It has been a pretty busy past 24 hours with Fed Chair in waiting Powell appearance before a Senate committee, mixed US data releases, confirmation of UK-EU Brexit bill (after some confusion), North Korea launching a ballistic missile and lastly the US Senate Budget Committee announcing a tax bill which has been sent to the Senate for voting. Reaction to the missile news has been pretty muted with US equities after a large intra- day sell-off, rallied strongly in the last hour of trading to close at yet another record high seemingly supported by Fed Powell’s preference to ease some regulation. The USD has edged a bit higher, but reaction ST yields has been pretty muted and like Maklemore would sing the key take away from the Fed Chair in waiting is that “Same Love” should be expected from a Powell led Fed.
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 can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 60 points yesterday and is now ahead by 987 points for November having made 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
Powell’s prepared statement released yesterday depicted a message of continuity and his appearance before the Senate committee left me with the same impression. The prepared statement had a few words that could have been interpreted as hawkish and others that could have been read as dovish, but overall it was a pretty neutral statement. At the hearing yesterday, the Fed Chair in waiting noted that the case for a December rate hike is “coming together” and then added that “we can afford to go more slowly” with Interest Rate hikes if inflation stays low, suggesting that monetary policy next year will be guided by the data. So as the Fed under Yellen, Powell’s Fed will also be data dependent. Mr Powell also said he expects the central bank’s portfolio of holdings to shrink to a range between $2.5tr and $3 tr over the next few years. Finally in terms of regulation, Powell said that he believes some rules should be re-evaluated to make sure they are efficient and tailored to the risks of individual firms.
After a volatile trading session US equities closed up between 0.4% and 1.07% with financial shares leading the way. Powell’s comments that bank rules are “tough enough” and his backing for a rewrite of the Volcker Rule that would give banks more freedom to trade on a proprietary basis has probably been a factor helping financial’ s outperformed. News that the Senate Budget Committee has voted to present a draft Tax Bill before the Senate has also been a late positive news. Now a vote could take place as early as this afternoon.
Meanwhile US data releases were a mixed bag. The Conference Board’s index of Consumer Confidence beat expectations and rose to a new 17 year high in November (129.5 vs 126.2 prev.), but the Trade data disappointed with the October Advance Trade Deficit jumping to a record $68.3bn, from $64.1bn in September. Overall, exports fell by 1% month on month, while imports rose 1.5%, going against expectations of a solid export read as depicted by strong ISM export orders index. One swallow doesn’t make a summer, but is not a good start to the Q4 GDP hard data.
The USD has had a good 24 hours in index terms with DXY +0.26% and BBDX +0.22%. Looking at the G10 leader board, barring Sterling the USD is stronger across the board. NOK is the big underperformer, down 1.04%% despite the fact that oil prices were flat to higher (WTI -0.3% and Brent 1.2%). After BoJ Kuroda’s yesterday confirmed that no sees no problem in Japan’s banking system, quashing any thoughts of an imminent tinkering with the Bank’s yield curve control policy, USD/JPY has been on a steady rise with news of a North Korean missile launch having little impact. USD/JPY currently trades at ¥111.51, up 0.40%. USD strength has also been felt against the Euro with the common currency down 0.45%. After trading above the 1.19 mark for most of the day yesterday, the pair has been on a steady decline and currently trades at 1.1865.
After a roller-coaster ride, Sterling is the outperformer, up 0.75% and currently trading at 1.3420. News of a UK-EU Brexit bill agreement has boosted the pound, after an initial confusion over the veracity of the news. The FT has confirmed that Britain has agreed to fully honour its financial commitments, assuming liabilities worth up to €100bn, although net payments, discharged over many decades, could fall to less than half that amount. So a positive step, but the T’s won’t be crossed or i’s dotted until the 14-15 Dec EU summit and this depends on EU workers’ rights and the Irish border situation.
This morning on the Economic front we have UK Mortgage Approvals at 9.30 am. This is followed by US MBA Mortgage Applications at 12.00 pm and German CPI at 1.00 pm. At 1.30 pm we have US GDP, followed by Pending Home Sales at 3.00 pm. Finally at 7.00 pm the Fed releases its latest Beige Book.
This afternoon Fed Chair Yellen appears before the Joint Economic Committee of Congress and Fed members Dudley and Williams are also on the speaking roster.
December S&P 500
Unfortunately the S&P missed my 2593 buy level with a 2597 low print after I posted before making a new 57th high for 2017 after the US Cash Markets opened and I am still flat. I mentioned yesterday about the extreme bullish sentiment which shows no signs of abating with both Goldman Sachs and UBS looking for the S&P to close at or near the 3000 mark next year. If this happens we will be close to the 4th Standard Deviation price level of 3344. The level of extremity in this market is best illustrated by the amount of outstanding credit as a percentage of GDP which now stands at a mind boggling 350% up from over 250% in 2009. Absurd does not do this situation justice. I saw a chart yesterday where the S&P Index is overlaid with the Federal Reserve’s balance sheet. When QE started this S&P rallied step by step with the Fed’s balance sheet. Once QE stopped and started to unwind its Balance sheet, this has to impact asset prices over time. The chart that I saw yesterday implies that the S&P has to fall up to 50% from current prices to catch up with the Fed’s balance sheet. Most traders know this and are either short or reluctant to buy the market thus fuelling the rally to unsustainable levels. However as I have consistently mentioned all year until we get this famous sell extreme it is a waste of time and capital in trying to pick a top. The market is getting closer and closer to my 2635/2645 sell level and today I will continue to look to go short here with a 2651 stop. Given how overbought the S&P is trading my only interest in buying the S&P is on a dip lower to 2598/2608 with a 2593 stop.
EUR/USD
Following the North Korea missile launch the US Dollar strengthened with the Euro trading lower to my 1.1850 buy level. In the last 20 minutes the Euro traded higher to my revised 1.1870 T/P level as emailed to my Platinum Members last evening and I am now flat. In my opinion the Euro continues to be a buy on dips and today I will again look to buy the market on any move lower to 1.1780/1.1825 with a 1.1745 stop. I still do not want to be short the Euro at this time.
December Dollar Index
The Dollar rallies as expected and I am still flat. Today I will now raise my buy level to 92.35/92.65 with a 92.05 tight stop.
December DAX
Despite the strength of the US Indices the German equity markets continues to struggle. However we did rally late in the session after the FTSE finally broke and closed over its 7385 100 Day Moving Average by a significant amount. I am still flat the DAX and today I will now raise my buy level to 13010/13080 with a 12950 stop. As we have month-end tomorrow I have no interest in going short the DAX.
December FTSE
Frustratingly the FTSE just missed my 7375 buy level with a 7383 low print shortly after I posted yesterday morning and I am still flat. The fact that the FTSE surged past its 7385 previous resistance level is bullish. This move higher was helped by the renewed sell-off in Sterling. However late last evening Sterling rallied strongly and this move higher in the Pound has continued overnight which is now hampering the FTSE’s progress. As a result I will only raise my In light of yesterday’s rally I will now raise my buy level to 7380/7410 with a 7350 stop.
Dow Rolling Contract
There is no stopping the Dow which made its 61st new all-time high for 2017 yesterday. Thankfully after some sweating, my Dow plan worked well with the market trading the whole of yesterday’s trading range with a 23774 high print before selling off nearly 140 points on the North Korea missile launch. I went short at 23710 before emailing my Platinum Members to exit any short position at my revised 23670 T/P level and I am now flat. I cannot believe the Dow is now trading over 230 points higher than last night’s post missile low with the the Dow closing above 23790 which was a nine month trendline. Given the fact that the Dow is trading outside the top of its Bollinger Band and Williams Index I no longer want to be long the Dow at this time. Instead I will now be a small seller on any further rally to 23980/24050 with a 24110 stop.
December NASDAQ
After rallying strongly over the past week the NASDAQ struggled yesterday. I am still flat and today I will continue to be a seller on any rally higher to 6480/6510 with the same 6535 tight stop. I will also leave my buy level unchanged from 6315/6355 with the same 6280 stop.
December BUND
The Bund had one of its narrowest trading ranges of the year to date. I am still flat and today I will continue to be a seller into the 163.50/163.85 strong resistance area with the same 164.20 stop.
Gold Rolling Contract
Gold tried to sell-off mid-morning yesterday before rallying small in the New York close. I am still flat as I watch the key 1300/1310 resistance area. I am still reluctant to chase this market higher and today I will leave my buy level unchanged from 1269/1276 with the same 1262 stop.
Silver Rolling Contract
I am still long from late Tuesday at 17.05 as the market just missed my second buy level at 16.70 with a 16.74 low print. I will leave my second buy level unchanged at 16.70 and if this is hit I will then lower my T/P level to 16.95. Otherwise my T/P level remains unchanged at 17.17.
Recent Comments