Market sentiment has been boosted over the past 24 hours by some more encouraging news on US-China trade negotiations. Yesterday, White House press advisor Kellyanne Conway told Fox News that President Trump wants to meet with President Xi very soon while the President added at a campaign rally that we do not want China to have a hard time. Adding some fuel to the risk on mood, Trump said that ‘’if we are close to a deal where we think we can make a real deal and its going to get done, I could see myself letting that slide for a little while,’’ speaking of the looming 1 March date when tariffs on $200b of Chinese goods jump to 25% from 10%. ‘’But generally speaking I am not inclined’’ to delay raising tariffs, he added. He also said that he had no current plans to meet with President Xi in March and that he is OK with either a deal of tariffs with China.

To mark my 1800th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details

For anyone following my Platinum Service it was flat yesterday and is still ahead by 368 points for February, having made 1671 points in January, 2803 points in December, 1541 points in November and 2094 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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There is something for both sides of the risk-on/risk-off line for everyone in all of that in a market that is being driven by soundbites as much as policy commitments. Talks start tomorrow in Beijing between U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with Chinese Vice Premier Liu He.

While the trade issue is bubbling away, there is a little more hope now that Republican and Democratic negotiators have made some progress on a deal to avert another government shutdown. The tentative agreement provides $1.5b for ‘’modern physical barriers’’ (a ‘’wall’’ or a ‘’fence’’ depending on what side of the political fence one sits on) along the border with Mexico, well below the $5.7b Trump has demanded. The deal needs to be signed off by the Senate and House as well as the President before Friday to avert a shutdown. Trump sounded lukewarm about the tentative deal, telling reporters ‘’I can’t say I am thrilled’’, but said he would study the proposal.

Equities

With markets back in risk on mode, equities were a sea of green in the US session with, the main board indexes all up comfortably over 1% (the S&P +1.32%), all sectors enjoying the ride after all the political machinations and a disappointing season for the earnings outlook, companies downscaling expectations for no earnings growth in the current quarter.

Currencies

The USD has been on the back foot against most other major currencies, excepting (in part) the usually risk-absorbing Japanese yen and Swiss Franc. Since yesterday morning the Yen has held its ground (JPY benefitting from a mildly yield-supportive for once BoJ) while the CHF has adopted its defensive risk-on posture. 10 year JGBs have been marginally negative recently. They did rise 1.6bps yesterday to -1.3bps (-0.013), but still short of the Bank of Japan’s +0.10% 10y target.

Meanwhile the Euro rallied from a low of 1.1257 shortly after the European Markets opened to close at 1.1330 in New York.

Economics 

Fed Chair Powell was speaking last night to college students in Itta Bena, Mississippi (the second poorest US state), remarks familiar now to market thinking. He gave an understandably generally upbeat report on the national economy, saying that economic output has been growing at a solid pace, unemployment is at a near half-century low (it is 7.3% in MS, well above the national average) and that officials do not feel the probability of recession is at all elevated. He acknowledged that ‘’prosperity has not been felt as much in some areas, including many rural places’’, having been introduced as the most important visitor to the State since Bobby Kennedy in the 1960s.

Also speaking, Bank of England Governor Carney who called for clarity over Brexit in an economy that barely grew at in the final quarter, growing by just 0.2%. ‘’What those figures show’’, he said is underscoring the ‘’importance of a transition to whatever end-state Parliament decides.’’ There is a very high level of uncertainty of the degree of access companies are going to have in the next two months, which is quite an extraordinary situation to be in, he said. ‘’Quite logically, rationally, understandably, they are holding back on making bigger investment decisions. Those who have contingency plans are putting them in place’’ he said, adding ‘’but not all companies can self-insure against this possibility.’’

He also expressed his hope that out of Brexit might evolve new freer trade in services as helping to resolve external imbalances, “barriers to services trade currently up to three times higher than those for goods, the Bank estimates that eliminating this differential could reduce the excess deficits of the US by up to one third and of the UK by up to one half.” This, he hoped, might also build a bridge to resolve the democratic shortfall in the current system. These are interesting thoughts from someone who has in the past championed the risk of Brexit through Project Fear.

The data flow was relatively light  with the US NFIB Small Business Optimism Survey for January (101.2, down from 104.4), still high historically but the lowest since the post-Trump election bounce. It was also likely plagued by the government shutdown, but it has been pulling back for the best part of six months now, small businesses expecting softer economic conditions and sales. Also released was the US JOLTs Job Openings report for December, of historical interest largely, but revealed record openings and still strong rates of labour turnover (new jobs, hiring, separations, and quit rates), reflective of the still strong labour market.

Commodities 

Oil has had a good day, WTI up by 1.39%, buoyed a little by a marginally softer USD, but also getting some support despite the EIA raising its 2020 projected US crude production forecast to 13.2m b/d from 12.86, production currently 11.9. Base metals were softer, iron ore has rebalanced lower as the market weighs up Vale’s production woes against possible mandated Chinese steel cuts ahead of the summer. Met coal was higher but steaming coal eased. Gold was little changed. US Treasury yields rose by 2-3 bps.

This morning on the Economic Front we have UK CPI and PPI at 9.30 am and this is followed at 10.00 am by Euro-Zone Industrial Production. At 12.00 pm we have US MBA Mortgage Applications. Finally at 1.30 pm we have US CPI. Speaking this afternoon are the Feds’ Bostic and Mester at 12.15 pm and 1.50 pm respectively.

March S&P 500

Yet again the S&P made new highs for the year to date as the rally extended to over 420 Handles off the December 26, low of 2332. Importantly the S&P just managed to join the Dow by closing over its key 200 Day Moving Average. My only sell level in yesterday’s commentary was in the S&P where I went short in small size at 2742. I will only add to this position on any further move higher to 2756 with a 2763 tight stop. I will now move my T/P level higher to 2737. If my second sell level is triggered before my 2737 T/P level is filled I will then raise my T/P level to 2746. If any of the above levels are hit I will be back with a new update for my Platinum Members.

EUR/USD

Frustratingly I moved my original 1.1260 buy level in the Euro lower 10 points in yesterday’s comment which in hindsight was a poor decision with the low coming in at 1.1257 before the market rallied to close at 1.1330 in New York. Today I will now raise my buy level to 1.1240/1.1285 with a 1.1195 higher stop.

March Dollar Index

I am still flat the Dollar and today I will now lower my sell level to 97.00/97.40 with a 97.85 stop.

March DAX

The DAX continues to struggle and I am still flat. Today I will now raise my buy level to 10950/11110 with a higher 10875 stop. I still do not want to be short the market at this time.

March FTSE

The FTSE missed my buy level before rallying yesterday and I am still flat. Today I will now move my buy level higher to 7005/7045 with a 6970 stop.

Dow Rolling Contract

Thankfully we had no sell level in the Dow yesterday given its 400 point rally. The market is now well insulated from its 200 Day Moving Average which comes in at 25015 this morning. As a result I will now move my buy level higher to 25120/25270 with a 24995 wider stop.

March NASDAQ

The NASDAQ never came close to my buy level before spending most of yesterday rallying. Today I will now raise my buy level to 6930/6980 with a 6880 stop.

March BUND

I am still flat the Bund and today I will again lower my sell level to 166.65/167.05 with a 167.35 tight stop.

Gold Rolling Contract

I am reluctant to chase the Gold Market higher given the narrow trading ranges over the past few weeks. Today I will leave my 1289/1297 buy level unchanged with the same 1281 stop.

Silver Rolling Contract

No Change as I am still long at 14.83 with the same 14.90 T/P level and 15.45 stop. Again if any of the above levels are hit I will be back with a new update for my Platinum Members