There was a further advance by US stocks on Monday in thin trading, with trade hopes lifted following weekend comments from US President Donald Trump claiming ‘’big progress’’ was being made towards a deal between the US and China. The Dow rose 1.15%, while the Nasdaq Composite closed up 0.77%. The S&P 500 closed up 0.85%. For the year, the Index was 6.24% lower, its worst annual performance since the GFC. The 9.18% decline last month represented the worst December since 1931. Despite the positive equity sentiment, the final trading day of 2018 saw Treasuries continue to rally, the UST 10yr tightening a further ~3bps into 2.68%. This is the lowest level since last February, the last significant spike in volatility prior to the most recent period. Other parts of the curve tightened. The 5yr was ~4bps tighter at 2.51%, while the 2yr was ~3bps tighter at 2.49%.
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For anyone following my Platinum Service it was flat last Monday as none of my trades were hit. It closed December with a gain of 2803 points, having made 1541 points in November, 2094 points in October and 1279 points in September. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Equities trading in the earlier shortened European session helped provide a solid lead into the US open, with the CAC 40 (+1.11%) gaining strongly. The German stock market was closed for the day. The FTSE 100 did however underwhelm as it posted a very slight decline, in spite of improving risk appetite in other markets. The GBP/USD was perhaps a factor in this, it rallied strongly to above 1.28 mid-way through the day, before settling to finish at 1.2754 by Monday’s finish, up 0.43% on Friday’s close.
The pound’s recent support follows a weekend report of a UK crossbencher plan to force a Brexit delay if Prime Minister May’s deal with the EU is voted down, as well as UK International Secretary Liam Fox’s statement in a Sunday Times interview that the UK’s chances of leaving the EU are 50-50 if Parliament rejects the Prime Minister’s plan.
Other G10 currencies gained against the USD on Monday, including strong performance from both the Swedish Krona (+1.20%) and Norwegian Krone (+0.78%). Meanwhile the Euro continue to rally against the US Dollar closing at 1.1470 which is its highest close in nearly two months.
In commodities, oil continues to see support at current levels, with Brent rising to just below US$54/b. WTI was little changed at just over US$45/b. Other moves were patchy, with some base metals retreating.
There were data releases out on Monday. In Australia, RBA Private Sector Credit (Nov) was in exactly in line with expectations at 0.3% m/m (4.4% y/y), though the data did show a moderation in investor housing credit. The Chinese Manufacturing PMI (Dec) was 49.4, below expectations and the first sub-50 print in over two years. Non-manufacturing PMI (Dec) of 53.8 beat expectations (53.2) and up 0.4 on November’s print. Later that evening, US Dallas Fed Manufacturing Index for December of -5.1 was well below the prior month’s 17.6 and well short of expectations of 15. The result represents the first negative print for the measure since September 2016. The Bloomberg Nanos Canadian Confidence Index for the week of December 28 was 55.1, up slightly on the prior week’s 54.7.
Earlier this morning we had the release of Chinese PMI which disappointed . This saw a 1.15% fall in Chinese Equities.
Over the New Year’s holiday, Kim Jong Un issued a warning that it will seek a ‘’new path’’ with respect to nuclear talks if the US does not relax economic sanctions imposed on North Korea. Returning to US domestic policy, President Trump confirmed he was not giving up with respect to the government shutdown standoff with democrats over border wall funding, later tweeting that he wants to ‘’make a deal’’. It was also reported that an invite was extended to top congressional leaders from both parties to a White House briefing on border security. This followed a confirmation from House Democrats that they will use their soon to be majority on Thursday to vote on legislation to end the shutdown. However the Senate, which remains controlled by the Republicans, has already signalled that it will not act without clearance from the White House.
This morning on the Economic Front we have German, Euro-Zone and UK Markit PMI at 8.55 am, 9.00 am and 9.30 am respectively. Finally at 2.45 pm we have US Manufacturing PMI.
March S&P 500
As I have mentioned on numerous occasions over the past few years the best technical indicator to follow is the McClellan Oscillator. On Christmas Eve when, due to a lack of liquidity the S&P got hammered in the last 30 minutes of trading the MO closed with a reading of -327. This was one of the highest negative closes in history with the official S&P close at 2344. As we know when the S&P re-opened last Wednesday it traded sideways for a few hours before mounting a 5% rally late in the session and that rally continued last Monday with the S&P closing at 2508. The MO finished the year in positive territory with a +55 print. Last night on the re-open of the S&P Futures Market we were trading at 2517. I was very surprised to waken this morning to see the S&P now trading at 2477 as the market got hit hard on the much weaker than expected Chinese PMI data. I would expect at least some of last Monday’s now large ‘’Open Gap’’ to be filled when the US Markets open. Today I will now lower my S&P buy level slightly to 2440/2455 with a 2829 stop. There is no doubt the 2532 area which was the February low and which contained the market on numerous occasions in early December is going to be hard to break. Therefore I will leave my 2530/2545 sell level unchanged with the same 2553 tight stop.
The Euro closed strong after trading sideways for most of the past two months with the market closing the year above the key 1.1425 pivot point. I am still flat and today I will now raise my buy level to 1.1380/1.1420 with a 1.1345 stop. A break and close over 1.1500 in New York this evening should see a much stronger Euro going forward as the market will then look to take out the September 24, 2018 high of 1.1815 over the coming weeks.
March Dollar Index
The Dollar closed at its lowest level since November 19, 2018 on Monday. I am still flat and today I will now lower my sell level to 95.90/96.30 with a 96.65 stop.
The DAX is now trading 1.5% lower than when it last traded on Friday as we wait for the German PMI data at 8.55 am. Thankfully I stayed flat this market over the Holiday period. The DAX has strong support from 10290/10360 and today I will be a buyer on any dip to this area with a 10240 stop.
A combination of a strong Pound and weaker Chinese PMI data sees the FTSE trading 1.2% lower this morning. I am still flat and today I will be a buyer of the March Contract on any further dip lower to 6470/6510 with a 6435 stop.
Dow Rolling Contract
Having traded as high as 23440 shortly after the markets re-opened last night the Dow is now trading 440 points lower at 23000 as 2019 starts with the same two-way volatility as we finished in December. The Dow has strong support from 22650/22800 and today I will be a buyer on any dip to this area with a 22520 stop as we wait to see if there is any progress in getting the US Government to re-open having been closed for the past 10 days. The Dow closed 2018 with a loss of 5.63% having been up over 12% in early October. As the start of a New Year is traditionally a positive time for US Equities I do not want to be short the Dow at this time.
I am still flat the NASDAQ as we wait to see if the large ‘’Open Gap’’ is filled when the US Cash Markets open this afternoon. The NASDAQ has good support from 6100/6150 and today I will be a buyer on any dip to this area with a 6055 stop. I still do not want to be short the market at this time.
The BUND has re-opened strongly this morning helped by the much weaker start to equity markets. I am still flat and today I will be a small seller on any further rally to 164.55/164.95 with a 165.25 tight stop.
Gold Rolling Contract
Gold continues to rally as expected and I am still flat. Today I will again raise my buy level to 1258/1268 with a 1249 stop.
Silver Rolling Contract
I am still flat Silver as the market looks to take out its next key resistance level at 15.71. Today I will again raise my buy level to 14.90/15.25 with a 14.55 stop. If I am taken long I will have a T/P level at 15.55.