Yesterday we saw a return to risk sentiment, with US equities closing at new all-time highs which helped the VIX to close back below 10 for the first time in two weeks. The S&P closed up 0.7% to sit at 2600. Meanwhile RBA Governor Phil Lowe yesterday morning re-iterated the view that the next move in Interest Rates will likely be up. Because of both of these, the Aussie dollar is higher, by almost 0.5% to a high of 0.7590. AUD has though been outbid by the Scandinavian currencies, SEK benefiting from a central bank talking its currency up not down (a very rare sight) and the NOK from modestly higher oil prices. The CAD and Mexican peso are also both stronger, less to do with oil, more on the ‘no news (yet) is good news’ with regards to preservation of NAFTA in its current guise, though that of course could yet all change in coming months.
To mark my 1475th 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. This offer is open to both new and existing members and if anyone is interested in this offer please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it finished flat yesterday as thankfully we had no sell levels across any of the equity Indices that I cover, and is still ahead by 814 points for November, having made 657 points in October. The previous months saw gains of 447 points for September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1335 in April, 1375 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
Amongst the so-called commodity currencies, even the NZD has pushed higher, seemingly on the coattails of AUD strength, despite another poor GDT dairy auction where average prices fell 3.4% (this following a 3.5% drop two weeks ago). This reinforces downward pressure on Fonterra’s current $6.75 milk price forecast (BNZ already forecasts this coming down to $6.30). On another day the NZD could have suffered quite badly (as indeed it did following the previous auction). Testament perhaps to the view that the flightless bird had become rather oversold in the aftermath of the election.
As for the Lowe speech yesterday, the Governor presented a positive picture of growth with the mining investment cycle seen to be well and truly behind us, while dwelling at length on the possible causes of low wages and which he equates to low inflation, low interest rates and high asset prices. Competitive pressures figured prominently here (with employees concerned about job security from either overseas labour markets or technology) and employers under pressure to keep a ‘laser-like’ focus on costs (in retailing especially, including food) of which of course wages are the biggest component for most firms.
Yet in reiterating that the next move in rates should be up, and that the current highly accommodative policy stance was appropriate for the ‘near term’, he did not give any succour to the view that the RBA was likely to be on hold indefinitely (e.g. for at least a year, as the IMF suggested after releasing its latest ‘Article IV consultation on the Australian economy earlier this week). Dr Lowe also made no reference to the currency, whereas there has been some thought he could have taken the opportunity to try give the AUD a nudge in the direction it has recently been travelling. Not so.
In other markets, the US Treasury yields curve continues to flatten, the 2-10s spread by another 3bps overnight driven from both sides – slightly lower 10-year yields but another 2bp rise in the 2-year note, weighing on the USD in the process.
Last night after the US Markets closed we had the interview with Yellen on TV. In it she said that the Fed are close to goals, sees dual risks as it looks to hike Interest Rates further. She also said that the low inflation rate is transitory and should rebound but at this time the Fed is uncertain.
This afternoon on the Economic Front we have the UK Budget with the UK Chancellor Philip Hammond deliver his Budget speech to parliament at 12:30 pm This Budget comes on the heels of reports Monday that Prime Minister Theresa May won support from members of her Cabinet to double Britain’s exit payment offer to the European Union to 40 billion pounds (~€45bn), though reportedly for some of the pro-Brexit ministers, a sum which could be withdrawn if the EU does not offer an acceptable Brexit deal). Let’s see if this number appears in the Budget arithmetic, or at least rates a mention in the speech. With US Markets closed tomorrow we have the US Weekly Jobless Claims and Durable Goods Orders released today at 1.30 pm. This is followed by Euro-Zone Consumer Confidence at 2.00 pm and the University of Michigan Consumer Sentiment at 3.00 pm. Finally we have the FOMC Minutes at 7.00 pm.
December S&P 500
There is just no stopping the US Stock Markets as yet again the S&P closed at a new all-time high last night. This move higher was flagged last Friday by the improvement in the McClellan Oscillator which is now firmly in positive territory (+52) as yet again anyone shorting this market has got slammed. We are getting closer and closer to the 2792 price which is where the 3rd Standard Deviation for the S&P comes in. There is no doubt that this market is severely overbought but until we get a sell extreme that breaks some key levels this market is still a buy on dips. Today I will now raise my buy level to 2583/2589 with a 2576 wider stop. My measured target is for this up move is from 2634/2645 and I will be an aggressive seller in this area with a 2652 stop.
EUR/USD
Frustratingly the Euro just missed my 1.1705 buy level with a 1.1713 low print before rallying and I am still flat. Today I will now raise my buy level to 1.1685/1.1735 with a 1.1640 stop. I still do not want to be short the Euro at this time as in my opinion it is only a matter of time before we break back above 1.20.
December Dollar Index
I am still flat the Dollar which came short of my 94.40 sell level yesterday. Today I will now lower my sell level to 94.05/94.45 with a 94.75 stop. I still do not want to be long the Dollar at this time.
December DAX
The DAX soared after I posted yesterday morning with the market now trading over 350 points higher off the 12850 low print early Monday morning. Thankfully we had no sell level in the DAX which despite last week’s sell signal has rallied strongly. Today I will now raise my buy level to 13050/13110 with a 13005 tight stop. The next resistance level for the DAX comes in at 13325 ahead of the 13390 /13450 major resistance level.
December FTSE
As we wait for the UK Budget this afternoon the FTSE rallied yesterday despite the strong currency as we finally closed above its 100 Day Moving Average at 7385. I am still flat the market and today I will now raise my buy level to 7355/7390 with a 7325 tight stop.
Dow Rolling Contract
The Dow is now trading almost 350 points higher than last Monday’s early morning low at 23258. I am still flat and today I will now raise my buy level to 23420/23500 with a 23360 stop. The next resistance levels for the Dow are 23695 and 23900. However given the fact that this is Thanksgiving Week I still will not look to go short the market at this time.
December NASDAQ
The NASDAQ also rallied strongly yesterday and I am still flat. Today I will now raise my buy level to 6285/6330 with a 6250 stop.
December BUND
The Bund just missed my sell level yesterday before having a nice 35 point move lower and I am still flat. This morning the Bund is opening higher as the market looks to test the 163.63 level which is the high from earlier this month. Today I will raise my sell level slightly to 163.55/163.90 with a 164.15 tight stop.
Gold Rolling Contract
Gold continues to trade in a sideways direction that has persisted for most of the past few months. I am still flat and today I will raise my buy level slightly to 1260/1269 with a 1253 stop.
Silver Rolling Contract
No change as I am still long the market at 17.10 with the same 17.20 T/P level. I will only add to this position on any move lower to 16.70 with the same 16.40 stop. Again if any of the above scenarios happen I will be back with a new update for my Platinum Members.
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