In terms markets, where are we now? Well, yesterday when I posted investors were still worried about another equity rout notwithstanding the relative stability in Chinese equity markets. European stocks had a terrible start following news that Renault had been raided by authorities as part of a national investigation linked to VW emission scandal. Following the news, the Stoxx Europe 600 index fell 3%, but later the index managed to pared some losses ending the day -1.6% . US equities opened under pressure, but a rebound in oil boosted energy stocks and a healthy earnings report from JP Morgan also contributed to the rally. The bank showed a 10% jump in Q4 profits, helped by strong performance within its investment banking division.
To mark my 1000th issue of tradernoble Daily Market Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/5 updated emails throughout the trading session. This offer is open to existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my new Platinum Service it made 540 points yesterday and is now ahead by 2140 points for January. Since I started this service last June it has generated over 17,000 points to date.
In currencies, the USD is stronger against most G10 with the Norwegian Krone and AUD the two exceptions. The first one aided by a rebound in oil and the second boosted by yesterday’s better than expected Employment numbers. The NZD lost ground against the USD and the late US equity rally appears to have contributed to the underperformance of the Yen.
Core Global Bond Yields had a mixed 24 hours, 10y Bunds and 10y UK are little changed at 1.729% and 0.572% respectively. US Treasury yields initially traded in a sideways pattern, but later in the day a soft 30y bond auctions as well as a late rally in equities pushed longer dated yields higher.
Looking at commodities, there was no news attributed to the rebound in oil prices either than an improvement in risk appetite. WTI gained 2.38% to close above the $31 mark. Gold is down 1.86% to $1073 while Iron ore has gained 1.8% and is back above $40. However after another sell-off in equity markets this morning Oil is back trading near $30 while Gild is $12 higher at 1085.
Yesterday the BOE left rates and QE on hold as expected and McCafferty did not abort his call for a rate hike (vote was 8-1). The Committee noted the current oil price fall means UK CPI will rise slightly more gradually than previously expected and should support UK spending in time.
ECB minutes from their December meeting were also released after I posted yesterday and they revealed some policy makers wanted the ECB to act more aggressively, pushing for a 20bps cut in the Deposit rate instead of the 10bps that eventuated. Staying with the ECB, after a previous story that suggested the ECB council was considering further stimulatory policies on the back of oil price declines, an exclusive Reuters interview contradicted this view reporting that “many” ECB policy makers are “sceptical” about the need for policy action near term .
US Fed Bullard (hawk and voter) was also on the wires and noted that the renewed decline in oil is “becoming worrisome”. He also said that while Central Bankers tend to “look through” oil price changes, one circumstance where they may become more concerned is when inflation expectations begin to change. To this point, I would note that the renewed decline in oil since December has weighed down on inflation expectation across many countries, including the US.
This morning European Equity markets are under pressure following the 4% fall in the Shanghai and Oil prices getting hit again. On the economic front it is a busy day. At 10.00 am we have Euro-Zone Trade Balance. This is followed at 1.30 pm by US Retail Sales. PPI and the Empire Manufacturing Index. At 2.15 pm we have Capacity Utilization and Industrial Production. Finally at 3.00 pm we have Business Inventories and University of Michigan Current Conditions.
Today is also a busy one of Fed speakers with Dudley (voter, moderate), Williams (non-voter, moderate) and Kaplan (nonvoter, mild hawk) in the roster. New York Fed Dudley’s views are seen to be closely aligned with the Fed Chair Yellen and as such his comments should warrant more attention.
March S&P 500
The volatility in the S&P continues without any time to draw breath. Shortly after the US Markets opened the S&P traded lower to 1971 which enabled me to go long at 1975. Subsequently as mentioned at length about my three criteria for a tradeable bottom kicked in with the S&P rallying over 50 Handles. I covered 50% of my position at 1895 and unfortunately with the Chinese news overnight I have just gotten stopped out of the balance at the same price and I am now flat. The McClellan Oscillator improved to print a still oversold negative reading at -180. The fact that we now have a large ‘Open Gap’ from last night’s close plus the fact that this evening the January Options Expire means I still do not want to be short the S&P at this time. Therefore I will again look to buy the market on any further dip lower to 1877/1886 with an 1870 stop. Again if I am taken long and subsequently stopped out I will use my 5 Handle Rule to go long with a stop below whatever new low is printed. I will also be a buyer in front of 1862 with an 1854 stop.
EUR/USD
Thankfully after I posted the Euro traded back below my already long 1.0905 price level. Subsequently the Euro rallied to 1.0944 which enabled me to T/P at 1.0932 as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.0810/1.0850 with a 1.0870 stop. I still do not want to be short the Euro at this time.
March Dollar Index
Late yesterday the Dollar traded higher to my 99.25 sell level. I am still short and today I will use any dip top 98.95 to T/P on this position and go flat.
March DAX
The DAX had another wild 24 hours since I posted. Shortly after I sent out my Daily Commentary the DAX traded down to my 9620 buy level before having a massive 300 point rally. I covered my position too early at 9660 as I was already long the FTSE and I am now flat. Today I will again look to buy the DAX on any further sell-off to 9590/9650 with a 9560 stop. Despite the negative price action I do not want to be short the DAX at this time.
March FTSE
Thankfully the FTSE traded back below my already long 5780 position shortly after I posted yesterday morning. Subsequent the FTSE had a nice rally which enabled me to T/P at my 5860 level as outlined earlier to my Platinum Members and I am now flat. If you want to have some long exposure to the equity markets at these levels then in points terms the FTSE is the less risky of the four Indices that I cover. Today I will again look to buy the FTSE on any dip lower to 5770/5810 with a 5740 stop.
Dow Rolling Contract
My Dow plan worked very well yesterday as shortly after the US Markets opened the Dow traded lower to my 16100 buy level before having a nice 350 point rally which enabled me to T/P on this position at my 16180 T/P level and I am now flat. This morning the Dow is following the other main Indices lower and I will again look to buy the market on any further dip lower to 16010/16080 with a 15950 stop.
March BUND
My short 159.95 BUND position taken late on Wednesday finally worked out as the BUND traded lower after I posted which enabled me to T/P on this position at my 159.80 level as outlined earlier and I am now flat. This morning the BUND is trading back above 160 and I will use any further rally higher to 160.50/160.80 to go short with a 161.10 stop.
Gold Rolling Contract
My Gold plan also worked well yesterday as when the Equity markets rallied Gold traded lower to my 1073 buy level before having a nice rally overnight which enabled me to cover this position at 1083 as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy Gold on any dip lower to 1065/1073 with a 1059 stip.
Silver Rolling Contract
No change as I am still long at 14.19 with the same 13.65 stop.
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