‘Under Pressure’ was a particularly apt title by way of homage to the late great David Bowie especially the way the World Equity markets have started the year. It is equally appropriate this morning in the context of the WTI oil price that has traded below $30 for the first time since Dec 2003. Nymex and Brent Crude closed down a further 2.6% and 1.7% respectively on the day (currently at $30.59 and $31.02) respectively – so back off the lows) and once against oil is proving more troublesome than supportive of global equity sentiment. What we can say is that concerns about the health of the US economy continue to look overplayed as a source of current global market angst judging from the latest incoming data prints (see below).
To mark my 1000th issue of tradernoble Daily Market Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/5 updated emails throughout the trading session. This offer is open to existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 75 points yesterday and is now ahead by 1767 points for January. Since I started this service last June it has generated almost 17,000 points.
The Canadian, New Zealand and Australian dollars occupy three of the bottom four places in the G10 scoreboard, with metals prices also lower across the board – albeit not by much – but a more mixed picture for softs. CAD is down another 0.4%, NZD – 0.3% and the AUD -0.2%. The latter still has to test Monday’s 0.6928 low and the cycle low of 0.6896 seen on 7 September in the midst of the August-September China currency and stock market led ructions. More likely than not this will occur in the coming days or at most few weeks, despite the current – for now successful – efforts by the Chinese authorities to stabilise the RMB.
Having successfully squeezed out the last of the short offshore (CNH) RMB positioning yesterday with o/n Hong Kong interbank rates (Hibor) near 70% (and 120% at one point) yesterday’s onshore fix – some 200 points below what was expected is also a strong signal that the authorities are currently prioritising market stability over flexibility. Another fix today close to yesterday’s 6.5628 would further underscore this view, though we need to remember that pent up demand for foreign exchange by Chinese households and corporates is currently being stymied by rapidly imposed restrictions on the extent to which Chinese banks are currently able to accommodate this demand.
The wooden spoon in G10 FX is currently being carried by Sterling, after latest UK industrial production numbers, for November, printing well below expectations (-0.7% vs. 0.0% expected for total production, and -0.4% vs. +0.1% consensus for manufacturing). The Bank of England meets tomorrow – and will publish Minutes and voting records immediately thereafter. This will be the first opportunity for a Central Bank to formally make comment on market developments thus far in 2016. There could also be a further attempt to talk the Pound down.
US data yesterday was not top drawer but still relevant. The NFIB Small Business Optimism Survey improved to 95.2 from 94.8 (95.0 expected). We already knew last week that the hiring intentions sub-component was strong. And the JOLTS report shows that job openings rose by 82k to 5,413k in November, close to consensus. One of Janet Yellen’s favourite sub-readings – for the quit rate – rose to 2% from 1.9%, suggesting employees are a little more confident about walking out of one job into another.
As was the case yesterday, US equities staged a late session rally (aided by the pullback in oil) to just push into the black closing 0.75% higher. But under the weight of the latest fall in oil prices, Treasury yields are making new lows for the year. 10s are down a further 7.6bp to 2.10% – the lowest since 27 October.
This morning markets are opening stronger following the near 3% rally in the Nikkei as the Shanghai closed slightly in the green following the lowering of the Hibor Interbank Rate as this morning’s fix.
On the economic front we have Euro-Zone Industrial Production at 10.00 am. The only other data of note due today is the Beige Book which will be released at 7.00 pm and this will certainly garner the market’s attention.
March S&P 500
On what was another wild trading session for US stock markets none of my parameters got hit yesterday and I am still flat. The market having roared ahead shortly after I posted to a 1940 high before falling 35 Handles following the opening of the US market only regain most of these losses in the last two hours of trading. The S&P has major resistance at last Thursday’s 1968 high and Friday’s post NFP high at 1964 and the market really needs to break this resistance to start to look firm again. If and when we break this resistance the S&P still has two large ‘Open Gap’s at 1994/2010 and 2012/2035.50 from earlier this month. In other words the aggressive sell-off so far this month has done a lot of technical damage to the S&P. The McClellan Oscillator only improved slightly with yesterday’s rally to close at a still large negative reading at -194. The fact that we have the January Options Expiration on Friday probably means the S&P is not going to take out the 1894 lows reached on Monday for the rest of the week. Today I will move my buy level higher to 1922/1928 with a 1916 stop. Again if I am taken long and subsequently stopped out I will use my 5 Handle Rule to go long again with a stop below whatever new low is printed. If the S&P continues to rally today I will look to go short from 1961/1969 with a 1975 stop.
EUR/USD
My idea of buying the Euro on dips continues to pay dividends. Yesterday the market traded lower to 1.0820 before having a nice rally to 1.0875. I went long at 1.0845 and I T/P on this position at 1.0860 and I am now flat. For me to turn bearish on the Euro I need to see the market take out its December pre ECB low print at 1.0520 as this is the day we had the huge Key Day Reversal. For the Euro to start to push higher it needs to take out 1.1050 and then its major resistance at 1.1180. Today I will again look to buy the Euro on any dip lower to 1.0720/1.0760 with a 1.0695 stop.
March Dollar Index
Yesterday the Dollar traded higher to my 99.15 sell level and as I was already long The Euro I cut this position at my revised 99.00 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to sell the Dollar on any rally higher to 99.95/100.40 with a 100.70 stop. Remember a break and close over 100.70/101.00 will be very bullish.
March DAX
The volatility in the DAX continues with the market again this morning trying to take out its major resistance at the 10100/10130 level form where we tested last Friday following the Payroll data only to subsequently fall over 400 points for a huge Key Day Reversal. As I mentioned yesterday it is so hard to be short as you do not know when the Central Banks are going to quietly intervene to stop/slow down the sell-off in the markets. To me it is only a matter of time despite last Friday’s Key Day Reversal before the DAX breaks higher especially if the Euro continues to trade lower. For these reasons I will raise my buy level in the DAX to 9960/10020 with a 9910 stop.
March FTSE
Unfortunately the FTSE just missed my 5800 buy level with a 5835 low print after I posted yesterday. There is no doubt the FTSE has very strong support at the 5770/5800 level and it will take a lot of bad news to break this support. I mentioned yesterday that I will look to put on a more Macro bullish position in this area and that is still the case. Today I will move my buy level higher to 5850/5890 with a 5815 stop.
Dow Rolling Contract
The Dow also just missed my 16270 buy level with a 16330 low print and I am still flat. Just like the DAX above it is very hard to be short this market with the threat of intervention from the Fed especially with the Dow falling nearly 2000 points since last year’s high. If Oil can move higher then we could see a huge rally in the US stock markets. Given how oversold Oil is trading I would not be surprised to see a 20/25% rally in Oil from here. Today I will move my buy level higher to 16380/16440 with a 16320 stop which is just below yesterday’s low print.
March BUND
My BUND plan worked well for those who sold the market after it traded higher to my 159.50 sell level with the market trading at 159.22 this morning. Unfortunately I emailed my Platinum Members that after going short I cut this position for a small gain at 159.45 and I am now flat. The main reason I cut this position is I would prefer to be short near the 160 level as the risk/reward is better. Therefore I will raise my sell level to 159.85/160.15 with a 160.35 stop. I will still be an aggressive buyer on any dip lower to 157.70/158.10 with a 157.40 stop.
Gold Rolling Contract
My Gold plan worked well yesterday as I was able to do my first Gold trade of 2016. Shortly after the US markets opened Gold traded lower to my 1084 buy level before having a nice rally to 1092 which enabled me to T/P on this position at 1088 and I am now flat. Gold is back trading lower this morning as the market finds its very difficult to sustain a break over the 1085/1100 major resistance level. Today I will again look to buy Gold on any dip lower to 1059/1066 with a 1053 stop.
Silver Rolling Contract
No change as I am still long Silver at 14.19 with the same 13.65 stop. I must say I am disappointed with the price action in Silver this year as the market is so far unable to get anything going on the upside.
Recent Comments