USD Indices made new highs yesterday mostly reflecting weakness by European currencies supported by solid US Consumer Confidence and faltering EU GDP growth. European equities closed mixed and US equities bounced into the close. Against a backdrop of USD strength, AUD and NZD outperformed boosted by President Trump comment of a great deal with China. US Treasury yields closed marginally higher reflecting the uptick in US equities. In other news Sterling got hit hard after S&P warns UK on credit downgrade on a no Brexit deal.
To mark my 1700th 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 was flat yesterday and is still ahead by 2094 points for October, having made 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
USD Indices have recorded a second consecutive day of gains, more than reversing the losses recorded on Friday. The broader BBDXY index (@1208) is 0.33% on the day and now trades at levels not seen since mid-May last year. Meanwhile DXY has finally traded through its mid-August year to date high and now trades at 97.00, up 0.43% over the past 24 hours.
USD strength has been mainly driven by weakness in European currencies while a solid US Consumer Confidence reading was also supportive. The Euro was under pressure following the release of a softer than expected Euro-Zone GDP, the advance Q3 GDP print revealed growth at just 0.2% for the Quarter, a lot weaker than the 0.4% expected by the market. Growth in annual terms also disappointed at 1.7% y/y against 1.8% expected.
Meanwhile US Consumer Confidence printed at an 18 year high, further reinforcing the notion that US GDP growth drivers remain solid for now while more question marks are raised on other major economies growth prospects. The soft EU Q3 GDP reading comes on the heels of soft EU PMI readings and a disappointing IFO German Survey, add to that Brexit uncertainty and Italy’s budget battle with Brussels and it is not hard to see why the market appears to doubt ECB president Draghi that the EU growth slowdown is only temporary. After trading to an intra-day high of 1.1388, the Euro now trades at 1.1346, a couple of points above its low.
No Brexit news also appears to be weighing on the pound as the clock keeps on ticking and politicians edge ever so closely towards a ‘’no deal’’. Sterling is the big G10 underperformer, down 0.73%, the pair briefly traded sub 1.27 and now trades at 1.2711. S&P noted that the risk of a no-deal outcome had increased sufficiently to become a ratings consideration, and the ratings agency forecast a moderate recession in the event of no-deal.
Despite the broader backdrop of USD strength, the NZD and AUD have moved higher over the past 24 hours. Yesterday afternoon, President Trump gave an interview with Fox News in which he predicted a ‘’great deal’’ with China on trade. While Trump added that he did not think China was ‘’ready’’ to reach a deal yet, the NZD and AUD immediately moved higher on those comments and both currencies have extended those moves a bit further into the New York session. The AUD is up 0.6% to 0.7106 over the past 24 hours while the NZD is up 0.5% to 0.6552, with market positioning (squaring of short NZD and AUD positions) likely exacerbating the moves higher.
Equities
European equities closed mixed and US equities bounced into the close with the S&P500 adding 1.5%, a day after dropping 0.7% raising the prospect of moving into correction territory. All 11 sectors in the S&P 500 traded higher, led by gains in energy (+2%) and communications (+1.8%) shares. The NASDAQ climbed 1.3%.
After the bell Facebook fell about 1% following its earnings report revealing revenue came in pretty much on the screws ($13.73bn vs. $13.8bn and analysts’ range of $13.12-14.09b), the share is now back to black (+1.9%)
Bonds
US Yields are a little bit higher reflecting the gains in US equities. The 10y UST yield closed at 3.113%, up 2.8bps on the day
Commodities
Metals and oil prices had a day to forget, both down around 1.6%, but copper and zinc where the big losers down 2.55% and 2.75% respectively.
Economics
US Conference Board’s Index of Consumer Confidence rose to an 18-year high of 137.9 in October, above the consensus, 135.9. The elevated number is suggestive of solid spending growth ahead.
US S&P/Case-Shiller 20-city home price index was +0.1% m/m in Aug in line with consensus, The yoy change is still solid at 5.5%, but down from the high 6.8% in March.
The Bank of Canada’s Governor Poloz spoke late yesterday evening in a parliamentary testimony, re-iterating the message from last week’s BoC Meeting that Interest Rates need to rise to neutral, ted to be 2.5-3.5% (1.75% now). Market currently fully priced for the next move in January.
This morning on the Economic Front we have Euro-Zone Unemployment and CPI at 11.00 am. This is followed at 12.00 pm by US MBA Mortgage Applications and at 1.15 pm by the ADP Employment Change. Finally we have the Canadian GDP at 1.30 pm and the Chicago Purchasing Managers Survey at 2.45 pm.
December S&P 500
The S&P had a wild up and down trading session before finally mounting an impressive 45 Handle rally in the last two hours of trading with all components finishing positive. As I wrote to my Platinum Members yesterday afternoon that I read an interesting article from JP Morgan regarding Equity Exposure. JP Morgan are the largest bank in terms of housing client assets. They said that as a result of the massive sell-off in US equity markets over the past few weeks that Equity Managers are now the most underweight equities since February 2009 which just before the March 6 bottom that launched the start of the great bull market. On top of this they said that Hedge Fund short exposure rose to the highest level since 2015. After reading this report I am even more convinced that we either saw the low at Monday’s spike lower to 2606 or we may see one more washout to my aggressive buy level from 2550/2570 before the market rallies into year-end. We may have to wait until we get next Tuesday’s US Mid-Term Elections out of the way but the fact that the McClellan Oscillator has improved over the past few days despite the weakening market is a major warning sign for higher prices in my view. The 9 Day Moving Average comes in at 2698 and if we can break and close over this level then we should be able to attack last Thursday’s 2722 rebound high. A break and close over this hurdle should then see a move higher to the key 2765 200 Day Moving Average. I am still flat the S&P and today I will now raise my buy level to 2652/2667 with a 2637 stop. I still do not want to be short the market at this time.
EUR/USD
I am still flat the Euro. The DSI has now fallen to just 9% bulls which means that the next major move for the Euro should be higher. Today I will lower my buy level slightly to 1.1280/1.1325 with the same 1.1255 stop.
December Dollar Index
The DSI for the Dollar has now risen to 91% bullish. I am still flat and today I will continue to be a small seller on any rally higher to 96.95/97.35 with a higher 97.65 stop.
December DAX
I am still flat the DAX and today I will now raise my buy level to 11100/11170 with a 11025 stop.
December FTSE
The continued sell-off in Sterling finally saw the FTSE rally after weeks of negative price action. I am still flat and today I will now raise my buy level to 6890/6950 with a 6840 wider stop.
Dow Rolling Contract
Another wild trading for the Dow which thankfully for once went out on its highs after the market rallied nearly 600 points off its mid-afternoon low print. I am still flat and today I will now raise my buy level to 24280/24500 with a 24195 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 23750/23950 with the same 23500 wider stop.
December NASDAQ
Frustratingly the NASDAQ just missed my 6640 buy level by 20 points before having a strong rally into the close. The NASDAQ is extremely oversold having fallen over 1200 points from its late August high print. Today I will now raise my buy level to 6690/6750 with a 6630 stop which is just below yesterday’s low print.
December BUND
I am still flat the Bund and today I will now lower my sell level slightly to 160.75/161.15 with a 161.45 lower stop.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1204/1214 with the same 1196 stop.
Silver Rolling Contract
I am still flat the market and today I will raise my buy level slightly to 13.90/14.30 with the same 13.55 stop.
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