Financial markets remained resilient yesterday despite recent geopolitical events and tragedies in Berlin, Zurich and Ankara. Putting those tragic events aside, for markets they are still singing to the tune of greater infrastructure spending by an incoming Trump Administration. President-elect Trump added to those expectations yesterday stating he is creating an infrastructure “task force”. Against that background, global equities continued their moves higher. The Dow was up 0.3%, near its record high and within a hairsbreadth of the psychological 20,000 level (currently sitting at 19,965) – can it crack 20,000 by Christmas? The S&P was up 0.2% while European stock Indices were also higher with the DAX up 0.3% and the FTSE up 0.4%.
To mark my 1225th 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 day. 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 60 points yesterday and is now ahead by 1206 points for December having made 1971 points in November and 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.
The Bank of Japan (BoJ) met yesterday and as expected kept policy unchanged. Although there was a slightly more positive assessment of the economic outlook, inflation expectations were noted to be weakening and the BoJ remains committed to keep expanding the money base until inflation exceeds 2%. The yield curve control measures were also unchanged (the BoJ is committed to purchasing JGBs so that 10-year yields remain around 0%). With US yields having moved higher and Japanese rates holding at low levels, the rate differential is growing and is putting downward pressure on the Yen. Despite this Governor Kuroda was not expecting excessive Yen weakness ahead and noted the Yen was at the same levels it was at in February 2016 despite having had fallen 12% since the election of Trump.
The Interest Rates market was very quiet, with US Treasurys up 2.6 basis points to 2.56% and German Bunds up 2.2 basis points to 0.27%. There was also little movement in the FX space apart from the Yen which fell 0.6% on the back of the BoJ Meeting. The US Dollar was slightly higher (up 0.1%) with most currency moves in line with that. The Euro and Kiwi were down 0.1%, while the Aussie was up 0.1%. The British pound underperformed, down 0.3%, with no clear reason and runs counter to the generally positive comments that the UK PM Made in regards to Brexit.
UK PM May reiterated that she planned on triggering the formal Brexit mechanism by the end of March 2017 – from then the UK has two years to negotiate. PM May also said she was in favour of a transitional deal after the UK had left the EU so possibly lowering soothing fears of a hard Brexit. She also said MPs would not be given a vote on the final Brexit deal negotiated by the government and did not support Scottish plans that would allow Scotland to stay in the single market if the UK left.
The RBA Minutes were released yesterday morning and while not garnering much market attention was unusually delphic – for those with a classics background the oracle was famous for giving two handed statements. At the meeting the Board discussed the benefits of recent cash rate cuts against “risks to household balance sheets” and that crucially they would “need to keep this under review”. There are two possible interpretations of this, first there is a higher bar to further easing, or second the RBA is thinking about the possibility of needing to ease rates further should the labour market data continue to soften – on this the Board states there is “considerable uncertainty about the momentum in the labour markets”. Markets however have concluded the former with the OIS market actually pricing in a 56% chance the RBA hikes rates by the end of 2017.
Finally, commodities end yesterday’s trading session mixed. The oil price was up between 0.2-0.7% depending on the measure with WTI at US$52.23. Iron ore fell 2% to US$79.6 a tonne while coal prices were broadly unchanged. Some of the negative sentiment in regards to iron ore may be due to fears of imminent factory shutdowns following dangerously high smog levels in China. 24 cities have been given red alerts with residents urged to stay indoors amid the worst smog spell of 2016.
This morning on the economic front we have UK Public Sector Net Borrowing at 9.30 am. This is followed at 10.00 am by Euro-Zone Consumer Confidence. Finally we have US Existing Home Sales at 3.00 pm.
March S&P 500
The S&P continues to trade in a sideways direction in very quiet trading with the McClellan Oscillator again firming to close with a positive 72 print. I would expect more of the same today as we await the large batch of economic data due tomorrow and Friday. Today I will again raise my buy level in the S&P to 2253/2258 with a 2248 stop. Remember the S&P needs to break and close below 2213 for the market to see a change of direction and some meaningful selling. If the S&P trades lower to 2212/2220 over the coming days I will be an aggressive buyer in this area with a 2206 stop. Given the seasonality I still do not want to be short the market at this time.
EUR/USD
The idea of buying the Euro on dips continues to pay dividends. Yesterday afternoon the Euro hit my 1.0360 buy level before rallying back above 1.04. As I was also short the Dollar Index I covered my long Euro position at 1.0385 and I am now flat. As I have mentioned countless times that given the extremely low Daily Sentiment Index reading for the Euro it is only a matter of time before we see a meaningful rally in the Euro and sell-off in the US Dollar and for these reasons I will again look to buy the Euro on any dip lower to 1.0340/1.0375 with a tight 1.0310 stop.
March Dollar Index
My Dollar plan also worked well with the Dollar hitting my 1.0360 sell level before finally selling off to my 103.25 T/P level and I am now flat. As I mentioned yesterday the Dollar has strong resistance at the 103.45/103.80 area and today I will be a seller in this area with a 104.20 stop.
March DAX
The DAX continues to move higher in a slow fashion in severely overbought conditions but with no sell signal the downside is likely to be limited. I am still flat the market and today I will only raise my buy level slightly to 11310/11370 with a 11260 stop. I still do not want to be short the DAX at this time despite the market being way overbought.
March FTSE
Yet again the FTSE just missed my buy level before trading higher. Today I will again raise my buy level to 6910/6940 with a 6880 tight stop. My only interest in selling the FTSE is on a rally higher to the October high at 7065/7100 with a 7135 stop.
Dow Rolling Contract
The march higher to 20,000 continues with the Dow topping just shy of this resistance level at 19991. As I have said over the past two weeks that it is only a matter of time before we take out this level despite last Wednesday’s Downside Key Day Reversal. Given how overbought the Dow is trading as shown by the extreme measures in the RSI, I still do not want to be long the Dow at this time. Today I will leave my sell level unchanged at 20060/20120 with the same 20170 stop. I will also still look to start to put on a more long term sell level on any further rally higher to 20250/20400 with a wider 20520 stop over the coming days.
March BUND
I am still flat the Bund which as expected is topping near the November high at 163.83 after a nice 350 point rally over the last week. Today I will raise my sell level to 163.65/164.05 with a 164.40 stop. I will also raise my buy level to 162.30/162.65 with a 161.95 stop.
Gold Rolling Contract
Unfortunately Gold just missed my 1124 buy level with a 1125.60 low print yesterday before trading to a 1137 high print this morning. I am still convinced that it is only a matter of time before Gold rallies strongly as it needs to correct its oversold condition. Today I will raise my buy level to 1118/1128 with a 1111 stop.
Silver Rolling Contract
Thankfully Silver rallied strong yesterday afternoon off its 15.61 low print. I bought more Silver last night at 15.96 which now averages my buy level to 16.08. Given the lack of liquidity due to Christmas week I will now lower my stop on this position to 15.35.
Recent Comments