Politics has once again triumphed over economics judging from yesterday’s market price action. US Equities are off, the VIX is up, the US Dollar is lower, US Treasury yields are lower and the Mexican Peso/Japanese Yen cross (-2.5%) is still proving to the be the FX market’s weapon of choice when it comes to reflecting sentiment regarding the prospect of Donald Trump becoming the next leader of the free world. A slightly better than expected US manufacturing ISM print (51.9 from 51.5 and 51.7 expected) would ordinarily have bolstered market confidence that the unfolding economic calendar is not going to derail expectations for the Fed moving on rates next month.
To mark my 1200th issue of Tradernoble Daily Commentary I am offing 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 email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 57 points yesterday for its first trading loss in seven weeks having made 1572 points in October and 1142 points in September. The previous three months saw gains of 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.
The detail weren’t quite so good, in particular the fall in New Orders, but overall the data was enough to bolster confidence that a recovery of sorts in manufacturing is under way. Construction Spending was weak in headline terms (-0.4% against +0.5% expected) but upward revisions to July and August totaling 1.1% offset this and if anything support an upwards revision to Q3 GDP.
Overriding the data was, it appears, a Washington Post/ABC poll published in front of the US trading day showing Trump with one point lead over Clinton (46/45). This after a poll by the same people on Sunday night had scored it 46/45 in favour of Clinton (the first evidence that the previous news of a fresh FBI probe into Clinton’s emails had hurt her poll standings). This set off the aforementioned chain reactions in market, and which look to have been compounded in the last couple of hours by the news that the FBI has, seemingly out of the blue, just released documents related to the 2001 FBI investigation into the pardon of Marc Rich by President Clinton. Some folks are openly wondering whether this is some sort of payback for Hillary Clinton’s blasting of the new FBI investigation last week.
From an early US day high near 1.88%, 10 year US treasuries slumped to 1.81% at one point before pulling up to close at 1.83%, while pricing for a December Fed rate hike has come in to around 70% from 77% this time yesterday. The VIX is up to 18.9 from 17.1, having been briefly above 20 and to its highest since early September. This has checked the upward progress above 0.7650 seen in the AUD/USD following yesterday’s China PMI data and then studiously neutral post-meeting RBA statement. The latter has left me confident that barring a major shock in the coming weeks the RBA has sent a signal that market’s should once again ‘chill out’ at least until February next year.
In commodities oil is down again but not by much but iron ore has added another $1 to a new post May 2016 high and steaming coal another $5 to yet another new cycle high.
This morning on the economic front we have German Unemployment and Manufacturing PMI at 8.55 am. This is followed by Euro-Zone Manufacturing PMI and UK Construction PMI at 9.00 am and 9.30 am respectively. At 12.15 pm we have the latest US ADP Employment Change which will closely watched for any hints ahead of Friday’s NFP data. Next we have the ISM New York at 1.45 pm. Finally at the earlier time of 6.00 pm due to the US not changing clocks until this weekend we have the FOMC Rate decision. The latter should be a fairly benign affair, with various Fed officials having said in recent weeks that there is reason for the Fed to pass on November and await the next ‘set piece’ meeting in December and after the US election has passed – the latter now an even more pressing constraint. With markets still pricing risk of a December rate hike at 70%, the Fed has no need to put markets any further on the scent. As mentioned yesterday there is no press conference with Fed Chair scheduled after the Statement release.
December S&P 500
Sometimes you get lucky with an announcement as happened on Friday when the S&P hit my 2114 buy level following the release of the report that the FBI were looking into the email server of Hillary Clinton as the market rallied to 2126 shortly after. However yesterday after the S&P traded lower to my average buy level at 2115 I was very quickly stopped out of this position after the FBI out of the blue released documents related to the 2001 FBI investigation into the pardon of Marc Rich by President Clinton. The S&P subsequently traded to a low print at 2090.75 before rallying to 2108 which ensured anyone who used my 5 Handle Rule a means to make the earlier loss back. I am still flat the S&P and today I will again look to buy the market on any dip lower to 2091/2096 with a 2086 stop. If I am taken long I will look to cut this position ahead of the FOMC release at 6.00 pm. Either way if the S&P subsequently trades lower to 2079/2085 I will be an aggressive buyer in this area with a 2073 stop, especially with the McClellan Oscillator closing with a negative 177 reading.
EUR/USD
Frustratingly the Euro just missed my 1.0950 buy level with a 1.0959 low print shortly after the European Markets opened as the Euro subsequently rallied over 100 points. I have had the correct view in the Euro over the past 10 days but unfortunately the Euro has missed some of my recent buy levels. Today I will again raise my buy level to 1.0980/1.1020 with a 1.0940 stop. This buy level will only come into effect after the FOMC Statement is released.
December Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 98.30/98.80 with a 99.20 stop.
December DAX
The DAX had a very weak trading session yesterday with the market hitting my 10565 buy level before having a nice rebound rally to 10608 which enabled me to cover this position at my revised 10590 T/P level as emailed earlier to my Platinum Members and I am now flat. Not helping the DAX and the reason that I cut my long position was the strength of the Euro. Today my only interest in buying the DAX is on a further dip lower to 10320/10380 with a 10270 tight stop. Despite the negative price action I still do not want to be short the DAX at this time.
December FTSE
Having got executed on my other three Indices I waited to buy the FTSE which I did at the bottom of my buy range at 6860. I am still long and I will leave my stop unchanged at 6820. If I am stopped out of this position I will be a more aggressive buyer on any further dip lower to 6780/6810 with a 6745 stop.
December Dow
Just like the S&P above after the Dow hit my buy level at 18010 which was the bottom of my buy range due to the number of open positions that I had at the time I was subsequently stopped out of this trade near the low of the day at 17950 before the market rallied 100 points only to sell-off again into the close and I am now flat. The Dow managed to close over its key 17950 support level and today I will again look to buy the Dow on any dip lower to 17850/17910 with a 10785 stop. If I am taken long ahead of the FOMC Statement I will use any rally to be flat ahead of its release at 6.00 pm.
December BUND
My BUND plan worked well with the Bund hitting my 161.65 buy level before having a nice rally which enabled me to cover this position at my revised 162.03 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the Bund on any dip lower to 161.50/161.90 with a 161.15 stop.
Gold Rolling Contract
A combination of a weaker US Dollar and equity market saw a bid return to both Gold and Silver with Gold closing over the original breakdown at 1280 from exactly four weeks ago. I am still flat Gold and today I will now raise my buy level to 1273/1280 with a 1266 stop.
Silver Rolling Contract
The aggressive move higher in Silver saw me email my Platinum Members to buy Silver at 18.20 with a T/P level at 18.45 which was subsequently filled and I am now flat. I am impressed by the way Silver broke the key 18.00/18.20 resistance level and this area should now as strong support on any test lower over the coming days. Today I will again look to buy the market on any dip lower to 18.10/18.40 with a 17.55 stop.
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