U.S. Equity Markets edged higher as investors measured the likelihood of a partial trade deal between America and China. The US Dollar and Treasuries advanced. The S&P 500 eked out a gain after retreating from a record high as remarks by President Donald Trump did not add much insight into negotiations between the world’s two largest economies. He did say a deal could happen soon, but he also said no agreement would mean significant tariff increases. Earlier, the benchmark pushed through 3,100 for the first time partly on hopes the president would make positive comments on trade. In company news, Facebook Inc. surged as it announced a new payment feature, and Walt Disney Co. rose after its much-anticipated streaming service debuted. Health care shares paced the advance as drugmaker AbbVie Inc. gained amid what may be the largest bond sale of the year. The 10-year Treasury yield fell to 1.91% before Federal Reserve Chairman Jerome Powell addresses Congress this afternoon. The dollar rose for the sixth time in seven sessions, testing its moving average of the last 100 days. Crude edged lower.
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Equities
With most earnings now out of the way and major central banks thought to be on hold, investor focus has turned firmly to trade. Hopes for a first-phase deal between the U.S. and China fuelled a risk rally and bond sell-off last week, before Trump’s comments over the weekend cooled some of the optimism. The rough edges of a deal are there, I think the market understands that. I didn’t see anything in the speech that would make me change my mind on that. However most of this news is now fully priced into the market.
The S&P 500 Index rose 0.2% to close at 3092.
The Stoxx Europe 600 Index gained 0.4%.
The MSCI Asia Pacific Index rose 0.4%.
The MSCI Emerging Market Index climbed 0.1%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index gained 0.2%.
The Euro decreased 0.2% to $1.1009.
The British Pound fell less than 0.1% to $1.2851.
The Japanese Yen rose at 109.08 per dollar.
Bonds
The yield on 10-year Treasuries fell three basis points to 1.91%.
Germany’s 10-year yield fell less than one basis point to -0.252%.
Britain’s 10-year yield was unchanged at 0.807%.
Commodities
Gold gained 0.2% at $1,459.17 an ounce.
West Texas Intermediate crude fell 0.1% to $56.80 a barrel.
Elsewhere, Nickel headed for its longest run of losses in almost a year.
This morning on the Economic Front we have German CPI at 7.00 am and this is followed at 9.30 am by UK CPI, PPI and the Retail Price Index. At 10.00 am we have Euro-Zone Industrial Production. Next, we have U.S. MBA Mortgage Applications and CPI at 12.00 pm and 1.30 pm respectively. Finally, Fed Chairman Jerome Powell addresses the Joint Economic Committee of Congress in Washington this afternoon at 3.00 pm.
December S&P 500
Frustratingly the S&P made a high of 3101.25 just below my 3103 sell level before falling 10 Handles into the close and I am still flat. Despite the S&P making new all-time highs I am still on the lookout for a trend reversal. We still have no trade deal despite all the talk over the past few months while both the VIX and McClellan Oscillator are signalling a bearish tone. To add to the mix the Put/Call ratio is getting back to levels last seen just before the January 2018 high. If Call buying continues it is another warning sign of a top in the market as most Option traders generally loose money. Ahead of the Powell Testimony I will now raise my sell level again to 3105/3120 with a 3129 stop. Meanwhile I will leave my 3060/3070 buy level unchanged with the same 3052 stop.
EUR/USD
I am still flat the Euro which again just missed my buy level before having a small rally into the New York close. Today, I will lower my buy level to 1.0920/1.0965 with a 1.0880 stop. Despite the Euro closing lower I will leave my 1.1090/1.1130 sell level unchanged with the same 1.1165 stop.
December Dollar Index
I am still flat the Dollar and ahead of Powell’s Testimony I will now raise my sell level to 98.45/98.85 with a 99.15 stop.
December DAX
I am still flat the DAX as the market had a nice rally despite a much weaker than expected ZEW Survey. Today my sell level will be from 13350/13410 with a 13455 tight stop.
December FTSE
The FTSE traded in a narrow range yesterday before closing 0.2% higher and I am still flat. I am reluctant to chase this market higher and my only interest in buying the market is still on a dip lower to 7220/7260 with a 7175 stop. If I am taken long I will have a T/P level at 7290.
Dow Rolling Contract
The Dow made a new record high of 27770 before having a small 100 point sell-off into the close. The Dow is severely overbought and due a correction for all the reasons outlined in my Daily Commentaries over the past two weeks. Today I will continue to be a seller on any rally higher to 27850/28000 with a higher 28105 stop.
December NASDAQ
Yesterday’s move to new all-time highs saw the NASDAQ hit my 8295 sell level before selling off to my revised 8286 T/P level and I am now flat. I still believe that the market is close having an up and down reversal and today my sell level will be from 8320/8370 with an 8415 tight stop.
December BUND
I had no luck with my calls yesterday as the Bund just missed my 169.25 buy level with a low print of 169.26 before rallying 50 points into the close and I am still flat. Today I will raise my buy level to 169.05/169.45 with a 168.70 stop.
Gold Rolling Contract
Gold made a low of 1446 which was just above my 1442 buy level before rallying $13 into the New York close and I am still flat. Given the fact that the Large Speculators are net-long over 39% of the Total Open Interest I am reluctant to chase the price of Gold higher and today I will leave my 1432/1442 buy level unchanged with the same 1424 stop.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 16.05/16.45 with a higher 15.70 stop.
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