U.S. Equity markets declined to start the week, led by the Dow which closed lower by 0.49%. This is the first Monday since the end of October that we have not had a ‘’gap’’ move higher. Coronavirus trends put downward pressure on markets. Stay-at-home orders went into effect in California. And White House Coronavirus task force member Dr. Deborah Birx warned that the winter could present the biggest risk of infections that the country has ever faced. Investors are also awaiting headlines on stimulus negotiations. Congressional leaders were said to be working on a short-term funding deal in order to buy themselves more time to work out stimulus and government spending bills. Senator Bill Cassidy said that he thinks the $900 billion bipartisan proposal has a better chance of passing through Congress than earlier stimulus proposals. There was positive vaccine news, after reports suggested that the Food and Drug Administration (“FDA”) could begin distributing a vaccine as early as Friday after it votes on Pfizer and BioNTech’s vaccine candidate on Thursday. European Markets also declined. Britain and the European Union’s post-Brexit trade negotiations were said to be stalled as the two sides debated fishing rights and level playing field concerns. The European Central Bank releases its policy announcement on Thursday, which is when President Christine Lagarde is expected to expand monetary stimulus. Euro-Zone Investor Confidence data for December were better than expected, rising versus November, as expectations for the outlook improved. The U.K.’s National Health Service said it has distributed Pfizer and BioNTech’s Coronavirus vaccine to 50 hub hospitals and will begin administering it this morning. Elsewhere, Oil closed 1.23% lower as new COVID-19 restrictions brought fears of slowing growth, while Gold rallied 1.43% ahead of this week’s ECB Meeting.
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The S&P 500 closed 0.19% lower at a price of 3692.
The Dow Jones Industrial Average closed 149 points lower for a 0.49% loss at a price of 30,069.
The NASDAQ 100 closed 0.54% higher at a price of 12,596.
The Stoxx Europe 600 Index closed 0.3% lower.
The MSCI Asia Pacific Index rose 0.3%.
This morning the Nikkei closed 0.30% lower at a price of 26,467.
The Bloomberg Dollar Spot Index rose 0.2%.
The Euro closed unchanged at $1.2119.
The British pound fell 0.7% to close at $1.3330.
The Japanese Yen closed unchanged at 104.12 per dollar.
Germany’s 10-year yield closed three basis points lower at -0.59%.
Britain’s 10-year yield closed seven basis points lower at 0.28%.
US 10 Year Treasury closed two points lower at 0.93%.
West Texas Intermediate crude closed 1.23% lower at $44.45 a barrel.
Gold closed 1.43% higher at $1,860.20 an ounce.
This morning on the Economic Front we have the German and Euro-Zone ZEW Survey at 10.00 am. At the same time, we will have Euro-Zone GDP and the Employment Change. This is followed at 11.00 am by the U.S NFIB Business Optimism Index. Finally, at 1.30 pm by have Unit Labour Costs and Non-Farm Productivity.
Stock Index Option investors are purchasing two-and-half Calls for every purchase of a Put. These Call purchases imply that the underlying Index will rally over the short-term and this has resulted in extreme bullishness as mentioned in yesterday’s commentary. The 10-Day CBOE Put/Call Ratio closed at .394 as of last Friday’s close. This is the lowest level in 21 years which implies that a trend reversal is close at hand. However, the month of December is seasonally one of the strongest months of the year with the only down Decembers’ coming in 2018 and 2000. Once the above 10-day ratio starts to reverse we should see an acceleration to the downside. I am still flat the S&P and today I will raise my buy level to 3648/3664 with a higher 3635 stop. Meanwhile I will leave my 3704/3720 sell level unchanged with the same 3731 stop.
The Euro traded in a narrow range yesterday and I am still flat. The Euro has support from 1.1980/1.2020 where I will be a buyer with a 1.1935 stop. I will continue to be a seller on any further rally to 1.2170/1.2220 with the same 1.2261 stop.
December Dollar Index
I am still flat the Dollar as the market tries to rally off its extreme oversold condition. I will now raise my buy level to 89.90/90.40 with an 89.55 tight stop. I still do not want to be short the Dollar at this time.
My DAX plan worked well with the market trading lower to my 13160 buy level shortly after I posted before rallying to my 13210 T/P level and I am now flat. It is difficult to be short the DAX ahead of more stimulus to be announced by ECB President on Thursday. As long as we can hold the 13100 support level I will continue to be a buyer of dips. Today, my buy level will be from 13090/13170 with a wider 12995 stop.
Unfortunately, in yesterday’s commentary I did not leave a 6581 ‘’Closing Stop’’ on my 6502 latest short position which is frustrating because as soon as I was stopped out of this position the FTSE fell 80 points and I am still flat. With Brexit negotiations hitting an impasse, expect plenty of two-way volatility. I still expect a ‘’deal’’ to get done as the ramifications of a ‘’no deal’’ are huge. The FTSE is overbought and has resistance from 6570/6620 where I will be a seller with a 6671 ‘’Closing Stop’’. If I am taken short I will have a T/P level at 6530.
Dow Rolling Contract
This morning the Dow has traded lower to my initial 29950 buy level. As I want to keep banking points when available I have now exited this long Dow position here at 30000 and I am now flat. The Dow has strong support from 29650/29850 where I will again be a buyer with a 29495 stop. I still do not want to be short the Dow at this time.
Frustratingly the NASDAQ missed my buy level by 20 points before rallying over 100 points into the close and I am still flat. I will now raise my buy level to 12410/12510 with a higher 12295 stop. I still do not want to be short the NASDAQ at this time.
I am still flat the BUND and today I will now raise my sell level to 175.85/176.25 with a higher 176.61 stop. If I am taken short I will have a T/P level at 175.51.
Gold Rolling Contract
Gold buyers have returned with force over the past week. Gold is now trading over $100 higher in that time. I am still flat and I will now raise my buy level to 1810/1828 with a higher 1799 stop.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 23.65 buy level before rallying to my 24.05 T/P level and I am now flat. This morning Silver is trading higher at 24.60. We have short-term support from 23.70/24.20 where I will again be a buyer with a 23.35 tight stop.