Equity markets regained some of their composure helped somewhat by US Dollar as tax legislation reconciliation continues and even as the debt ceiling approaches, coming with an in-line ADP Employment result. A “cautious” Bank of Canada saw the loonie (Canadian Dollar) as the biggest loser yesterday. Sterling has also lost some ground amid report that the DUP (UK coalition partner) is digging its heels in with no deal over the Irish border question.
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For anyone following my Platinum Service it made 50 points yesterday and is now ahead by 571 points for December, having made 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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All that optimism of getting a deal over the Irish border question ahead of the EU Summit next week seems is now under threat. Adding to government discord, denial by UK Brexit Secretary David Davis that the UK Government has done no impact assessments on the implications of Brexit for sectors of the British economy had pundits wondering what that referred to but not released 850 page-58 sector touted report was all about! He said no formal assessment was undertaken into the impact of Brexit before the Cabinet took the decision to withdraw.
It was the Bank of Canada that stole the market limelight yesterday. Having hiked Interest Rates twice this year from a very emergency 0.5% to 1.00%, the Central Bank left rates steady, as all bar three of the 26 surveyed by Bloomberg expected. The watchword from the Central Bank was “caution”: “While higher rates will likely be required over time, the Governing Council will continue to be cautious. The current stance of monetary policy remains appropriate”. Adding a little more to the uncertainty flavour were concerns raised over trade issues (NAFTA?) and geopolitics and that there was ongoing labour slack despite jobs growth.
Canadian Bonds (and stocks) rallied, the loonie copping a pasting after the statement was released. The market backpedalled on rate rise expectations: pricing for the 17 Jan meeting was wound back two ticks with the 7 March meeting wound back from 23 bps (near all priced) to 16 (just over 50%). USD/CAD rallied hard by over a big figure from 1.2650 to currently trade just above 1.28.
In Commodities, Oil prices have also been progressively giving back some ground, which may have added reasons to sell after the BoC. Meanwhile both Gold and Silver are under pressure with Gold now trading below its key 1260 pivot point and previous support level.
This morning on the Economic Front we already had the release of German Industrial Production which came in much weaker than expected with a -1.4% print. At 8.30 am we have the UK Halifax House Price Index and this is followed at 12.30 pm by the US Challenger Jobs Cuts and the UK CBI Trends Total Orders/Selling Prices. At 1.30 pm we have the US Weekly Jobless Claims, followed by the Bloomberg Consumer Comfort Index at 2.45 pm. Finally we have US Consumer Credit at 8.00 pm ahead of the key US Payrolls tomorrow.
December S&P 500
It took a while but finally overnight the S&P traded higher to my 2636 sell level before selling off small this morning and I used this move lower to cover my position at my revised 2633 T/P level and I am now flat. The S&P has strong resistance from 2640/2650 which may be tested later today ahead of the NFP data tomorrow. Today I will again look to sell the S&P on any rally higher to 2642/2650 with a 2655 stop. I will also raise my buy level slightly to 2610/2618 with a 2604 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive on any further dip lower to 2588/2596 with a 2583 stop.
The Euro traded sideways for most of yesterday before selling off late in the New York session to my 1.1800 buy level with a 1.1780 low print. I am still long and will only add to this position on any further move lower to 1.1760 with the same 1.1725 stop.
December Dollar Index
The 92.50 level is proving to be strong support for the Dollar Index with the market now trading 110 points above this key level. I am still flat and today I will now raise my buy level slightly to 92.75/93.05 with a 92.40 stop.
Just like Gold I do not trust this DAX market still believing that it is in danger of a serious sell-off. However for this to happen we need to break and close below 12700. I am still flat the market which had a nice rally off its early morning low print which occurred before I posted yesterday morning. Today I will now raise my buy level slightly to 12795/12860 with a 127450 stop. Ahead of the NFP data tomorrow I still do not want to be short the DAX at this time.
The renewed weakness in Sterling helped the FTSE to stabilise over the past 24 hours. You feel with the FTSE that one bad headline will send this market sharply lower. I am still flat and today I will raise my buy level to 7260/7295 with a 7230 stop.
Dow Rolling Contract
The Dow rallied strong off yesterday’s 24080 low print but so far is running into strong resistance at 24240. I am still flat and today I will now raise my buy level to 24000/24075 with a 23945 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 23840/23905 with a 23785 stop. The latest survey from the American Association of Individual Investors (AAII) shows the percentage that investors allocate to cash in their portfolios is now the smallest (13.9%) since the January 2000 stock market top (12%). If this was not December I would paying a lot more attention to this data but this is more evidence how much the US stock is stretched with the 3rd Standard Deviation not far away at 2792 for the S&P.
The NASDAQ was strong yesterday rebounding sharply off its early morning low. I am still flat and today I will now raise my buy level to 6215/6250 with a 6175 stop. Remember the 6190 level is key support as a break and close below here has a target level of 6055 and then 5975.
No change as I am still a seller on any rally higher to 163.85/164.15 with the same 164.35 tight stop.
Gold Rolling Contract
Gold traded lower overnight to my 1256 initial buy level. As I am long Silver and concerned by the break of 1260 I emailed my Platinum Members to exit and long position at 1258 and I am now flat. My own view is that we are going to put in a tradeable bottom for both Gold and Silver this month to replicate what has happened in the previous three years. With this in mind I will again look to buy Gold on any further dip lower to 1234/1242 with a 1227 stop.
Silver Rolling Contract
Silver has strong support from 15.80/15.90 which is a 5 year trendline. We are now oversold on a Daily Chart and I have bought back some of the Silver that I sold at 18.50 for my pension fund here this morning. I am still long at 16.25 and as we are having a decent month so far I will now lower my stop on this position to 15.68. Meanwhile I will leave my T/P level unchanged at 16.35.