anybody following my New Platinum Service it lost 10 points yesterday but is still ahead by 452 points for December. The previous six months saw gains of 1510, 1600, 2833, 2195, 1810 and 3045 points respectively. If anyone is interested my new Platinum Service please email me on bryan@tradernoble.com for details.
Not surprisingly, commodity currencies have taken some heat, and this time the AUD has given back some ground trading back down to the mid 72s, closing down 1% yesterday as it was unable to sustain support the face of unrelenting commodity headwinds. Ahead of the RBNZ meeting on Thursday with the market split view on whether the Bank will cut or not, the NZD declined by a lesser 0.44%. With commodity currencies weak, the USD has strengthened a little further, though not against the Euro and the Yen that have more than held their ground.
Weighing in with his views on lift-off, St Louis Fed President James Bullard (hawkish, non-voter) added his voice supporting lift-off saying that it should be seen as good news for the US economy. He said the US labour market is doing very well and in his views Unemployment will fall to the low 4% range. He also noted that the Fed’s is watching inflationary expectations very carefully and they have not been unhinged. Pricing for Fed lift-off next week inched a little higher to 78% overnight.
And finally, one to pop into the memory banks for future use. Released yesterday by the RBA as a Research Discussion Paper Okun’s Law and Potential Output”, RBA research estimated that potential output for the Australian economy is currently running a bit below 3%. I mention that because at 2½%, Australia’s growth to Q3 was running not far shy of that potential (something Governor Stephens also mentioned last week in Perth), hence a steady rate of unemployment at around 6%.
Equity markets are opening lower this morning on the back of the much weaker than expected Chinese Trade data with both Imports and Exports falling for a 5th and 13th month respectively. As a result of this weaker Trade data the Yuan has extended its losses to a four month low while the Nikkei has closed 200 points lower at 19,400.
This morning on the economic front we have UK Industrial Production at 9.30 am. At 10.00 am we have Euro-zone GDP. This is followed at 11.00 am by US NFIB Small Business Survey. Finally at 3.00 pm we have the US JOLTS Job Opening Survey which as you know is closely watched by Fed Chair Janet Yellen.
For Canadian dollar watchers, Bank of Canada Governor Poloz is speaking as well as Canadian Housing Starts and Building Permits data.
December S&P 500
The S&P plan did not work out yesterday as after the market traded lower to my 2076 buy level I was very quickly stopped out of this position at 2069 and I am now flat. Subsequently the S&P made a low at 2065.50 before rebounding by 15 Handles into the close. With both the Fed Meeting and the December Quarterly Contract Expiration next week I just cannot see the S&P falling ahead of these two key events. We are also in December which is traditionally one of the strongest months for the US Stock markets. Today I will again look to buy the S&P on any dip lower to 2063/2069 with a 2058 stop which is just below the 2060 support level. For all the reasons listed above I still do not want to be short the market at this time. Just as a note internally the Stock market is still very weak as shown by yesterday’s McClellan Oscillator which closed with a negative reading of -138.
EUR/USD
Frustratingly the Euro just missed my 1.0790 buy level after I posted yesterday by six points and I am still flat especially with the Euro trading at 1.0870 this morning. I still believe the US is heading into at least a mild recession despite the strong Employment data and that the US Dollar will continue to weaken. This view will hold as long as the Euro does not break the major 1.0490/1.0520 support level which was tested last April and again just before the ECB Rate announcement last Thursday. Today I will raise my buy level to 1.0790/1.0830 with a 1.0765 stop.
December Dollar Index
The Dollar also missed my sell level by a few points yesterday and I am still flat. Today I will lower my sell level to 98.70/99.00 with a 99.30 stop.
December DAX
The DAX plan worked well yesterday as shortly after I posted the DAX traded higher to my 10970 sell level before having a nice 100 point fall which enabled me to cover this position too early at my 10940 revised T/P level and I am now flat. Today I will raise my buy level to 10700/10750 with a 10650 stop. I will also raise my sell level slightly to 11010/11070 with a 11110 stop.
December FTSE
The fall in Gold prices and base metals in general is having abig affect on the FTSE as the mining stocks are now trading near 10 year low. As the FTSE contains a large number of mining stocks this is weighing on its performance. Despite this fact I would not chase the FTSE lower from here as these mining stock must be very close to a tradeable bottom and for this reason I will look to buy the market on any dip lower to 6140/6175 with a 6115 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
Yesterday afternoon I was lucky with my Dow call as both my S&P and Dow longs got hit at the same time. After I went long the Dow at 17730 I emailed my Platinum Members to exit this position at 17760 as I did not want to be long both markets at the same time. Just like the S&P above I cannot see the Dow falling ahead of the two key events next week. When you also factor in the now weaker Dollar I believe the Dow will be supported from this adjustment especially as the Dow has underperformed the other major US Indices all year. For these reasons I have bought the Dow here at 17670 with a 17610 stop.
March BUND
This morning the BUND is opening firmer on the back of the weaker Chinese Trade data. The BUD has hit the top of my sell level at 158.40. I am still short and today I will leave my stop the same at 158.80. If I am stopped out of this position I will be a more aggressive seller in front of 159.20 with a 159.50 stop.
Gold Rolling Contract
I still believe that both Gold and Silver are close to at least a decent tradeable low. With both Gold and Silver falling at the same time yesterday I bought Silver first (please see below) and I waited to buy Gold at 1072. I am still long and I will leave my stop the same at 1065.
Silver Rolling Contract
I am more bullish of Silver than Gold and I hate not to have a long position in this market especially with Silver trading at $14 compared to its 2011 high at just over $50. That particular day in May 2011 Silver having touched $51 got hammered and closed at $37 for an incredible $14 fall in one trading session. Shortly after I posted yesterday Silver traded lower to my 14.40 buy level. I am still long and I will leave my stop the same at 13.90.
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