A solid day of economic releases on either side of the Atlantic provided a positive backdrop for equities to perform and for the US Dollar to regain ascendency again most currencies. Core Global Bond Yields followed the move higher, but later in the session a slide in oil prices took some of the gloss off. US equity Indices ended a three day decline with a solid start to the new year as the market got off to a positive start for 2017 with the S&P and NASDAQ closing up 0.9% while the Dow ended the day with a 0.6% gain. The bulk of these gains came after the release of strong US economic data.
To mark my 1250th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 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 74 points on the first trading day of January having made 1351 points in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
The December ISM Manufacturing Index rose to a two-year high of 54.7 from 53.2, beating expectations of a 53.8 rise. The jump in the headline number was largely driven by a 7.2 spike in New Orders, while the Exports Orders Index also recorded a solid increase at 56 from 52 the previous month. Prices Paid also jumped 11 points to 65.5, mostly due to the rebound in oil prices. Meanwhile Construction Spending for November rose a solid 0.9% which is a new 10 year high, with decent gains recorded in all key components.
In Europe, markets have added to Monday’s opening gains with Italy the best performer up 2% for the year to date. Solid German data releases supported the upbeat sentiment given the perception that economic growth is poised to accelerate on both sides of the Atlantic. Not to be undone, UK equities also started 2017 on the right footing with a solid data release again the main catalyst.
The stronger than expected ISM Manufacturing print saw the US Dollar rally to a new 14 year high, but the pullback in oil prices later in the session weighed on the Dollar which paired some of its gains. The Dollar Index closed 0.44% higher having been up over 1% at one stage. The Australian Dollar was the top performer yesterday as it made a decisive move over 0.72 cents amid positive news from China and it has managed to hold its ground overnight as it currently trades at 0.7240 despite the broad based US Dollar outperformance.
The bulk of the US Dollar gains has been recorded against European Currencies ( EUR -0.36%, GBP -0.30% and Danish Kroner -0.40%) while the Japanese Yen, Canadian Dollar and Norwegian Kroner are little changed. The Euro traded to a new 14 year low against the US Dollar at 1.0341 before having a quick 90 point rally and currently sits at 1.0415 this morning.
Oil prices held Monday’s gains for most of yesterday’s trading session, but the strength in the US Dollar eventually weighted on the demand for commodities priced in US Dollars as doubts remain in OPEC and non-OPEC producers ability to restrain output. WTI fell 2.1% to $52.56 a barrel after reaching a high of $55.15 in early afternoon trade. This was the highest level for WTI since 6 July 2015.
Much better than expected German Unemployment figures which showed a drop of 17K in December helped equity sentiment. This fall was the lowest monthly drop in the whole of 2016 and leaves the Unemployment Rate equal to the lowest in the Euro-Zone period from 1999-2016. Meanwhile German inflation more than doubled in December largely due to base effects from December 2015 oil price drop but also due to higher prices for the month. UK Manufacturing PMI also rose sharply to 56.1 which was the highest rate in over two years.
This morning on the economic front we already had the release of Japanese Manufacturing PMI which came in higher than expected at 52.4. This helped the Nikkei to closes with a 2.5% gain at 19,594. At 8.55 am and 9.00 am we have German and Euro-Zone Services/Composite PIM respectively. This is followed at 9.30 am by UK Mortgage Approvals and Euro-Zone CPI at 10.00 am. Finally at 7.00 pm we have the FOMC Minutes from the December Meeting when Interest Rates were raised for the first time in twelve months.
March S&P 500
The first trading day of a new year can be tricky and volatile and that is certainly what we had in yesterdays’ trading session with the S&P trading in a 21 Handle range from 2239/2260. After the S&P hit an early afternoon high at 2260 the market sold off but unfortunately could not close the ”Open Gap” from Friday’s close at 2233.50 thus missing my 2235 buy level with the above mentioned 2239 low print before rallying strongly into the close to currently sit at 2255 as I write this commentary. I would expect the S&P to hold its own until we get the US Presidential Inauguration on January 20 and that this market will continue to be a buy on dips despite its overvalued and overbought condition. The key event to watch over the coming weeks is to see who Trump appoints for the two vacancies on the FOMC Committee as both are expected to be the new Chairman and Vice Chairman when Fed Chair Yellen’s term comes to an end in February 2018. I still expect the S&P to rally to my 2300/2334 target that I have had for the last six months and today I will now raise my buy level to 2241/2247 with a 2236 stop which is just below yesterday’s low print. If I am taken long and subsequently stopped out of this position I will still be a very aggressive buyer in the unlikely event that the market trades lower to 2212/2219 with the same 2206 stop. In contrast to yesterday I do not want to be short the S&P at this time especially ahead of the FOMC Minutes to be released at 7.00 pm this evening.
EUR/USD
The Euro also had a volatile trading session and after I was stopped out of my 1.0447 long position at 1.0395 I said to be an aggressive buyer on any further dip lower to 1.0330/1.0365. The Euro subsequently hit my 1.0350 buy level before rallying strongly to a high of 1.0434 and this rally enabled me to cover this position at my 1.0405 T/P level and I am now flat. As I said in one of my emails to my Platinum Members yesterday nearly every bank research that came across my desk over the past two weeks is Dollar bullish and Euro negative. This is despite the fact that the Dollar has already rallied over 40%. The economic data is improving in the Euro-Zone and the Bundesbank for one will not be happy with yesterday’s German inflation data and to me over time this is Euro positive. Today I will again look to buy the Euro on any dip lower to 1.0365/1.0405 with a 1.0330 stop which is just below yesterday’s low print. Personally I have a large US Dollar exposure to assets held in Florida and I have now covered the majority of this exposure at 1.0380. Remember it is only a few years ago that the EUR/USD was trading at 1.60 and it is very rare that we see a movement of this magnitude in the two main currencies.
March Dollar Index
As I was already long the Euro I waited until I was stopped out of this position before going short the Dollar at 103.50. Unfortunately I had too tight a stop on this position at 103.80 and I subsequently emailed my Platinum Members that I went short the Dollar again at 103.75 with a 103.10 T/P level which was the filled and I am now flat. With the Dollar at a 14 year high and sentiment at extreme levels you wonder who is left to buy the Dollar and today I will again look to sell the market on any rally higher to 103.35/103.70 with a 104.20 stop.
March DAX
The DAX just missed my 11540 buy level before rallying into the close and I am still flat. The DAX is finally looking tired after its 800 point rally over the past few weeks and today my only interest in buying the market is on a dip lower to 11450/11500 with a 11395 wider stop. Despite the market looking heavy I do not want to be short the DAX at this time.
March FTSE
Unfortunately the FTSE just missed my 7145 sell level with a afternoon rebound high at 7142 before having a nice sell-off and I am still flat. As mentioned yesterday the FTSE has a strong 10 year trendline at 7140/7150 and a break and close over this level will be very bullish initially with a target price of 7235. Today I will leave my sell level unchanged at 7150/7180 with a 7210 stop especially as the FTSE is trading at the top of its Williams Index and outside the top of its Daily Bollinger Band. My only interest in buying the FTSE is on a dip lower to 7020/7050 with a 6995 stop.
Dow Rolling Contract
No change as I am still convinced the Dow will eventually break the 20,000 round number resistance level. Today I will leave my sell level unchanged at 20030/20090 with a 20140 tight stop.
March BUND.
Unfortunately the BUND topped soon after I posted yesterday morning with the market reversing a lot of the gains made in the lead up to the new year and indeed on Monday itself when we hit a high at 164.94. Yesterday we traded as low as 163.00. Today I will be a small buyer on any further dip lower to 162.55/162.85 with a 162.20 tight stop. My only interest in selling the Bund is on a rally higher to 163.90/164.20 with a 164.60 stop which is just above yesterday morning’s high print.
Gold Rolling Contract
Unfortunately my luck did not hold in Gold yesterday with the market missing my 1145 buy level with a 1145.10 low print before rallying $20 and I am still flat. Today I will now raise my buy level to 1145/1153 with a 1138 stop.
Silver Rolling Contract
Finally Silver rallied yesterday and this rally enabled me to cover my average long 16.08 position from two weeks ago at 16.41 this morning and I am now flat. I wanted to bank some points for yesterday and this was the main reason That I cut my position. Today I will again look to buy Silver on any dip lower to 16.00/16.35 with a 15.55 stop.
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