It has been a mix of events in the UK (better data), Europe (no immediate declared Catalan independence from Puigdemont) and the US (Trump tax politics and a softer NFIB report) that have provided the background for limited currency moves over the past 24 hours. The Euro and Sterling have been the better performers, the Euro up a net 0.25% since I posted yesterday morning, Sterling up 0.14%, while the DXY has eased 0.44%. AUD and NZD have been relatively unchanged, the AUD having had a little shot in the arm yesterday after another strong NAB Business Survey and the Kiwi now waiting for Winston Peters to declare his coalition partner. On that front, it now seems that Peters will not be declaring his hand by tomorrow night for logistical reasons. Meanwhile in Australia on the political front, the High Court case is now underway over whether the seven MPs who declared dual citizenship can remain in Parliament, a decision possibly as early as later this week. Barnaby Joyce’s case is one of those, sitting as he does in the Lower House where the Government holds a one seat majority.
To mark my 1450th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested in this offer can you please contact me on firstname.lastname@example.org for details.
For anyone following my Platinum Service it made 80 points yesterday and is now ahead by 254 points for October, having made 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
Bonds have not broken new ground, a modest risk-off tone evident given events in Spain and some uncertainties over the Trump tax plan. Among commodities, oil was higher (supply cut half promises?, positioning?), iron ore fell further, while LME most base metals rose.
The markets were waiting to hear from Catalan President Puigdemont on whether he would declare independence from Spain. He did not declare independence in his speech, but accepted that the referendum is a mandate to push for independence. For now however, he is suspending the referendum for “weeks”, calling for a dialogue. The initial response of the Spanish Government has understandably been firm saying that Catalonia has declared “deferred independence” and that Puigdemont’s irresponsibility is at an absolute extreme. The Euro has been little moved, stronger overnight and holding on to those modest gains. Spanish stocks under-performed.
Sterling has risen a quarter of a cent or so, currently trading just above 1.32 after better data. Industrial production rose 0.2% in line with expectations but upward revisions saw annual growth at 1.6%, 0.7% above expectations. Manufacturing was stronger too, as was Construction Output, that report also helped by revisions. It was revision city at the ONS, the August trade deficit much wider than expected, as much from revisions. Sterling OIS pushed a little higher the priced-in probability of the Bank of England hiking at the Nov 2 meeting to 79% from 78% and by the Dec 14 meeting from 92% to 97%.
The 2017 IMF released upgraded global growth forecasts yesterday, increasing growth this year and next by 0.1% to 3.6% and 3.7% on the back of upgrades to the US, China and Europe. Australia’s growth forecast for this year was set at 2.2%, a forecast that looks a little low to me, although the IMF do see growth picking up to 2.9% for 2018 as Cyclone Debbie average year growth effects dissipate. No market impact.
Finally, the politics of the Trump tax plan continues to get murkier, this time the President and senior GoP Senator Corker having swapped barbs over recent days. The NFIB Small Business Optimism Survey for September was weaker than expected at 103, down from 105.2, six of the nine survey districts (beyond hurricane areas) reporting weaker job creation. This survey might have missed or only caught the tail at most of the Trump tax plan released 27 September. I will be watching next month’s to see if there’s any kick to confidence or investment plans.
This morning we have no Economic data from either the UK or the Euro-Zone. At 3.00 pm we have the US JOLTS Job Openings. Finally at 7.00 pm we have the Minutes from last month’s FOMC Meeting. There’s more Fed interest later this afternoon with the Fed’s Evans and Williams both speaking. But to be frank, the market is really waiting on Friday’s CPI as the next key watch point (along with Retail Sales), including whether they were at affected by the hurricanes.
December S&P 500
My S&P plan worked well yesterday with the market trading higher to my 2552 sell level with a 2553.75 high print before selling off 11 Handles and this sell-off enabled me to cover my short position at my 2547.50 T/P level and I am now flat. After the initial sell-off the S&P traded sideways for most of the session before having a small rally into the close. There is no change to my short-term view that the S&P is trying to put in a temporary top followed by a sell-off that may or may not gather legs ahead of a strong rally into year-end before we finally see the end of this great bull market rally. However for the market to sell-off it needs a sell extreme and needs to break and close below 2505 first. I have my doubts whether this will happen. The S&P has strong resistance from 2554/2561 and today I will be a seller in this area with a 2566 stop. I will still be a strong buyer on any dip lower to 2529/2535 with a 2524 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2506/2514 with a 2500 stop.
Late yesterday evening the Euro traded higher to my second sell level at 1.1810 which now has me long at an average rate of 1.1790. I am nervous in being short as I still believe the path of least resistance is to the upside for the Euro. Today I will now look to exit this short position on any dip lower to 1.1805. I will also be a buyer on any further dip lower to 1.1730/1.1765 with a 1.1695 stop.
December Dollar Index
After the Euro traded higher to my second sell level I emailed my Platinum Members to lower their buy level in the Dollar to 92.40/92.70. I will continue to be a buyer in this area with a 92.10 stop.
The sideways boring action for the DAX continues with the market now stuck in the same range for most of the past 10 days. Today for the fifth consecutive session I will leave my DAX buy level unchanged from 12830/12875 with a 12780 stop.
I am still flat the FTSE as the market finally closed above its important 4 month trendline at 7450. I have to respect the price action and today I will now raise my buy level to 7425/7460 with a 7395 stop. Despite the FTSE trading overbought I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan also worked well yesterday with the Dow trading higher to my 22840 sell level with a 22850 high print before selling off to a 22770 low print and this move lower enabled me to cover my short position at my revised 22805 T/P level and I am now flat. The McClellan Oscillator which closed in negative territory on Monday for the first time in six weeks was back in positive territory last night despite the small sell-off in the main Indices. Meanwhile the CNN Fear & Greed Index closed again at ‘’extreme’’ greed with an 85 print. Like most of you I am confused why the market has failed to sell-off given the extreme bullish sentiment reading to stocks which is close to all-time highs plus the sustained close in the VIX with a ‘’9’’ Handle over the past few weeks. As I noted at length in my S&P commentary yesterday, that despite the beliefs that the FANGs and other high-tech are undervalued because of their enormous cash holdings, the research that I published showing that the ‘’cash’’ that AAPL, MSFT, ORCL and CSCO have raised has all been accounted for in the enormous sums of debt they have incurred on their balance sheet. Caution is still the name of the game in my opinion. Today I will again look to sell the Dow on any further rally to 22895/22965 with a 23020 stop. I will still be a strong buyer on any dip lower to 22580/22650 with a 22530 stop.
I am still flat the Bund which has strong resistance at 161.60 and good support at 160.70. Today I will now lower my buy level slightly to 160.40/160.75 with a 160.10 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold continues to consolidate last Friday’s buy extreme and I am still flat. I am not going to chase this market higher form here and I will leave my buy level unchanged from 1269/1277 with the same 1262 stop. Gold has strong resistance from 1309/1315 and today I will be a small seller in this area with a 1322 stop.
Silver Rolling Contract
Having taken a nice gain on my 16.40 long position on Friday at 16.60 I have been flat since.No change as I am still a small buyer on any dip lower to 16.60/16.90 with a 16.25 stop which is just below last Friday’s 16.32 low print.