March 2011 was also the last time Australia printed a negative quarterly GDP, but that is what happened earlier this morning when the Q3 GDP was released which showed the economy contracting by 0.5%. This miss is hardly the start of a recession as economists expected the Australian economy to have rebounded in the fourth Quarter. Yesterday has been a quiet but good trading session for risk assets with equity indices up on either side of the Atlantic. The move higher has been led by European stocks with the Euro Stoxx 50 closing 1.57% higher while US equities ended the day in positive territory with financial and telecoms the outperformers.
To mark my 1225th 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 email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 91 points yesterday and is now ahead by 647 points for December having made 1971 points in November and 1582 points 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.
Benchmark yields are little changed after a volatile start to the week, the US Dollar is stronger across the board and oil prices have leaked lower for the first time since last week’s output cut announcement by OPEC.
In G10 currencies the Euro has been the underperformer over the past 24hrs. After reaching a high of 1.0785 in the early part of the overnight session, the currency pair dropped to a low of 1.0698 and over the past few hours it has settled just above the 1.07 mark. The move lower in the Euro as well as the move higher in EU equity markets suggests investors may be positioning for an extension of the ECB QE programme at the current pace of €80bn p/m. That said, light trading volumes also appear to be at play while comments by Angela Merkel that the region could not afford a “second Euro crisis” and that Euro members must abide by stability pact rules seemingly also weighted down on the currency. Incidentally and as expected, Merkel was re-elected by her CDU party as leader to stand for election a fourth time.
Yesterday’s softer than expected AU GDP partials prompted the market to move towards expectations of a negative Q3 GDP print which we got earlier. This reassessment by the market appears to have been the main cause for the AUD’s underperformance over the past 24 hours. The currency continued its decline in the early part of the overnight session reaching a low of 0.7416, it then recovered a bit of ground and over the past few hours it has settled around 0.7430. Yesterday the RBA left cash rate unchanged, the statement was neutral and it suggested the Bank will look through a soft Q3 GDP outcome given its expected transitory nature.
After yesterday’s mini flash crash, the NZD recovered all the lost ground, but it has given almost everything back in the overnight session. The latest GDT auction, early this morning, provided no significant surprise. Average prices rose 3.5% from the previous event while the fundamentals suggest the risks are tilted toward near term price gains, but potential for some consolidation during 2017. The NZD/USD currently trades at 0.7117.
On other news, although Italian political fears have subsided, the potential of an early election is still a concern and ahead of china’s FX reserves data release today, the FT is running a story noting how EU companies are struggling to make dividend payments abroad given China’s new exchange controls.
This morning on the economic front we already had the release of German Industrial Production which came in weak with a +0.3% print versus +0.8% expected. At 9.30 am we have UK Industrial Production and this is followed at 12.00 pm by US MBA Mortgage Applications. Next we have the NIESR GDP Estimate and the JOLTS Job Openings at 3.00 pm. Finally just before the New York close at 9.00 pm we have Consumer Credit.
December S&P 500
The S&P continues to trade higher in an overbought market as one short position after another gets stopped out. Internally the market improved with the McClellan Oscillator closing with a positive reading of +120, which was up from +70 on Monday. I am still flat the S&P and today I will now move my buy level higher to 2196/2202 with a 2191 stop. Again if I am taken long and subsequently stopped out of this position I will use my ”5 Handle Rule” to go long again with a stop below whatever new low is printed. The S&P does not have resistance until 2224/2230 and I will be a seller in this area with a 2235 stop. Remember my target for the S&P on this move is still 2300.
EUR/USD
Just as I posted yesterday morning the Euro hit my 1.0785 T/P level on my latest long 1.0740 position before slowly trading lower for the rest of the day. This move lower saw the Euro hit my second average buy level at 1.0725. As long as the Euro can hold the key pivot point at 1.0675 then I am happy to stay long after the huge upside Key Day Reversal on Monday. My stop will therefore remain unchanged at a tight 1.0670. The Euro needs to break and close over 1.0820 for the market to turn more positive. A break of this area will target the next major resistance at 1.1040/1.1100.
December Dollar Index
So far we are not seeing much follow through to the downside after Monday’s Key Day Reversal. As I was already long the Euro, I waited to sell the Dollar which I did at 100.60. I am still short and today I will now lower my stop to 101.10 on this position. My own belief is the major move higher for the Dollar is near an end and that the market will have difficulty in breaking last week’s high at 102.05.
December DAX
Thankfully we have had no sell levels in the DAX over the past few weeks as it was only a matter of time before the key 10800/10850 resistance level was broken. If the market can close over this level this evening then we have a buy signal targeting 10,990 and 11,160. Today I will move my buy level higher to 10790/10845 with a 10735 stop.
December FTSE
Unfortunately the FTSE just missed my buy level after I posted yesterday before rallying strongly. However the FTSE needs to break and close over 6880 for the bulls to regain control. Given the importance of this resistance level I will be a seller on any rally higher to 6870/6910 with a 6940 tight stop. I will also move my buy level higher to 6760/6790 with a 6725 stop.
Dow Rolling Contract
I am still flat the Dow which continues to consolidate after its huge move higher in November. Today I will leave my sell level unchanged at 19310/19380 with a 19440 stop. Given how overbought the Dow is trading I still do not want to be long the Dow at this time, preferring instead to buy the S&P as noted above.
March BUND
I have now rolled to the March contract as today is the last trading day for the December Contract. The March Contract is trading at premium of 144 points over the December Contract. Yesterday my Bund plan worked well with the December Contract trading lower to my average 159.80 buy level this morning before rallying to a current price of 160.20. As the December Contract is maturing tomorrow I emailed my Platinum Members to exit this long position at 160.06 and I am now flat. For the March Contract, today I will be a buyer on any dip lower to 160.70/161.10 with a 160.40 tight stop.
Gold Rolling Contract.
Gold traded in a very narrow range yesterday. I am still looking for a tradeable bottom in Gold as indicated by the single digit reading on the Daily Sentiment Index for the precious metal and today I will again look to buy the market on any dip lower to 1154/1162 with a 1147 tight stop.
Silver Rolling Contract.
Just as I posted yesterday morning Silver was trading at my 16.80 T/P level on my latest long 16.60 position. Subsequently Silver traded lower to my second buy level at 16.70. I am still long and today I will leave my stop unchanged at 16.10 which is just below last month’s 16.15 low print.
Recent Comments