The last hour of US stocks trading is often referred to as the ‘’hour of power’’ such is the scale of moves (both up and down) often recorded by the major US Indices. Yesterday it would be better referred to as the ‘’four hours of power’’, with a large crack appearing under the market at exactly midday New York time with four hours of trading still to come. Financials (-4.2%) have led the slide in the S&P500, a predictable response to the ever-flattening US yield curve, where the 2/10s spread has made a new post-June 2017 low just beneath 10bps (11bps now). Adding to the malaise here have been comments from JP Morgan chief Jamie Dimon warning of flat earnings in the current quarter. It is not just about the yield curve though, with doubts about whether the Trump-Xi handshake and agreed 90-day moratorium on further tariff action was anything more than just that. For one, the US administration has already had to row back on Trump’s twitter claims that China ahead agreed to reduce tariffs on US auto imports while officials on the Chinese side have been notably mum on what was agreed last Sunday (currently being ‘’explained’’ by the absence of President Xi and other Chinese official from the mainland). This hit the Dow hard with the market falling 3% to record its fourth largest point drop in history.

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Ongoing Brexit related turmoil looks to have created some fresh ripples outside of the UK coastline, after the UK Parliament ruled the government to be in contempt over its earlier failure to publish legal advice implying that the EU had a veto over when or whether the UK could avoid having to adhere to the Irish backstop contained in the Withdrawal Agreement (which as it stands would lock the UK (or Northern Ireland at least) into the Customs Union indefinitely). UK PM Theresa May currently looks to be scrambling to mitigate the risk of the government losing a no-confidence vote if Parliament next week rejects the Withdrawal Agreement.


The US dollar is back together with the Japanese yen displaying its pre-eminent safe haven characteristics. Gains in the DXY accelerated as soon as the stock market slide accelerated, having earlier being given a lift by comments from NY Fed President John Williams who said he sees further gradual rate hikes over the next year or so (something the market is most definitely not thinking is likely judging from current market pricing that now has barely two more hikes priced into the money market curve between now and the end of 2019). DXY has ranged between 96.0 and 97.70 in the last month, and currently sits at almost exactly 97.0, little changed on the day but up well over 0.5% from its intra-day lows.

USD/JPY is down 0.8% on Monday’s close, far and away the best G10 FX performer of the past 24 hours, having proved largely immune to the sharp US and global stock market falls in October amid an absence of repatriation flow judging from weekly Ministry of Finance data. Perhaps this will now show up on the next few weeks’ releases.

Sterling meanwhile is back to flat on Monday’s close, all of the gains that came earlier on news of an opinion issued by the European Court of Justice that the UK could unilaterally rescind its March 2017 letter invoking Article 50 reversed, on news of parliament voting in favour of the government being in contempt over its earlier failure to publish legal advice to the effect that the EU had a veto over when or whether the UK could avoid having to adhere to the Irish backstop provision contained in the Withdrawal agreement (that as it stands could condemn the UK or Norther Ireland at least  to remain inside the EU Customs Union indefinitely).


The continuing bull-flattening theme in US Treasuries that carried further after I posted yesterday morning was accentuated in the New York session, with the 10yr UST making a low just above 2.88%  (down some 8.5bps on the day) before pulling back up to 2.92% in the last hour of trading. The 2 yr note yield meanwhile has been restrained by the aforementioned Williams comments, at best down 3.5bps and currently off only 1.5bps on the day. The 2/10s curve sits at 11bp and has been 10bps (new post-June 2007 lows). I would point out here that as a recession lead indicator, it is the 3m/10yr spread that has better predictive powers. This currently sits close to 50bps.


Oil is currently slightly flat on the day with hopes that OPEC+ will agree production cuts following their meetings commencing tomorrow offset by the impact of a stronger USD. Elsewhere it is a fairly mixed picture though iron ore has done well (+1.9%) as too metallurgical coal (+3.7%) so both reversing a bit of the recent sharp declines.

Coming Up

The official day of mourning for George H. W. Bush means that US stocks and bond markets (both cash and futures) won’t trade on Wednesday. Technically it will be a normal North American day for FX.

This morning on the Economic Front we have German Euro-Zone and UK PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Retail Sales. Finally at 3.00 pm we have the Bank of Canada Rate decision.

Fed chair Jay Powell’s previously scheduled Congressional Testimony has been cancelled (and not rescheduled) but the Beige Book will be released ahead of the Dec 18/19 FOMC meeting.

Earlier at 8.30 am we have a speech from ECB President Dragi at 8.30 am in Frankfurt.

December S&P 500

What a day with most of last week’s rally getting reversed in another dramatic US trading session with the S&P closing 90 Handles lower. My S&P plan worked well with the market trading lower to my 2770 buy level before rallying to my 2777 T/P level. Subsequently I emailed my Platinum Members to re-buy the S&P at 2769 and to cover this position and stay flat at 2773 as I did not want to have any exposure overnight given the fact that the US Futures and Cash Markets are closed for the George H.W. Bush funeral. As there is no market today my next update for the S&P will be tomorrow.


Late in the New York session the Euro traded lower to my 1.1320 buy level before rallying to my 1.1342 revised T/P level and I am now flat. I will look to buy the Euro again on any dip lower to 1.1260/1.1300 with a 1.1225 stop.

December Dollar Index

No change as I am still a small seller on any rally higher to 97.35/97.70 with a 98.05 stop.

December DAX

As I wanted to hang on to my points made yesterday morning/afternoon I did not buy the DAX when the market dropped late in the after- hours session and I am still flat. Despite the aggressive sell-off in the US Indices the DAX held in well. The DAX has strong support from 10940/11010 and today I will be a buyer on any dip to this area with a 10880 tight stop.

December FTSE

My FTSE plan worked well with the market trading lower to my 7010 buy level before rallying to my 7035 T/P level and I am still flat. The renewed weakness in Sterling prevented the FTSE from having a significant fall late yesterday. The FTSE has strong support from 6840/6890 and today I will be a buyer on any dip to this area with a 6790 stop.

Dow Rolling Contract

The Dow fell over 800 points yesterday to record it’s fourth largest points fall in history. As I had a good day already in other markets I stayed away from buying the Dow once I heard about the fact that Trump ‘’fabricated’’ his so called agreement with China in last Sunday’s tweet. This is a new low even for him to mislead the markets in that way. With the US Indices closed today my next commentary will be in tomorrow’s Daily Commentary.

December NASDAQ

The NASDAQ fell nearly 400 points from Monday’s close in what turned out to be a brutal session for the FANG stocks. I am still flat and will stay that way until tomorrow.

March BUND

The December contract expires today with the March Contract trading at a 90 point premium to the December Contract. Late yesterday the December Contract traded higher to my 162.15 sell level. Immediately I emailed my Platinum Members to exit any short position in this contract which I did at a price of 162.27 and I am now flat. The continued fall in German Bond Yields shows the worrying state of the Euro-Zone economy which in my opinion is close to entering another recession. The March Bund has resistance from 163.60/164.00 and today I will be a seller on any rally to this area with a 164.40 stop.

Gold Rolling Contract

Gold again close over the key 1230 pivot point. I am still flat and I will now raise my buy level to 1216/1223 with a 1208 stop.

Silver Rolling Contract

I am still flat and I will now raise my buy level to 14.15/14.45 with a 13.80 stop. If I am taken long I will have a T/P level at 14.70.