Originally published by AxiTrader
Market Summary (7.16am)
US stocks are a little weaker this morning led lower by tech shares as concerns grow about the sales and volume impact – or lack thereof – from Apple's (NASDAQ:AAPL) new iPhone X. That hit Taiwanese supplier shares yesterday and has leaked into US trade today.
So the Nasdaq is off half a percent at 6,431, while the Dow and S&P 500 are off only marginally with falls of 0.1% respectively.
Theoretically, this gives a negative lead to the local market but strength on oil and metals markets, along with strength in gold markets has futures pointing higher this morning. So after Friday’s close at 6,069 there is every chance the S&P/ASX 200 heads toward 6,100 as we end the year.
On forex markets beside the euro flash crash it’s been fairly quiet. The Aussie dollar has been buoyed by the strength in commodities and is up at 0.7727, the kiwi and Canadian dollar are likewise doing well while the majors are fairly quiet, with the US dollar under mild pressure from the yen and pound.
All the action is in commodity markets. The Saudi budget and Libyan attack on a pipeline have driven prices sharply higher with both Brent and WTI up around 2.5%. Gold has hit $1283, while copper touched the 50% retracement of the 2011/2016 sell off as it took the 2017 highs.
Quite a solid backdrop for the Aussie and the S&P/ASX 200 today really. It’s thin, which could aid both markets upside chances.
Besides API crude stocks in the US there is nothing of great import out in the next 24 hours.
Here's What I Picked Up (with a little more detail and a few charts)
International (everything is in this section till the new year)
- YOU JUST HAVE TO SEE THIS CHART I saw on Twitter (@PainCapital) over the break. It’s of the long term downtrend in US 10-year Treasury rates and the coincidence of crises as rates hit the top of the channel. Frankly, it’s a weird chart that suggests to me rather than bonds cause crises that crises pull bonds back from a trend break. But it is interesting nonetheless as we head towards month and year-end with a possible break of this trendline.
- The euro had a flash crash of 3% Christmas Day as either an Algo or a “Fat Finger” saw the single currency collapse and quickly recover in what was necessarily thin holiday trade. It’s recovered it’s poise this morning to sit at 1.1800.
- In general it’s been fairly subdued forex trade since last Friday’s note. The Mexican central bank has continued operations to bolster the peso, the South African rams has continued to celebrate the power transition but otherwise there is not much change. The Australian dollar sits at 0.7726 just below important Fibonacci resistance, the kiwi is also higher at 0.7730, and the Canadian dollar is a little stronger with USD/CAD at 1.2690. Sterling is up as well at 1.3381, while despite some good data yesterday USDJPY is at 113.13 - most likely because BoJ governor Kuroda continues to signal continuing monetary stimulus despite the recovery.
- Here’s an interesting thought for 2018. Most analysts forecasts are bullish for US stocks in 2018. But what if a rotation out of this year's leaders - FAANGS - into stocks that do well under the tax cuts and growth scenario simply means US stocks mark time? I say that after Taiwanese reports Apple's (NASDAQ:AAPL) iPhone X is not shipping anywhere near the volume expected and as regulatory scrutiny seems to be lifting for the tech giants. Just a thought.
- So the Saudi’s reckon oil is going to head to and hold $75 a barrel in the next few years. That seems to be the implicit expectation from reports of how the Kingdom thinks it will get its budget back in surplus by 2023. I know, I know, US shale might have something to say about that. Not to mention actual global demand. But clearly the Saudi’s are backing their forecast or tightness. And possibly US producers new found love of actual returns in equity not just production stats. Either way as Bloomberg highlights the Saudis reckon revenues will increase “to 801.4 billion riyals ($214 billion) from 440 billion riyals this year”.
- Anyway, the wash-up of the Saudi budget news and a Libyan pipeline disruption is that prices for crude are sharply higher again this morning. WTI is up 2.45% at $59.90 while Brent crude (where the Forties pipeline is back on line for limited flow after repairs) is up 2.59% to $66.94. That’s taken both price above their recent highs which gives me a Fibonacci projection of $64.00 for WTI and $74.00 for Brent – although $67.55 is the top of the current up channel.
- Gold is still rallying and has hit my target of $1283 I set on the break of $1260. A little USD wavering is certainly helping the yellow metal.
- News that China’s second biggest producer was halting output on pollution concerns certainly haven’t harmed prices and as a result copper is higher as well and actually traded up and through recent highs as well with prices hitting the 50% retracement level of the 2011/2016 selloff just above $2.29.
- On North Korea - Chinese export and import data showed the nation went above and beyond in completely cutting off the DPRK. It’s a sign of the growing isolation and global efforts to reign in the rogue nation. It’s likely China wants a conflict on the peninsula only slightly less than the South Koreans and this is a assign of pressure to get the North Koreans to the negotiation table. That’s something the South Koreans reckon will happen and something the Russians are happy to facilitate.
Have a great day's trading.