The global equity rout continues with US equities now close to levels seen at the start of the year. Unlike Monday, where tech shares led the decline, yesterday’s falls have been broadly based although the energy sector is the big loser weighted down by an eye watering 6.5% decline in oil prices. Against this backdrop the USD has outperformed across the board with commodity linked currencies, excluding NZD, the big losers. UST yields once again are bystanders, little changed from Monday’s levels. Recent soft economic data and a US led equity rout in November have not played against the USD even though we have seen a pullback in Fed hiking expectations alongside a softening in Fed speakers messaging. The DXY Index is up 0.66% to 96.87 and the broader BBDXY is +0.59%.
To mark my 1720th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 155 points yesterday and is now ahead by 1266 points for November, having made 2094 points in October,1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
So for now, the big USD dollar has retained its safe haven attributes outperforming across the board in yesterday’s session although the Dollar is opening weaker this morning. Brexit news are weighing on Sterling and the Euro while risk off sentiment and a softer commodity backdrop have pulled down commodity linked currencies and EM FX.
Moves above 73c remain unsustainable for the AUD, early yesterday morning the pair briefly traded above the figure, but a combination of risk aversion in equities alongside a sharp drop in oil prices was never going to be a good combo for the AUD. That said, the initial decline in the aussie to its current level of 0.7216 (-1.02% compared to this time yesterday) can be attributed to RBA Governor Lowe comments overnight. Although the Governor gave a similar message comprised in the Board Minutes released yesterday, the market latched onto a greater acknowledgement of concerns over housing (‘’watching the housing market closely’’), credit conditions (‘’getting concerned about credit supply’’) and the Governor’s remark that the recent fall in unemployment to 5% does not foreshadow much of a rise in inflation. Lowe said ‘’I suspect nationally we could sit around 4.5 percent (unemployment) without seeing wage growth pick up by too much’’. So putting it all together, ongoing risk aversion, softer commodities driven by oil and now a more cautious RBA suggest the AUD’s near term path of least resistance is likely to be down rather than up.
Against this backdrop is not surprising then to see other commodity linked currencies as the major underperformers. CAD is down 1% to 1.3307 and NOK is -1.34% to 9.5810.
Brexit news have dragged Sterling lower with pair now back below the 1.28 mark (-0.54%). Early in the yesterday’s trading session, Spain’s PM Sanchez threatened to vote against the Brexit deal if there was no clarification on the status of Gibraltar , then the DUP said it will withdraw support for the UK government, effectively going on strike, abstaining from voting any legislation in Parliament until an acceptable solution is found for the Irish border . This means Prime Minister May will be forced to change tack, or needs to find votes from somewhere else to pass the Brexit transition deal. Meanwhile, Jacob Rees-Mogg has warned fellow Tory MPs that if they don’t ditch Theresa May now she will lead them into the next election, scheduled for 2022.
The Euro has followed GBP lower and in fact it has underperformed the pound, dropping from a 1.1472 to an intra-day low of 1.1354 before bouncing overnight to sit at 1.1395 this morning. Italian budget concerns remain an issue with further widening in BTP-Bunds spreads (more below)
Commodities
Oil prices have led a broad decline in commodities with Brent and WTI down over 6%. Iron ore and coal fell just 0.6% while copper is -1.20% and gold is -0.3%.
President Trump said in a statement that the U.S. remained a steadfast partner of Saudi Arabia despite the killing of a dissident journalist last month. Some commentators have suggested Mr. Trump’s remarks could be an attempt to keep Saudi Arabia from cutting production at the December meeting among OPEC and non-OPEC members
Equities
Equity markets are deeply in the red again, continuing their trend retreat from September’s highs. The S&P500 closed down around 2.0%, following similar sized losses in Europe. US equity declines have been led by energy shares (-3.18%), although IT, Financials and industrials have also underperform the broad market with declines close to 2%.
Bonds
US interest rates traded a narrow range. US 10 year Treasury yields dipped below 3.04% as oil prices fell, but soon recovered some ground. Yields currently sit around 3.05%, down 1bp on the day, a limited move in the context of the ongoing hefty declines in oil prices. Meanwhile in Europe, 10y German Bunds fell another 2bps closing at 0.348% and 10y UK Gilts climbed 1bps to 1.381%. Bunds seemingly benefiting the most from the risk off mood, while 10y Italian BTTP rose 2bps to 3.612%, taking the BTTP Bunds spread to 326bps, the Italian budget remains a concern in Europe.
Economics/Politics
Bloomberg reports Trump’s legal team may submit written responses to Special Council Robert Mueller as early as today capping off nearly a year of back and forth negotiations. Apparently Trump wrote a number of the responses himself and “it din’t take very long to do them…”
US: Housing data largely in line with starts +1.5% m/m against expectations of 1.8%. Permits slightly better at -0.6% m/m against expectations of -0.8%.
UK CBI industrial orders for Nov saw the headline bounce to +10 from -6 (it was last close to this high back in Jun). Forward-looking orders also rose to +8 from -3. Decent report.
This morning on the Economic Front we have UK PSNB at 9.30 am and this is followed at 10.00 am by the Euro-Zone OECD Economic Bulletin. At 1.30 pm we have the US Weekly Jobless Claims, Durable Goods Orders and Capital Goods Orders. Finally ahead of the Thanksgiving Holiday tomorrow we have the Leading Index and the University of Michigan Consumer Sentiment at 3.00 pm.
December S&P 500
Another bloodbath for the US Indices with stops almost impossible to have in the market given the two-way volatility which is no surprise when the VIX is trading close to 23. You know that as soon as your stop is hit that the market is going to reverse course with vengeance and that is exactly what happened to me yesterday in both the S&P and Dow. After the S&P traded lower to my 2658 average buy level I was quickly stopped out of this position at 2645. Subsequently the S&P made a low just below 2634 before rallying back above 2670 on two separate occasions. After I was stopped out I used my 5 Handle Rule to re-buy the market which I did at 2639 with a 2660 T/P level. After these levels were hit I again emailed my Platinum Members to re-buy the S&P on any dip lower to 2645 with a 2653 revised T/P level and after both of these trades were filled I stayed flat overnight. As I mentioned yesterday the 2680/2700 area is a strong inflection point and it will take a lot for the market to break and close back above this now key resistance area. Today I will be a small seller from 2682/2695 with a 2710 stop. The S&P has support at last month’s low from 2605/2618 and I will be a buyer on any dip to this area with a 2596 stop. Long-Term support is from 2560/2585 and today I will be an aggressive buyer on any plunge to this area with a 2545 wider stop. Remember value below this key support for a two week period will signal a long-term top in the S&P.
EUR/USD
My Euro plan worked well with the market trading lower late in the New York session to my 1.1360 buy level before rallying overnight to my 1.1395 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1300/1.1340 with a 1.1265 stop.
December Dollar Index
The Dollar traded higher to my 96.70 sell level. I am still short and I will now lower my stop on this position to 97.15. I will also raise my T/P level on this trade to 96.35.
December DAX
My DAX plan also worked well with the market trading lower to my 11020 buy level before rallying to my 11075 T/P level and I am now flat. It is clear from the price action yesterday that despite the weakness in the US Indices that the DAX has strong support from 10970/11030 and today I will again look to buy the market in this area with the same 10920 tight stop.
December FTSE
Shortly after I posted yesterday morning I was stopped out of my 6975 long position at 6945 and I am still flat. The renewed weakness in Sterling should be a support for the FTSE market and today I will again look to buy the market on any dip lower to 6870/6920 with a 6835 stop.
Dow Rolling Contract
After I bought the Dow at 24630 I was stopped out of this position near the initial low of the day at 24475 before the market of course rallied back to the 24700 before getting slammed into the close and I am still flat. The Dow has strong resistance from 24800/25000 and today I will be a small seller in this area with a 25120 stop. I will still be an aggressive buyer on the first time down to 23900/24100 with a 23750 stop.
December NASDAQ
My NASDAQ plan worked well with the market trading lower to my 6470 buy level before rallying to my revised 6550 T/P level and I am now flat. Given how oversold the NASDAQ is trading I will continue to be a buyer on any dip lower to 6400/6480 with a 6345 stop.
December BUND
No change as I am still a seller on any rally higher to 161.10/161.50 with a 161.80 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1205/1214 with the same 1197 stop.
Silver Rolling Contract
Silver just missed my 14.55 T/P level on my latest 14.30 long position. Silver subsequently sold off from its highs before have a small rally into the close. I will now lower my T/P level on this position to 14.45 with the same 13.80 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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