The past 24 hours has seen the US Bond market stage a mediocre rally – not quite a party – for most of the session, tilted to the belly of the curve and the long end. It looks to have been some profit taking after the surge in Bond Yields since the US election. Released yesterday, the US Retail Sales report for October was very solid indeed and this has been bookended by two late-session strong comments from two Fed Presidents. (Oil was higher too.) Rosengren (a voter, and dissenter till Nov) and Kaplan (a voter in 2017) pointed the market even further to the likelihood of a December 15 rate hike. The US OIS market currently has a 91% chance of a hike priced, supporting the front end of the curve.
To mark my 1200th 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 session. 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 103 points yesterday and is now ahead by 1112 points for November having made 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.
Rosengren said that the November FOMC statement signalled a rate hike (that’s what likely convinced him not to dissent then) while Kaplan said that he would have backed a hike at the September or November meetings. US Retail Sales jumped 0.8% (0.6% was expected) and that came with the sweetener of a four tenths upward revision to September. The Atlanta Fed upped its estimate for Q4 GDPNow from 3.1% to 3.3% as a result, adding 0.3% to its Q4 estimate of consumption to 2.9%.
In the political sphere, it was announced last night that Paul Ryan will again be nominated as Speaker of the US House. The US Dollar is little changed in net terms from yesterday’s levels.
New Australian Bank Governor Lowe’s CEDA address yesterday had little to no impact, speaking on policy/structural “buffers” as providing “options” should a shock arrive. His closing comments on the outlook suggested the Bank is reasonably comfortable on hold but still very alert to inflation data. He rightly emphasised flexibility, but noted that inflation is “a bit lower than where they’d like it to be” and that “we should not get worried it’s going to get stuck at these levels”. Not exactly a clean bill of unremitting confidence about the outlook for inflation. He did note that in response to Trump’s policies to lift growth that rising inflation would be “a good thing”. Lowe noted that targeted infrastructure spending had a role to play in the growth outlook. Yesterday’s IMF Article IV annual report on Australia said that the economy is not immune from the “new mediocre”, that policy should remain accommodative given it might take longer than expected to get inflation back to target.
The AUD/USD is trading this morning in the mid 0.75s. US equities are stronger and the VIX is lower again. Iron ore dropped back to a still high $72.78 (-$5.09/t), met coal was steady, but thermal coal rose $1.10/t to $106.45. Meanwhile, the New Zealand Dollarr has lost some net ground in the past 24 hours, though has clawed back some lost ground in the second half of the session in the wake of the latest Global Dairy auction, prices rising 4.5%.
There was a bit more intra-session volatility with the Pound yesterday though it sits back where it was yesterday. A leaked memo to The Times said a report commissioned by the UK Government found there was no strategic plan for Brexit, not that this would really surprise too many people. UK CPI for October had also underwhelmed (0.1%/0.9%, 0.2% less than f/c) though core PPI was 0.3% higher than expected, indicative of some upstream lower Sterling pressure, even if that pressure has dissipated to some extent recently.
This morning on the economic front we have UK Employment and Average Earnings at 9.30 am. This is followed at 1.30 pm by US PPI. Finally we have US Industrial Production and the NAHB Housing Market Index at 2.15 pm and 3.00 pm respectively.
Today is another busy day for Central Bank speakers. This morning at 9.00 am the Fed’s Bullard is in London to speak on Monetary Policy. Next at 9.30 am the Bundesbank’s Thiele is speaking the European Finance Minister Meeting in Frankfurt. Finally at 1.45 pm the Fed’s Kaskari is due to speak in New York on the theme ‘’Too Big To Fail’’.
December S&P 500
Unfortunately the S&P just missed my 2161 buy level with a 2161.75 low print before after a quiet trading session the S&P rallied strong late in the session to close at 2178. The Futures market is now approaching its 2190 all-time high from August and once we clear this area it will signal the next leg higher in the long-term bull trend. A lot of traders are still expecting a large correction but I do not see at this time as I still expect the S&P to hit my long-term target at 2300. I am not saying that history will repeat itself but if you go back to when Ronald Regan was elected President both the US Dollar and stock markets rallied and kept rallying after Regan introduced similar polices to what Trump is trying to do especially with regard to infrastructure. The S&P has minor support from 2167/2173 and I will be a buyer in the area with a wider 2161 stop which is just below yesterday’s low print. I still do not want to be short the S&P at this time. The really strong support for the S&P is from 2148/2154 and if I am stopped out of my initial long position I will be an aggressive buyer in this latter 2148/2154 area with a 2143 stop.
EUR/USD
Just after I posted yesterday the Euro traded higher to my 1.0815 T/P level on my long 1.0770 position. Subsequently I emailed my Platinum Members to re-buy the Euro at 1.0765. This position looked fine this morning on the open but the Euro is selling off as I post this commentary. I will leave my stop unchanged at 1.0695 and if I am stopped out of this trade I will be more aggressive buyer on any further dip lower to 1.0645/1.0685 with a 1.0595 stop. Remember the Euro needs to break and close below last December’s post ECB low at 1.05 for me to turn bearish.
December Dollar Index
Late yesterday the Dollar hit my 100.25 sell level before selling off early this morning which enabled me to cover this position at my revised 100.00 T/P level as outlined to my Platinum Members and I am now flat. The key level for the Dollar is still last December’s 100.56 high before the market had a significant Key Day Reversal. Today I will again be a small seller on any rally higher to 100.60/100.90 with a 101.25 stop. Given how overbought the Dollar is trading I do not want to be long the Dollar st this time.
December DAX
I am still flat the DAX which traded in a narrow range yesterday. Today I will again look to buy the DAX on any dip lower to 10570/10630 with a 10525 same stop. I am amazed that given how weak the Euro is trading that the DAX has not tested and broken the key 10800/10850 major resistance level. Remember a break and close over 10850 targets 11160.
December FTSE
Unfortunately the FYSE just missed my 6755 buy level with a 6762 low print and I am still flat. I am not going to chase this market higher and today I will only raise my buy level slightly to 6730/6760 with the same 6695 stop.
Dow Rolling Contract
My Dow plan worked well with the market hitting my 18820 buy level. The market traded around this level for a couple of hours before eventually rallying strongly into the close. Unfortunately as my S&P buy level was close by I emailed my Platinum members to exit this position for a small gain at 18848 and I am now flat. Finally the internals of the market started to perform with the McClellan Oscillator closing with a positive 92 reading last night after a mediocre few trading sessions. Today I will again look to buy the Dow on any dip lower to 18750/18820 with the same 18710 stop. If I am taken long and manage to T/P on any long position or I am stopped out of this position I will be a very aggressive buyer in front of 18670 with a 18595 tight stop. Even though the Dow is overbought it is pointless trying to sell the market unless we get a sell signal but having said that I will still be a small seller on any further rally to 19075/19140 with the same 19200 stop.
December BUND
No change as I am still a buyer on any dip lower to 159.35/159.75 with the same 159.05 stop.
Gold Rolling Contract
No change as I am still a small buyer into the 1207/1215 strong support with the same 1199 stop. Gold has strong resistance at 1250 and today I will be a small seller on any rally higher to 1249/1256 with a 1263 stop.
Silver Rolling Contract
I am still long Silver form yesterday morning at 16.95 which just missed my 17.40 T/P level overnight. Today I will lower my T/P level on this position to 17.25. I will leave my stop unchanged at 16.25.
Following the success of the NFP Live Trading Day and Education Session in London on September 2, Paul Wallace and I are bringing this event to Dublin for the December NFP day on Friday December 2nd. If anyone is interested in attending this event the details are on the following link:
https://www.eventbrite.com/e/live-nfp-trading-day-dublin-tickets-28159689389
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