U.S. Equity Markets gained along with Treasuries after solid hiring data quelled recession fears without crushing the odds of future Federal Reserve easing. The US Dollar declined. The S&P 500 rose the most in seven weeks — though still suffered its third weekly loss — after payrolls slightly missed estimates for September, while August’s reading was revised upward. Traders trimmed their bets on the results, but the odds still favoured a Fed rate cut this month. Chair Jerome Powell did little to change the speculation, saying Friday the economy “faces some risks” but is overall “in a good place.” Tech paced the advance, with Apple Inc. leading benchmark members amid reports of stronger-than-expected sales of its newest phone. The 10-year Treasury rate dropped for the seventh session in a row, and the US Dollar fell for a fourth straight day. West Texas oil rose toward $53 a barrel. Meanwhile, Boris Johnson doubled down on his pledge to take Britain out of the European Union on Oct. 31 without a deal if necessary, two days after it emerged he had promised to obey a law forcing him to send a letter requesting a delay if he can’t get an agreement with the bloc. The U.K. PM’s latest promise to deliver Brexit in an op-ed in The Sun on Sunday comes as he tries to persuade the EU to negotiate a new deal along the lines of the one he proposed during the week. It envisaged keeping Northern Ireland in regulatory alignment with the Republic of Ireland, so long as the region’s political leaders agree to it every four years. But the EU so far has pushed back, and Irish Prime Minister Leo Varadkar has suggested Friday is a “reasonable” deadline for Johnson to come up with revised proposals.
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Friday’s job numbers followed a string of disappointing economic data last week that had fuelled concerns a slowdown in manufacturing could spread to the consumer, and in turn ratcheted up bets that the Fed will reduce rates this month. The burst of rate-cut optimism helped snap a two-day losing streak that reached 3% in the S&P 500 Index Thursday
The S&P 500 Index rose 1.4%, the most since Aug. 16, to close at 2952.
The Nasdaq Composite Index gained 1.5%, while the Dow Jones Industrial Average advanced by 1.4%.
The Stoxx Europe 600 Index increased 0.5%.
The MSCI Emerging Market Index gained 0.3%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index fell 0.2%.
The Euro rose by 0.1% to $1.0980.
The British Pound slid 0.3% to $1.2295.
The Japanese Yen rose 0.1% to 106.87 per dollar.
The yield on 10-year Treasuries fell two basis points to 1.51%.
The yield on two-year Treasuries added two basis points to 1.41%.
Germany’s 10-year yield advanced less than one basis point to -0.58%.
Japan’s 10-year yield sank two basis points to -0.211%.
Meanwhile, India pulled the trigger on another rate cut on Friday, the fifth in the cycle so far.
West Texas Intermediate crude fell 0.5% to $52.16 a barrel.
Gold was steady at $1,513.90 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders which came in weaker than the -0.3% expected with a -0.6% print. At 8.30 am we have the UK Halifax House Price Index and this is followed at 9.30 am by Euro-Zone Sentix Investor Confidence. This afternoon we have another speech from Fed Chair Powell at 6.00 pm. Finally, we have US Consumer Credit at 8.00 pm.
December S&P 500
My S&P plan worked very well with the market trading the whole of my sell range late in the U.S. session on Friday with a 2954 high print before getting hit hard on the re-open of the Futures Market last night when the market hit a low of 2928 within a few minutes of opening. As I did not want to hold a position over the weekend I covered my initial 2939 short position at my revised 2937 T/P level ahead of Powell’s speech on Friday and I am still flat. This morning the S&P is trading higher at 2941. The S&P has support from 2908/2921 and I will be a buyer on any dip to this area with a 2899 stop. The S&P has strong resistance from 2959/2970 and I will be a seller in this area with a 2978 stop.
I am still flat the Euro and this morning I will now raise my buy level to 1.0890/1.0930 with a higher 1.0855 stop. I still do not want to be short the Euro at this time.
December Dollar Index
I am still flat the Dollar as the market again finds it difficult to break above the 99.00/99.50 resistance area. Commercial Hedgers are net-short 78% of US Dollar Futures Open Interest, which is the most extreme position in nearly eight years. While this measure is not a short-term timing tool, it does indicate a heightened potential for a Dollar decline. At the same time, the Daily Sentiment index for the Euro was just 9% for the Euro last Tuesday. Today I will be a seller from 98.90/99.30 with a 99.75 tight stop.
My DAX plan worked well with the market trading lower to my 11865 buy level before rallying to my 11900 T/P level and I am now flat. This morning the DAX is back trading at the 12,000 level. The market has support from 11850/11910 and I will be a buyer on any dip to this area with a 11805 stop.
I am still flat the FTSE and I will now raise my buy level to 7010/7055 with a higher 6970 stop.
Dow Rolling Contract
It is so difficult to be short the US Indices for any length of time as the bounce-back in these markets are incredible. At 3.30 pm on Thursday the Dow was trading at a price of 25733 before rallying to close at 26550 on Friday evening. Yet over the past two years the Dow is basically flat despite all these volatile moves. The Dow has strong resistance from 26750/26900 and I will be a seller in this area with a 27020 stop. Initial support for the Dow is from 26170/26330 and I will be a buyer on any dip to this area with a 26095 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 25875/26025 with a tight 25790 stop.
I am still flat the NASDAQ with the market never coming close to my buy level after rallying 1.5% on Friday. The market has strong resistance from 7800/7860 and I will be a seller on any rally to this area with a 7910 stop. My only interest in buying the market is on a further dip lower to 7610/7670 with a 7555 stop.
Just before the NFP release the Bund traded lower to my 174.48 T/P level on my latest 174.70 short position and I am still flat. The Bund has short-term resistance from 174.85/175.25 and I will be a seller in this area with a 175.55 stop.
Gold Rolling Contract
There is every chance that the recent low of 1459 in Gold will hold for the foreseeable future. I am still flat the market and today I will raise my buy level to 1484/1492 with a 1477 tight stop.
Silver Rolling Contract
My Silver Plan worked well with the market trading lower to my 17.30 buy level after the NFP release before rallying to my 17.50 T/P level and I am now flat. Today I will again look to buy Silver from 17.00/17.40 with a 16.65 stop.