The S&P 500 Index posted its biggest loss in a month after a report that Washington and Beijing are unlikely to reach a trade deal this year. The US Dollar rose and oil jumped. Telecom companies and automakers led losses on the gauge after Reuters said that a pact may be delayed, though the Index pared losses following a report that progress is being made. The developments came after China threatened to retaliate for the Senate’s passage of a bill that sought to support Hong Kong’s autonomy from Beijing. The House votes on the measure this morning. After reaching fresh highs Monday, U.S. stocks have retreated on concern about the outlook for trade. While investors are sensitive to any reports on the economy, the potential of a detente between China and the U.S. had driven gains this year that left stocks poised for their best performance since 2013. China’s chief trade negotiator said at a dinner Wednesday night that he was “cautiously optimistic” about reaching a phase one deal with the U.S., even as talks continue to stretch out amid tensions over Hong Kong and other issues. Separately from the speech, he told one of the attendees that he was “confused” about the U.S. demands, but was confident the first phase of an agreement could be completed nevertheless.
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Travel and leisure companies led the retreat in the Stoxx Europe 600 index. Swedbank AB dropped after a report that American authorities are investigating possible breaches of sanctions against Russia by the Swedish lender.
Hong Kong shares fell along with Japanese and South Korean benchmarks. Australian equities slumped after allegations of financial crimes at Westpac Banking Corp. hit financial stocks.
The S&P 500 Index fell 0.4% to close at 3108.
The Dow Jones Industrial Average fell 113 points to close at 27,821.
The Stoxx Europe 600 Index dropped 0.4%.
The MSCI Emerging Markets Index fell 0.5%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index gained 0.2%.
The Euro fell 0.1% to $1.1072.
The British Pound decreased 0.1% to $1.2918.
The Japanese Yen was little changed at 108.58 per dollar.
The yield on 10-year Treasuries sank five basis points to 1.73%.
Germany’s 10-year yield dipped one basis point to -0.35%.
Britain’s 10-year yield was little changed at 0.73%.
Japan’s 10-year yield sank three basis points to -0.124%.
Oil jumped, paring Tuesday’s more-than 3% loss, as American crude stockpiles rose less than expected and inventories at a key storage hub shrank by the most since August
West Texas Intermediate crude increased 3.4% to $57.11 a barrel.
Gold was little changed at $1,472.34 an ounce.
This morning on the Economic Front we have UK Net Sector Public Borrowing at 9.30 am and this is followed at 12.30 pm by the Minutes of the last ECB Meeting. At 1.30 pm we have U.S. Weekly Jobless Claims and the Philly Fed Manufacturing Survey. Finally at 3.00 pm we have Existing Home Sales and the Euro-Zone Consumer Confidence.
Today is also a busy day for Central Bank Speakers with the Fed’s Mester and Kashkari on at 1.30 pm and 3.10 pm respectively. Meanwhile European Central Bankers speaking this morning include Mersch and De Guindos at 8.10 am and 9.30 am respectively.
December S&P 500
The S&P is trying to break lower from a severely overbought condition but as we saw yesterday it is not easy to maintain a bearish position with the S&P rallying 17 Handles off its 3091 low into the close. I remain sceptical that we will have a meaningful trade deal in place by the end of the year with most of this news now fully priced into the market. The 20 Day Moving Average offers initial support at the 3075 level and today I will raise my buy level to 3068/3078 with a tight 3059 stop. I am not going to chase the market lower and I will leave my 3120/3132 sell level unchanged with a 3141 stop. The S&P has a small ‘’Open Gap’’ from Monday’s close at 3121 which may be filled before eventually the market breaks lower.
I am still flat the Euro and ahead of the ECB Minutes at 12.30 pm I will now lower my buy level slightly to 1.0985/1.1025 with a 1.0945 stop. I still do not want to be short the S&P at this time.
December Dollar Index
No Change as I am still a seller on any rally higher to 98.05/98.45 with a 98.75 stop.
Frustratingly the DAX missed my 13060 buy level by four points before turning around and rallying 100 points off this low and I am still flat. Remember the DAX Futures Market is only open from 7.00 am until 9.00 pm and prices outside of these hours are created by the spreadbetting firms which are not valid. Overnight the DAX did trade to a low of 13040 on these platforms and if you did buy the market in my buy range then take your gain now and go flat. Today I will be a small buyer on any dip lower to 12940/13000 with a 12885 stop.
My FTSE plan worked well with the market trading lower to my 7225 buy level before rallying to my 7245 revised T/P level with a 7265 rebound high and I am now flat. Today I will again look to buy the market on any further dip lower to 7120/7165 with a 7080 stop.
Dow Rolling Contract
I mentioned at length about my concerns how overbought the US Equity Market is at this time. To summarise some indicators that I have discussed over the past 10 days: The CBOE 10-Day P/C ratio is turning from an extreme reached on November 14, the DSI Indicator hit 90% and 91% (S&P and NASDAQ) on November15, there remains a record VIX net-short position on the COT data and the NYSE 5-day new highs as a % of new highs plus new lows diverged on November 7 and is declining persistently. On top of this we got a fifth Hindenburg Omen on Tuesday in six trading sessions. These measures are all compatible with the late stages of a rally. I am still flat the Dow and today I will lower my sell level slightly to 27940/28090 with a 28170 stop which is juts above last Monday’s high. My only interest in buying the Dow is still from 27320/27470 where I will be an aggressive buyer with a 27195 stop.
My NASDAQ plan worked well with the market trading higher to my 8345 sell level shortly after the US Markets opened before selling off to my 8310 T/P level and I am now flat. Today I will again look to sell the market from 8320/8360 with a 8405 stop.
Late yesterday the Bund traded lower to my 171.00 buy level before rallying to my revised 171.15 T/P level and I am now flat as I did not want to have a position in this market overnight. This morning the Bund is trading unchanged at 171.15 as we wait for the ECB Minutes this afternoon. The Bund has good support from 170.20/170.60 and I will be a buyer in this area with a 169.85 stop.
Gold Rolling Contract
My Gold plan also worked well with the market trading lower to my 1467 buy level before rallying to my 1472.50 T/P level and I am now flat. Today I will be a buyer on any further dip lower to 1448/1458 with a 1441 tight stop.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 16.40/16.80 with a lower 15.95 stop.