President Trump is in Puerto Rico and has been making some fairly tasteless remarks about this unincorporated United States territory putting the US budget ‘out of whack’. Someone should perhaps have reminded him that Puerto Ricans ostensibly have the right to emigrate to the United States; probably not a refugee problem Trump would welcome at this point. Estimates of the repair bill for the Caribbean island currently look to run into the tens of billions of dollars, on a par with the clean-up and reconstruction costs in Texas and Florida. Meanwhile closed Chinese markets this week also means that we can’t use it to reference further falls in the already 20%+ drop in iron prices in the last four weeks or so.
To mark my 1425th 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 18 points yesterday and is now ahead by 90 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.
On the subject of US budgets, Senator Bob Corker (who sits on the Banking and Budget committee) has been out lamenting suggestions that the elimination for deductions designed to at least partially fund income tax cuts could be scaled back to appease Congressional officials in certain states. The battle between those in Congress opposed to any tax reform that lifts deficits, and the US administration claims that so called ‘dynamic scoring’ (or the growth dividend) will pay for them in perpetuity, will run for a good while yet.
For now, we can be sure Trump will be telling Congress ‘I won’t back down’ on his tax ambitions (sentiments that equally apply to Catalonians intent on independence from Spain and to both Trump and N. Korean President Kim Jong-Un, albeit there are reports of back-channel communication between the two nations). For markets, N. Korea fatigue set in a while back, evident in the VIX now comfortably back on a ‘9’ handle.
Pricing for a December Fed rate hike hasn’t moved much since the end of last week from the +/-70% area. Fed Chair anet Yellen speaks tonight and is unlikely to move the dial. More importantly, within a few weeks she might be getting a memo from the Oval Office that reads ‘Don’t come around here no more’ (Tom Petty).
The New Zeeland dollar is the weakest G10 currency in the last 24 hours, an unexpectedly weak Global Dairy Trade auction (prices down 2.4%) compounding Tuesday’s locals session weakness. Hardly a breakdown, but even so. Sterling is second weakest currency, after a poor Construction PMI (48.1 down from an unchanged 51.1 that was expected).
The ongoing Conservative party Conference also does not seem to be helping, UK Foreign Secretary Boris Johnson’s claim to agree with ‘every syllable’ of PM May’s Florence speech last week ringing hollow and May, in a Sky news interview, saying nothing to repair the apparent fault lines between her government and the rest of the EU.
As for yesterday’s RBA statement, the Board appeared to be more optimistic about growth in yesterday’s post Board Statement where they predictably left the cash rate unchanged at 1.5%. A few weeks ago Governor Lower gave the clearest sign yet that the next move in rates is likely to be higher yet yesterday’s Statement gave no hint of any imminent move. I expect the RBA are waiting for evidence of a tighter labour market through a lower unemployment rate and clearer evidence of upside wage pressure.
This morning on the Economic Front we have German, Euro-Zone, UK and US Services/Composite PMI at 8.55 am, 9.00 am, 9.30 am and 2.45 pm respectively. This is followed at 10.00 am by Euro-Zone Retail Sales and US ADP Employment Change at 1.15 pm – this will be closely watched for any clues ahead of Friday’s Non-Farm Payrolls. Finally we have ISM Non-Manufacturing Composite PMI at 3.00 pm.
Normally we would be getting excited about a scheduled Janet Yellen speech, but tonight at 8.15 pm it is just welcoming remarks at a community banking event. Move on. More interesting tomorrow might be further comments from Fed Governor Jerome Powell in so far as he is reportedly one of the candidates to have been interviewed by Donald Trump to potentially be the next Fed chair (a question he neatly side-stepped overnight). The predictit.org betting site currently has Powell as second favourite after Kevin Warsh, with Janet Yellen running a distant third.
December S&P 500
When you see that the VIX has closed with just a 9.51 print you know it has been a quiet trading session. Just before the US Markets closed last night the S&P traded higher to my initial 2533 sell level with a 2533 .50 high print. As I wanted to be flat overnight I emailed my Platinum Members to cover this position at 2532 and I am now flat. Yesterday was the 41st new high for the S&P so far this year. The CNN Greed & Fear Index closed at Extreme Greed with a 89 print which is the second highest level this Index has risen to in the course of the past three years, ‘’bested’’ only by the peak made mid-year 2016 when the S&P rose to 2190 before falling to 2088 at the end of October, a break of 4.7%. Although I stand in awe at the majesty of this bullish run, I am also conscious how overbought the US Market is at this time. However until we get a large sell extreme this market continues to be a buy on dips. Today I will now raise my buy level to 2513/2519 with a 2508 stop. The next resistance level for the S&P is from 2540/2548 and today I will be a seller in this area with a wider 2556 stop. Remember as I have mentioned consistently over the past two weeks a break and close over 2505 for a few weeks is bullish opening up the strong possibility of a move higher to the third Standard Deviation at 2792.
EUR/USD
I am still flat the Euro which has strong support at 1.6660 and very strong resistance from 1.1830/1.1870. Today I will now raise my buy level slightly to 1.1640/1.1680 with a 1.1610 stop. I will also raise my sell level to 1.1820/1.1865 with a 1.1910 stop.
December Dollar Index
Overnight the Dollar just missed my 93.10 buy level with a 93.16 low print and I am still flat. Today I will now lower my buy level slightly to 92.70/93.00 with a 92.35 stop.
December DAX
I am still flat the DAX which continues to move higher. Even though the market is extremely overbought until we get a sell extreme it is just not worth being short. Today I will be a small buyer on any dip lower to 12820/12870 with a 12780 stop.
December FTSE
The FTSE did close over its 100 Day Moving Average at 7380 and any sell off should see this level hold at least on the first test. Thankfully we have had no sell levels in the FTSE over the past few weeks. Today I will now raise my buy level to 7360/7395 with a 7325 tight stop.
Dow Rolling Contract
Despite the extreme sentiment and low volatility the Dow still closed at a new all- time high yesterday. Incredibly the McClellan Oscillator fell yesterday despite the S&P, Dow and NASDAQ closing at these new highs. This is certainly a fractured Central Bank manipulated market with valuations stretched to unbelievable levels. But as Keynes famously said ‘’Markets can remain illogical longer than I can remain solvent’’ is extremely apt at this time. Late yesterday evening the Dow traded higher to my 22670 sell level. Just like the S&P above I did not want to have a short position overnight and I covered this position at my revised 22657 T/P level. The Dow has strong support from 22360/22440 and I will be a buyer on any dip to this area with a tight 22280 stop. I will also be an aggressive seller on any further rally to 22770/22850 with a 22925 stop.
December BUND
The BUND is opening strong this morning and I am still flat as the market looks to test the 161.80 key resistance level from where the market broke down last week. I must say I am finding it extremely difficult to get an edge in this market which seems to gap higher or lower every day. The fact that the Bund is closed from 9.00 pm to 7.00 am does not help with these large gaps. Today I will be a small seller on any further rally to 161.80/162.10 with a tight 162.35 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
I am still flat Gold as I do not trust this market given the fact that almost everyone I talk to is long. Thankfully we have avoided this massive $100 sell-off over the past month. Today I will raise my buy level slightly to 1258/1265 with a 1251 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer on any dip lower to 1232/1245 with a 1225 stop.
Silver Rolling Contract
Overnight Silver traded higher to my revised 16.75 exit level on my long 16.80 position with a 16.81 high print. As mentioned to my Platinum Members with the Daily Sentiment Index reading still high at 36% as of last Friday’s close I fear we may have one more washout before Silver mounts a year- end rally. I am tempted to go short Silver on any rally back to 17.00 but this would against all my long term bullish view for this market. Instead I will continue to be a buyer on dips. I will be a very aggressive buyer on any dip lower to 15.45/15.95 with a 14.95 stop over the coming days. For today I will be a small buyer on any dip lower to 16.20/16.50 with a 15.95 stop.
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