Yesterday was one of the most incredible trading day’s that I have witnessed in my 30 years of trading markets with seven of my nine markets that I write about each day having Key Day Reversals. The Euro and Bund had downside Reversals while the S&P, DOW, Dollar Index, DAX, and FTSE all had upside Key Day Reversals.16 Years ago the Simpsons episode “Bart to the future” aired for the first time with a plot partly consisting of Lisa becoming president of the United States. Lisa tries to get the country out of financial trouble due to the high levels of debt left by the previous president, Donald Trump. Fiction has certainly become reality, at least partially, with Donald Trump’s election as the 45th president of the United States. Now we have to wait another four to eight years to see whether he leaves the country with a mountain of debt. To say that the past 24hrs have been a volatile session for markets it’s probably an understatement. Markets were set for a Clinton victory, but as a Trump win became more likely, risk aversion kicked in and safe haven assets went bid. JPY fell four big figures to ¥101.2, Gold gained more than 5% and 10y US treasury yields dropped from 1.89% to 1.72%. Meanwhile equities and equity futures were sold, EM and commodity currencies were dumped with the AUD sinking from a high of 0.7777 to 0.7580.
To mark my 1200th 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 email@example.com for details.
For anyone following my Platinum Service it made 218 points yesterday and is now ahead by 670 points for November having made 1582 points in October. The previous four months saw gains of 1142, 1752, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Then as a Donald Trump win became almost unassailable, markets did a massive u turn with selling pressures on risk assets evaporating and eventually turning into buying. US equities appear to have latched on to the idea that Donald Trump means more growth via an increase in fiscal spending. The Dow closed 1.4% higher while the S&P and NASDAQ both closed 1.11% higher. Meanwhile European equities closed between 1% and 1.50% higher.
As for currencies, the USD is up about 0.7% on a trade weighted basis and close to its high for the session. Looking at G10 currencies JPY is flirting with the idea of breaking through the ¥106 mark, after reaching an intraday low of ¥101.20. The EUR was up as much as 2.5% to a high of 1.1300 and now trades 0.8% lower at 1.0939. With the focus elsewhere, Sterling has managed to outperform and is the only G10 currency up against the USD (+0.51%). Meanwhile the AUD is currently trading at 0.7686, after trading to a low of 0.7580 yesterday.
So while equities have liked the prospects of a debt induced US growth, US Treasuries have reacted violently to the idea of more issuance and possibly higher inflation. After trading to a low of 1.7181%, now they are 35bps higher at 2.066%. Meanwhile UK gilts and Bunds closed a modest +2bps and +1.5bps respectably. As for commodities, just like equities, the increase in US growth prospects has been a massive boost. Iron ore is +4%, copper is 3.4% and met coal is +3.3%. The contrasting reaction by equities and commodities versus US Treasuries will need to be watched over the coming days and this will be particularly important for the AUD and other risk sensitive assets. See our coming up section below for more details.
Lastly just after the American markets closed last night, the RBNZ (New Zealand Central Bank )has cut the OCR to 1.75% as expected and the statement appears to suggest a shift from an easing bias to neutral. The forward cash rate track suggests an almost flat cash rate profile, suggesting the Bank is unlikely to cut again unless a turn in economic data forces its hand. NZD has rallied on the news, jumping from 0.730 to 0.7355 before falling back to 0.7250 this morning.
Meanwhile in Asis the Nikkei reversed yesterday’s huge loss by closing 6.75% higher with an 1100 point move to 17,345.
This morning we have no economic data from either the UK or the Euro-Zone. At 1.30 pm we have the latest US Weekly Jobless Claims. This is followed at 2.45 pm by the Bloomberg Consumer Comfort Index. Finally at 7.00 pm we have the US Monthly Budget Statement.
The Fed’s Bullard is due to speak on US Economic Outlook in St Louis at 2.15 pm while later this afternoon the ECB’s Schaeuble and Weidmann are speaking at aEuropean Bank Lobby Event.
December S&P 500
A wild and volatile 24 hours in US stocks ended with the S&P rallying 35 Handles to a high of 2164 after been as low as 2028 early yesterday morning. This is one of the largest upside Key Day Reversal’s that I have witnessed. However internally the market did not perform with the McClellan Oscillator which closed with a negative -19 reading on Tuesday only rallying to close last night at +3. Exasperating the move higher was the number of US traders who went home short late on Tuesday via an ultra bearish ETF that trades on the CME and can only be exited during market hours. When these traders saw the S&P trading 100 handles lower from when they put the trade on and had no Futures Account to hedge their position they had to wait until the market opened at 2.30 pm to cover their position by which time 10 minutes after the market opened they were offside on their positions and had to scramble for the exit door. This move higher hit my 2124 average sell level with the market hitting a 2133 high print before selling off to 2120. I subsequently emailed my Platinum Members to exit this short position for a breakeven and I am still flat. In hindsight we should had just bought the market yesterday morning as just like after Brexit the Central Banks bought the US Dollar and equity markets aggressively to yet again prevent a crash. The fact that the S&P broke the 2114/2120 resistance level so easily and then the previous 2015 high at 2134 is bullish. If the S&P can eventually break and close over 2200 then there is no reason why we cannot challenge my long standing target from 2300/2334 before we may see a sell-off that lasts for more than a few days. Given how overbought the S&P is trading I will try a small short on any move higher to 2182/2188 with a 2193 stop. I will also be a buyer on any dip lower to 2152/2158 with a 2147 stop.
My Euro plan worked well with the market trading lower to my average buy level at 1.1060 just after I posted with a 1.1040 low print before the Euro rallied to a 1.1120 high print. This rally enabled me to cover my long position at my revised 1.1105 T/P level. Unfortunately I emailed my Platinum Members to re-buy the Euro at 1.1035 before getting stopped out of this position at 1.0990 and I am now flat. I must say the move lower in the Euro took me by complete surprise as this was the largest move in the Euro since the ECB Meeting last December. The Euro has strong support at the October low at 1.0850 and today I will be a small buyer from 1.0830/1.0870 with a tight 1.0795 stop. Despite yesterday’s huge move lower my only interest in selling the market is on a rally higher to 1.1060/1.1110 with a 1.1130 stop.
December Dollar Index
As I was already long the Euro I waited to sell the Dollar which I did at 98.35. I am still short and I will leave my stop unchanged at a tight 98.75. Remember the key level to watch for the Dollar is still at 100.50 which was the high from the ECB Meeting mentioned above last December.
Thankfully we stayed away from the DAX yesterday in what must have been one of the most volatile trading session’s in the DAX’ s history. Thankfully we have had no sell levels in this market over the past two weeks as the move lower in the Euro is a big help for the German Market. The DAX has very strong resistance from 10830/10880 and today I will be a small seller in this area with a 10925 tight stop. Despite yesterday’s aggressive move higher my only interest in buying the market is on a dip lower to 10570/10630 with a 10520 stop. A break and close over 10900 will be very constructive.
My FTSE plan worked well with the market rallying strongly as I posted yesterday morning. This rally saw the FTSE hit my 6820 sell level before having a nice sell-off to 6760 which enabled me to cover this position at my 6775 T/P level. Subsequently I went short the FTSE again at 6815 and as I did not like the price action I emailed my Platinum Members to cover this position at 6805 and I am still flat. Today the FTSE is marching higher and I will again try to sell the market from 7020/7050 with a 7080 stop. If I am taken short and I am stopped out of this position or I mange to T/P on any short FTSE position, I will be an aggressive seller against the 7135 which is a nine year trend-line. My sell level will be from 7125/7160 with a 7190 stop.
Dow Rolling Contract
The Dow rallied to an intraday high at 18650 having earlier yesterday morning trading below 17500 in what was one of the most incredible trading session’s in the Dow’s history. The all-time high for the Cash Dow is at 18688 and with the move higher this morning the Dow is on course to break this previous high when the Cash Dow opens at 2.30 pm by over 100 points. The Dow has been the strongest of the US Indices over the past couple of months and if the S&P can break it previous high at 2193 then we could see another acceleration higher as this Bull market refuses to buckle. With the tailwind of the Central Bank’s behind the market it is one of the main reasons why I have refused to short the US stock market over the past two years. Yesterday I was lucky as after the Dow initially spiked higher to my 18150 sell level the market quickly dropped to my revised T/P level at 18090 and I am now flat. Thankfully after I sent my revised T/P level to my Platinum Members the Dow traded at this T/P level for 15 minutes before exploding to the upside. Yesterday I sent a record seven updated emails to my Platinum Members which has now become a key component of my Platinum Membership. Today the Dow is overbought, trading outside the top of its Daily Bollinger Band and at the top of its Williams Index. For these reasons I will try to sell the market again on any further move higher to 18810/18870 with a 18920 tight stop. Given how overbought the market is trading I do not want to be long at this time.
Thankfully we had no buy level in the Bund yesterday which unfortunately just missed my 162.80 sell level after I posted yesterday morning. The Bund has strong support at the 160.90 level which is the spike low from last April. Today I will be a buyer from 160.70/161.10 with a 160.45 tight stop.
Gold Rolling Contract
My Gold plan worked well yesterday as having been already long of Silver I waited to buy Gold at my 1285 buy level. Subsequently I emailed my Platinum Members to exit this position at 1289 and I am still flat. As I am currently long Silver I will look to buy Gold on any dip lower to 1270/1279 with a 1263 stop.
Silver Rolling Contract
The last 24 hours have been the busiest I have had in Silver since I started my Daily Commentary in February 2012 with three trades getting executed. Silver after hitting my initial 18.50 buy level had a nice rally to 18.75 which enabled me to cover this position at my 18.71 T/P level. I emailed my Platinum Members to re-buy the market which was filled at 18.38 during my IG lecture last night before rallying this morning to my 18.80 T/P level. I then sent my seventh email to my Platinum Members at 7.00 am to buy Silver again at 18.70 which was filled in the last hour. I am still long and I will now raise my stop on this position to 18.25 which is just below yesterday’s low print.
Following the success of the NFP Live Trading Day and Education Session in London on September 2, Paul Wallace and I are bringing this event to Dublin for the December NFP day on Friday December 2nd. If anyone is interested in attending this event the details are on the following link: