Oil having been the main driver of most of the market price action of the past two weeks, it was Friday’s near 10% rebound that was the catalyst for much of Friday’s retracements and following on from Thursday’s moves inspired by the prospect of additional ECB easing action as early as the March Council meeting. The oil rally looks to have been as much a function of blizzards hitting the East coast of America as the prospect of more central bank largesse or comment from Saudi Arabia’s oil minister that sub-$30 oil was ‘irrational’.
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 both 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 120 points on Friday and is now ahead by 3025 points for January. Since I started this Platinum Service last June it has generated a return of over 17,500 points.
In currencies, unsurprisingly it was the commodity export dependent EM currencies that fared best on Friday (e.g., RUB +5.6%, MYR +2.07% and MXN +1.6%). In G10, the CAD fared best (+1.04% to 1.4119) and JPY worse (-0.91% to Y118.78) while the AUD finished pretty flat at 0.7002 after strong gains on Thursday and NZD lost 0.57% to 0.6493. EUR/USD maintained its pedigree of falling in a risk-positive environment (carry funding currency attractions back on display, down 0.72% 1.0796). ECB president Draghi also added to his message from the previous day’s ECB meeting press conference, saying in Davos that “on inflation things are different. Certainly the situation gives less reason to be optimistic for the time being”.
US stocks closed near the highs Friday, the S&P500 +2.03%, the Dow +1.33% and the NASDAQ +2.66%. The VIX lost 4.35 points, down to 22.34. In US Treasuries, 10yr yields rose by 2bps to 2.05%. Commodities saw Brent crude +$2.93 to $32.18 and WTI +$2.66 to $32.19. The LMEX index added 0.18% and Iron ore gained 91 cents to $42.20. Gold lost $3.25 to $1097.95 so slipping back off the $1,100 handle achieved on Thursday.
Data wise, US Existing Home Sales rose by a stronger than expected 14.7% (+9.2%E) after November’s 10.5% drop, the latter seen to be the result of new mortgage disclosure rules. The Markit version of US manufacturing PMI rose to 52.7, up from 51.2 and better than the 51.0 expected.
Earlier the EZ PMI composite slipped to 53.5 from 54.3 and beneath the 54.1 expected, with manufacturing 52.3 (53.0E, 53.2P) and services 53.6 (54.2E, 54.2P). UK retail sales were weak, headline -1.0% m/m (-0.3% expected) and ex auto fuel -0.9% against -0.3% expected.
Canadian Retail Sales greatly exceeded expectations, +1.7% m/m (+0.4%E) and ex-autos +1.1% (0.2%E) while CPI came in a bit below on the core measure (0.1%m/m vs. +0.2% expected, to pull the annual rate down to 1.9% from 2.0%. Headline was +0.1% as expected but y/y only went up to 1.6% from 1.4%, not the 1.7% expected.
European markets are opening firmer this morning on the back of the 1% rally in the Nikkei which closed at 17100.
This morning on the economic front we have German IFO Business Climate and Current Assessment/Expectations. This is followed at 11.00 am by UK CBI Total Trends. Finally at 2.30 pm we have the Dallas Fed Manufacturing Activity Index on what is the only US data release for today.
March S&P 500
The S&P plan worked well on Friday as the S&P traded higher to my 1897 sell level with a 1900 high print before falling to 1883.50 which enabled me to cover this position at my 1891 T/P level and I am now flat. Friday’s 2% rally in the S&P has left another large ‘Open Gap’ from last Thursday’s Chicago close at 1856 to the 1883.50 low mentioned above and I just cannot see this large Gap left unfilled. However with the FOMC Meeting on Wednesday in which no change in Monetary Policy is expected this Gap may not get fully filled until we get the FOMC out of the way. As most members know at this stage I hate to be short the S&P ahead of an FOMC Meeting but the fact the S&P has rallied 100 Handles since last Wednesday’s afternoon’s low print makes it difficult for me to chase the market higher. As I have mentioned countless times over the past two years it is so hard to be short the market for more than a few hours /days as the Central Banks will always intervene to prevent a stock market crash as they have collectively too much invested in World Indices holding in. Technically the move lower since late December has done a lot of damage so rallies from here will be hard to sustain. Today I will again look to sell the S&P on any rally higher to 1904/1910 with a 1915 stop. My only interest in buying the market is on a dip lower to 1873/1879 with a 1868 stop. If I am taken long and subsequently stopped out I will be an aggressive buyer in front of 1856 with a 1849 stop.
EUR/USD
No change as I am still a buyer on any dip lower to 1.0730/1.0770 with the same 1.0695 stop.
March Dollar Index
I am still flat the Dollar which is trying to test the 100.40/100.70 double top resistance level from 2015. Today I will again look to sell the Dollar on any rally higher to 100.10/100.50 with a 100.85 stop. Remember a break and close over 101 will be very bullish as it opens up the possibility of a move higher to at least 107 over the coming weeks/months.
March DAX
The DAX plan worked well on Friday as the market traded higher to my 9850 sell level before having a nice sell-off this morning which has enabled me to cover this position at my 9790 T/P level as outlined earlier to my Platinum Members and I am now flat. The DAX needs to break and close over 10100/10200 which so far we have had two major Key Day Reversals off this level in 2016 for the market to start to look positive. Today I will again look to sell the DAX on any rally higher to 9860/9920 with a 9970 stop. Despite the large rally in the DAX last week off the 9300 major support level I do not want to be long the market at this time.
March FTSE
Today I will raise my buy level slightly to 5770/5810 with a 5745 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
As mentioned at length on Friday the McClellan Oscillator is the best technical signal for a rally in the US Stock markets when it has a print of at least -250 and preferably near -300 as this is the fourth time since the -335 low print in the MO recorded on August 24th 2015 that we have had at least a 80 Handle S&P tradeable rally in the markets. Last Friday (after the recent 700 point Dow rally off the original weak MO) the MO closed at just -20 I am still flat the Dow which just missed my 16140 sell level on Friday with a 16138 high print before getting hit hard this morning. Today I will lower my sell level slightly to 16130/16200 with a 16250 stop. Despite the positive price action since late Wednesday I do not want to be long the Dow at this time.
March BUND
I am still flat the BUND and today I will raise my sell level slightly to 161.70/162.00 with a 162.30 stop.
Gold Rolling Contract
Gold is still having great difficulty in breaking the key 1080/1100 resistance level on what has been a very quiet trading year so far for both Gold and Silver. I am still flat Gold and today I will raise my buy level slightly to 1078/1085 with a 1069 stop.
Silver Rolling Contract
No change as I am still long Silver at 14.19 which just missed my 14.40 T/P level on Friday with a 14.38 high print. If I manage to T/P on Silver I will again look to buy the market on any subsequent dip lower to 13.95/14.25 with the same 13.65 stop.
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