US markets right have been caught between 1) the ongoing negotiations over tax between the White House and Republicans, 2) who will be the next Fed Chair (the market seems to be positioning for a Taylor-Powell duo but there is still no news), and 3) the course of the broader economy. While there has been no announcement yet on the next Fed Chair, there have been some developments on the others. Released just after the US Markets closed, it has been announced that US Republican Senator Jeff Flake will retire at the next election. It is a prospect that has some thinking of less chances of getting tax reform done if Flake were to be more outspoken against the President with no re-election worries.
To mark my 1450th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 69 points yesterday and is now ahead by 564 points for October, having made 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 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.
There has been another war of none too flattering words between the President and Senator Corker yesterday, Corker speaking of the President “debasing our nation” and the President saying that Corker “could not get re-elected dog catcher in Tennessee (and) is now fighting tax cuts”. The US Dollar briefly reacted negatively to the Flake news, but the US 10 year is holding firmly above the 2.40% level this morning. The Dow closed up 168 points (it was over 200 points higher), helped by strong results from 3M (boosting its earnings outlook) and Caterpillar (the CFO speaking of the mining recovery in its “early innings”).
Adding more into the global growth story have been further strong Manufacturing PMIs out of the Euro-Zone and the US (the latter the Markit versions). Euro-Zone Manufacturing PMI was a very solid 58.6 up from 58.1, with the Services PMI at 54.9, down from 55.8; still solid. The US Markit PMIs were both stronger.
While the USD has been steady to somewhat higher for the session, the losers have been Sterling and the Kiwi. UK Chancellor has apparently stepped back from the push for a two year post-Brexit “business-as-usual” transition, Europeans demanding a cleaner deal. Sterling is down a big figure since I posted 24 hours ago. The Kiwi has moved lower still from the announcement of the incoming Government renegotiating the RBNZ agreement, lower migration targets and uncertainty also over other policies, even though policy specifics are scant. The AUD has been trading below 0.78. Chinese steady political leadership news came and went with little market impact while commodities are very supportive, except Gold that is marginally lower.
This morning on the Economic Front we have German IFO Business Climate and Current Assessment/Expectations at 9.00 am. This is followed at 9.30 am by UK GDP, Index of Services and Finance Loans For Housing. At 12.00 pm we have US MBA Mortgage Applications and this is followed at 1.30 pm by Durable Goods Orders. Finally we have the FHFA House Price index and New Home Sales at 2.00 pm and 3.00 pm respectively.
Also of note today the Bank of Canada rate decision where they are expected to leave rates on hold at 1.00%, the market having priced out most of the 40% chance priced in just after the BoC hiked in September, having also lifted rates in July. Only 4 bps is priced in. The tone of Governor Poloz’s press conference will be key, coming just over an hour after the rate decision and the central bank’s Monetary Policy Report.
December S&P 500
While the Dow rocketed to new all-time highs the S&P traded heavy as the market was hindered by the weakness in the NASDAQ. I am still flat the S&P and today I will continue to be a small buyer on any dip lower to 2551/2558 with the same 2545 stop. The worry for the bears is that if the NASDAQ starts to outperform then we will see a large move higher in the S&P to new highs and thus catch up with the more powerful move in the Dow. Everyone that I talk to is bearish which is probably why we are going to move higher first especially as earnings so far have been positive. As I have mentioned over the past few days I need to see the S&P break and close below 2545 for me to start to short the market.
EUR/USD
No change as I am still a buyer on any dip lower to 1.1665/1.1700 with the same 1.1630 stop. This 1.1660/1.1690 is huge support as a break and close below here opens up the possibility of a quick move lower to the stronger 1.1375/1.1440 support zone. As we are trading near this key support level I still do not want to be short the Euro at this time.
December Dollar Index
The US Dollar again traded in a narrow range yesterday and I am still flat. Today I will leave my buy level unchanged from 92.95/93.25 as I do not want to chase this market higher preferring to be patient.
December DAX
After nearly four weeks of sideways action in a severely overbought market the big question is when is volatility going to return to the DAX. Volumes have collapsed yet still the market continues to hold in. Today I will continue to be a buyer on any dip lower to 12865/12910 with a 12820 stop as we wait for the key ECB Meeting and Dragi press conference tomorrow.
December FTSE
Just like the DAX above the FTSE has also traded in a narrow range. Worryingly for the bulls was the fact that the FTSE could not rally despite the large move lower in Sterling. However I am still not comfortable in being short the FTSE without a sell extreme and today I will leave my buy level unchanged from 7410/7445 with a 7380 tight stop.
Dow Rolling Contract
My Dow plan worked well yesterday with the market initially trading higher to my 24430 sell level with a 23440 high print before selling off twice to a 23397 low print. Subsequently I emailed my Platinum Members to cover any short position at my revised 23415 T/P level and then to go short again on any rally higher to 23460 with a 23420 T/P level if hit. Thankfully this worked well with both levels getting hit and I am now flat. Yes the Dow is overvalued on almost every scenario imaginable including the 14 Day RSI which is now printing over 88 – a level that I have never seen before. However until we get a sell extreme that breaks some key levels we can only be short this market for a few hours before strong buying returns. Today I will continue to be a strong buyer on any dip lower and will now move my buy level higher to 23250/23345 with a 23190 wider stop. I will also be a seller on any further rally to 23525/23585 with a 23640 stop.
December NASDAQ
While the Dow continues to make one new closing high after another the NASDAQ is stuck in a narrow trading range unable to break higher. I am still flat the NASDAQ and today I will continue to be a strong buyer on any dip lower to 5980/6015 with the same 5945 stop. If I am taken long I will have a T/P level at 6040.
December BUND
Finally the Bund traded lower to my 161.10 buy level. After the market traded to my buy level it traded sideways for hours. As I wanted to be flat I covered this position before the European close at 161.19 and I am now flat. Ahead of the ECB Meeting tomorrow I will again look to buy the Bund on any dip lower to 160.50/160.90 with a 160.20 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1260/1267 with the same 1254 stop.
Silver Rolling Contract
Late in the day Silver traded lower to my 16.90 buy level. In keeping with my strategy of banking points when available I covered this position at my revised 16.95 T/P level before the New York close and I am now flat. Today I will again look to buy Silver on any dip lower to 16.50/16.80 with a 16.20 stop and a T/P level if hit at 17.00.
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