The FOMC post Meeting Statement played a very straight bat, not locking themselves in to one course or the other as far as the March 17 meeting decision is concerned, leaving that outcome to the course of the economy between now and then and prospects beyond as it will be assessed at that time. Of course the Fed left rates unchanged at 0.25-0.5% as entirely expected.
To mark my 1000th issue of Tradernoble Daily 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 Platinum Service it made 95 points yesterday and is now ahead by 3215 points for January. Since I started this Platinum Service last June it has generated a return of over 17500 points.
The Statement laid out a pretty clinical and fair summary of economic market developments since December lift-off, modifying their description of the economy reflecting some slowing but with still strengthening labour market recognising generally higher levels of market volatility.
It aims to strike a balance. On the one hand it says the Fed is “closely monitoring global economic and financial developments and is assessing their implications for the labour market and inflation and for the balance of risks”. It dropped its expectation of being “reasonably confident that inflation will rise to 2% over the medium term to 2%, opting for further risk evaluation. On the other side it notes labour market conditions improved further and household spending and business fixed investment have been increasing, now describing that growth as moderate, a slight downshift from December’s “solid” description. They note that the housing sector has improved further, evidenced also by yesterday’s report of a stronger than expected rise in New Home Sales in December.
This Statement that looks to be a holding operation, describing the evolution of a still expanding but recently slowing US economy, telling markets they are not blind to the risks. The Statement does not suggest that the Committee was close to another increase in rates, and March is looking doubtful too without renewed economic strength emerging and less market volatility. The Statement reminded the market that it expects rate rises to be gradual.
US bonds rallied, 2s by 5-6bps since the Fed and a small net gain for the session; December Fed Funds Futures easing back from 0.65% to 0.62%. Currency and equity markets have been whippy, before and after the Statement, with Commodity currencies yesterday following the fortunes of oil that recovered mid-session, but US stocks closed lower on what was another volatilte trading session.
After the US Markets closed, the RBNZ left the OCR unchanged at its latest meeting, noting that further deprecation of the NZD would be appropriate (Fonterra a little earlier reduced its 15/16 milk price forecast more than expected), and while core inflation is close to target, some monetary easing ahead may still be required.
This morning on the economic front we already had the release of German Import Price Index which printed -1.2 versus -1.1 expected. At 9.30 am we have UK GDP and the Index of Services. This is followed at 10.00 am by Euro-Zone Business Climate Indicator. At 11.00 am we have UK CBI Reported Sales followed by German CPI at 1.00 pm. Next up at 1.30 pm we have US Durable Goods Orders and the Weekly Jobless Claims. Finally we have Pending Home Sales and the Kansas City Fed Manufacturing Index at 3.00 pm and 4.00 pm respectively.
Overnight the Shanghai had another weak trading session with the stock market closing 2.9% lower which so far is not affecting the European markets which have been very resilient over the past 48 hours.
March S&P 500
What a wild 24 hours for the S&P which has traded up and down in a large trading range of 1865/1910 since I posted yesterday morning. Yesterday proved again that if you buy weakness ahead of the FOMC Meeting you will be rewarded but you must exit any long position ahead of the announcement. Unfortunately after I posted yesterday morning the S&P twice missed my 1879 buy level by 1 Handle which was very frustrating when subsequently the market rallied by 30 Handles to 1910 ahead of the FOMC Statement. After the market sold off after the Statement release the S&P was trading at 1894 at 7.45 pm when I had to leave the office and what happened in the next 90 minutes of trading was wild with the S&P trading lower to 1865 before rebounding 15 Handles into the close. As the market had already tested my 1879 buy level twice without getting filled I did not trade for the rest of the session and I am still flat. For those who bought the S&P and got stopped at 1869 my 5 Handle Rule would have put you long again at 1870 before the market rallied over 1880 into the close thus reversing any losses that may have occurred. As mentioned above the European Markets are very resilient at this time making it difficult to go short the S&P. Today I will look to buy the market on any dip lower to 1876/1882 with a 1871 stop. Again if I am taken long and subsequently stopped out I will use my 5 Handle Rule to go long again with a stop below whatever new low is printed.
EUR/USD
No change as I am still a buyer on any dip lower to 1.0800/1.0835 with a 1.0770 stop. As I mentioned at length yesterday the ramifications for a stronger Dollar from here are big especially in relation to the Emerging Market Currencies which have gotten decimated over the past 12/18 months.
March Dollar Index
No change as I am still a seller on any rally higher to 99.50/99.80 with a 100.10 stop.
March DAX
Surprisingly the DAX traded strongly yesterday despite the woes that the US Indices encountered. One of the main reasons for this was the significant upside Key Day Reversal in the DAX on Tuesday. Unfortunately the DAX just missed my 9670 buy level with a 9695 low print overnight which is frustrating when you see the market trading nearly 200 points higher this morning. Despite the negative start to 2016 it is still difficult to be short the market for more than a few hours/few days as the rebounds are huge and can occur at any stage. It was only last Wednesday that the DAX was trading below 9300. For these reasons I will move my buy level higher to 9750/9810 with a 9690 stop which is just below the overnight low print. The DAX has major resistance at the 10200 level and I will look to sell the market on any rally higher to 10160/10220 with a 10260 stop.
March FTSE
Following Tuesday’s upside Key Day Reversal the FTSE has just like the DAX above held in very well despite the negative price action in the US Markets. The fact that we have month end tomorrow which traditionally sees new monies put to work in the FTSE maybe last Wednesday’s low print below 5700 for the March Contract may hold for the time being. I am still flat the FTSE which yet again just missed my 5810 buy level after I posted yesterday morning. For these reasons I will move my buy level higher to 5890/5930 with a 5860 stop.
Dow Rolling Contract
Just like the S&P above the price action in the Dow was insane. The Dow having traded as high as 16238 ahead of the FOMC fell nearly 400 points before rebounding this morning. Interestingly despite the Dow falling 222 points yesterday the McClellan Oscillator only weakened from +20 on Tuesday’s close to last night’s close at -7. Normally when you get a 200 point Dow decline the MO would weaken substantially. Given all of the above and the fact that the main European Indices had Key Day Upside Reversals on Tuesday then maybe we have seen the low in the US Indices for the time being. Yesterday my Dow plan worked well as shortly after I posted the Dow traded back below my already long 16055 level before having a quick rally following the opening of the US Markets which enabled me to cover this position at my 16100 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the Dow on any dip lower to 15920/15980 with a 15860 stop.
March BUND
My short 162.05 BUND position worked well yesterday as thankfully by the time that I posted yesterday the BUND was trading at 162.15 before having a nice sell-off to 161.50 which enabled me to cover this position at my 161.80 T/P level as I wanted to be flat ahead of the FOMC Statement release. I am still flat and today I will again look to sell the BUND on any further rally to 162.30/162.60 with a 162.85 stop.
Gold Rolling Contract
I am reluctant to chase the Gold market higher especially as I have a reasonably large long Silver position on board. Therefore today I will leave my buy level unchanged at 1097/1105 with a 1091 stop.
Silver Rolling Contract
No change as I am still long Silver at 14.30 with the same 13.95 stop.
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