U.S. Equity Markets surged and Treasuries tumbled after a raft of data bolstered confidence in the American economy and trade tensions eased. The US Dollar edged lower while precious metals were also hit hard. The S&P 500 jumped to a five-week high, led by Tech shares, after China and the U.S. agreed to trade talks early next month. Banks rallied as yields on two-year notes jumped as much as 14 basis points, which would have been the largest full-day increase in a decade, before inching back. Defensive sectors retreated as strong private payrolls data and a hot reading on the services sector tamped down recession angst. The US Dollar pared early losses, but still headed for its third decline in a row. The Pound padded Wednesday’s surge after the U.K. Parliament blocked a no-deal Brexit and an early election. West Texas crude fell to around $56 a barrel. In other news British Prime Minister Boris Johnson stood in a police academy in the north of England, giving a speech that was supposed to mark the start of a month long snap election campaign. Instead, the U.K.’s embattled leader was trying to fight back after a series of humiliating defeats for his Brexit strategy, culminating in the resignation of his own brother in protest at his plans. Out of options, Johnson doubled down on his plan to trigger a general election to win a parliamentary majority so he can fulfill his pledge to take the U.K. out of the European Union — with or without a divorce deal — on Oct. 31. The Prime Minister didn’t say if he’d resign if he failed, but he did declare that he would “rather be dead in a ditch” than agree to another Brexit delay.
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For anyone following my Platinum Service it was flat yesterday and is still ahead by 385 points for September, having made 2387 points in August, 1153 points in July, 1346 points in June,1722 points in May, 955 points in April and 1027 points in March. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Escalating U.S.-China trade tensions have been the biggest equity headwind for months, so a relief rally on news high-level trade talks are planned for early October is no surprise. The bottom line is that stocks need earnings growth to move forward, and you cannot get that without progress on U.S.-China trade. The glimmer of hope in the global trade war — officials from the U.S. and China had been struggling to agree on new talks — adds to a broad risk-on mood that took hold Wednesday, when British lawmakers moved to block an imminent no-deal Brexit and Hong Kong’s leader sought to quell unrest in Asia’s key financial hub. After the strong economic readings, focus is now likely to shift to remarks from Federal Reserve Chairman Jerome Powell and the latest U.S. jobs report, this afternoon.
The S&P 500 Index increased 1.3% to close well above its 50 Day Moving Average at 2976.
The Dow rose 372 points to close at 26726.
The Stoxx Europe 600 Index rose 0.7%.
The U.K.’s FTSE 100 Index declined 0.6% on a stronger Pound.
This morning the Nikkei has just closed 0.55% higher at 21200
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index was little changed.
The Euro climbed 0.1% to $1.1041.
The British Pound gained 0.5% to $1.2318.
The Japanese Yen fell 0.5% to 106.89 per dollar.
The yield on 10-year Treasuries climbed 9 basis points to 1.56%.
Germany’s 10-year yield rose nine basis points to -0.584%.
Britain’s 10-year yield gained 11 basis points to 0.605%.
Gold dipped 2.5% to $1,520.40 an ounce.
West Texas Intermediate was little changed at $56.26 a barrel.
Elsewhere, Florida orange groves seemingly escaped major damage from Hurricane Dorian, but concern is now turning to soy, corn and cotton fields as well as livestock in Georgia and the Carolinas as the storm churns northward.
This morning on the Economic Front we already had the release of German Industrial Production which came in much weaker than the +0.4% expected with a fall of 0.6%. At 9.30 am we have UK Consumer Inflation Expectations and this is followed at 10.00 am by Euro-Zone GDP and Employment Change. At 1.30 pm we have the US Non-Farm Payrolls. The U.S. jobs report is projected to show the widely watched NFP rose by 160,000 in August, versus 164,000 the month prior. Estimates are for the Unemployment Rate to be steady at 3.7% and the Average Hourly Earnings rate of increase to slow to 3%. Finally, the Fed Chair Powell is speaking at 5.30 pm.
September S&P 500
The S&P continued to rally prior to the Non-Farm Payrolls as expected and I am still flat. As I mentioned to my Platinum Members yesterday the Central Banks and Trump will do everything in their power to prevent a crash and I have no doubt the Central Banks bought the markets on Wednesday night as they knew the benefit of getting the major US Indices to close over their 50 Day Moving Averages which they have now succeeded. This is a strategy that will not end well given the awful economic data being released over the past few weeks but that is for another day. The 50 Day Moving Average for the S&P comes in at 2945 and today I will raise my buy level to 2945/2957 with a 2938 tight stop. Despite the huge rally this week I still do not want to be short the market at this time.
I am still flat the Euro as we wait for the NFP release. I am not going to chase the market higher and I will leave my 1.0930/1.0970 buy level unchanged with the same 1.0890 stop.
December Dollar Index
No Change as I am still a seller on any rally higher to 98.50/98.90 with the same 99.30 stop.
Although the DAX did close over 12100 the market has not really moved since I posted 24 hours ago. This is not surprising given the strength of the Euro and the fact that we are overbought after rallying over 600 points in the last week. Today I will leave my 11920/11990 buy range unchanged with a 11850 stop.
Frustratingly the FTSE just missed my 7360 sell level with a 7352 high print before falling 100 points as the stronger Pound weighed on the FTSE as expected. The FTSE has support from 7170/7210 and I will be a buyer in this area with a 7135 stop.
Dow Rolling Contract
Last Monday week the Dow was trading at 25200 and here we are 11 days later trading at 26770 as yet again anyone trying to stay short has been slammed. This move higher sees the Dow now comfortably above its 50 Day Moving Average which comes in at 26540 this morning while the McClellan Oscillator also improved to close with a positive print of 141 last night. Today I will move my buy level higher to 26400/26550 with a 26310 stop. Ahead of the weekend I do not want to be short the Dow.
The NASDAQ was the strongest of the US Indices yesterday closing 1.8% higher. The NASDAQ traded the whole of my sell range for a now average short position at 7860. I will lower my stop on this position to 7905 while raising my T/P level to 7835. If any of the above levels are hit I will be back with a new update for my Platinum Members.
The BUND had its worst day in many months yesterday, falling nearly 200 points. I have had the correct view looking for this sell-off buy frustratingly it has been extremely difficult to get a short position on board having been stopped of many of these attempts over the past few weeks. The Bund has support from 173.70/174.10 and I will be a buyer in this area with a 173.35 stop.
Gold Rolling Contract
Gold just missed my 1505 buy level with a 1506.50 low print before rallying back above 1520 as finally the DSI worked. As I go to press Gold is selling off again and I will now lower my buy level to 1480/1490 with a 1471 stop.
Silver Rolling Contract
Silver just missed my 19.90 sell level with a 19.75 high print after I posted yesterday morning before falling over 4%. This move lower saw my whole buy range hit for a now 18.80 average long position. I am not happy in being long and I will leave my 18.30 stop level unchanged. I will also lower my T/P level to 18.85 and of any of the above levels are hit I will be back with a new update for my Platinum Members.