After last week’s ECB and RBNZ Monetary Policy announcements, Central Banks are again in the spotlight this week as earlier this morning the Bank of Japan left rates unchanged as we wait for the Fed tomorrow evening and the Bank of England on Thursday. In contrast to last week, expectations for any policy change this week are pretty low, that said the market will be watching for any hints about the next policy move while at the same time Central Bankers will be closely watching the market reaction to their moves. The Fed will be conscious of emphasising the need to tighten, but only gradually. This message will need to be balanced against the ‘Dot plot’ of Fed Members’ projected Funds Rate. Historically these projections have proved to be too aggressive. In December officials projected another four rate increases in 2016, in today’s environment that looks way to aggressive.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary which includes 1/4 updated emails throughout the trading day. 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 anyone following my Platinum Service it lost 35 points yesterday but is still ahead by 1245 points for March having made 2265 points in February and a record 3365 points in January. Since I started this service last June it has made over 21,000 points.
One of the key points in the Bank of Japan Statement released in the last hour was the exemption from negative interest rates for Money Reserve Funds (MRF) which came as no great surprise. The Nikkei has closed down 0.7% on this news at 17117 while the BoJ Governor Kuroda is still speaking as I write this commentary. He said the BoJ will continue with negative interest rates for as long as they are needed. He also said they will need some time to watch the impact of negative rates.
The somewhat delayed market uplift from the ECB stimulus last week has now turned into a more cautiously optimistic mode. Yesterday Asia and European equity markets extended their Friday gains while the US stocks have traded in and out of positive territory, reflecting a more hesitant mood. Gains in US consumer companies have been offset by losses in financial and energy stocks as oil prices fell following comments from Iran over the weekend that it won’t freeze production until production climbs to 4m b/d.
This cautious mood has been reflected in currencies with the safe haven Yen the only outperformer against the US Dollar. G10 commodity related currencies are at the bottom of the leader board led by the NZD which fell 1.21%.
Global Core Bond Yields had a quiet but mixed 24 hours. In Europe the German Bund closed higher at 0.28% after last Thursday’s Key Day Reversal while UK 10 Year Gilts closed 3bps lower at 1.55%.
WTI Oil ended the day -3.2% and Brent closed 2.1% lower. In other commodities, Iron ore lost another 2.7% closing at $55.6 which is well below its $67 price last Friday. Copper gained 1.7% while Gold lost 2.5% and is currently trading at $1230.
This morning on the economic front we have Euro-Zone Employment at 10.00 am. This is followed at 12.30 pm by US PPI, Retail Sales and the Empire Manufacturing Index. Finally at 2.00 pm we have the NAHB Housing Market Index and Business Inventories.
March S&P 500
The S&P traded in a narrow range yesterday as we wait for the FOMC announcement at the earlier time of 6.00 pm tomorrow. I am still flat and today I will continue to look to buy the market on any further weakness to 1998/2005 with the same 1992 stop. It is interesting despite the US Indices closing flat to modestly lower the McClellan Oscillator (which is the internal reading of the stock market) got hit hard while closing at a still strong positive reading of +166 versus its +228 reading last Friday. There is no doubt after the 220 Handle rally over the past month that the S&P will have major difficulty in breaking the now huge resistance at 2030/2050 and longer term players can look to set up a macro short position in this area if we spike into this area following tomorrow’s announcement. Today I will leave my sell level unchanged at 2027/2034 with a 2041 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 2050 with a 2062 stop.
EUR/USD
I am still flat the Euro which again came close to hitting my 1.1065 buy level with a 1.1078 low price before rallying again over 1.11. Today I will raise my buy level slightly to 1.1050/1.1080 with a 1.1020 stop. I still do not want to be short the Euro after last Thursday’s upside Key Day Reversal.
June Dollar Index
No change as I am still looking to go short on any spike higher to 96.85/97.15 with a 97.45 stop following last Thursday’s downside Key Day Reversal.
March DAX
This is the one market that I trade which on most days represents a casino given the volatility. I am still flat the DAX and today I will lower my sell level to 10010/10060 with a 10120 stop. Remember the DAX needs to break and close over 10200 for the market to turn bullish following the sequence of downside Key Day Reversals since the famous ECB Meeting on December 3 last. The fact that the DAX managed to close over the 9800 previous resistance level this price should act as decent support on any further sell-off. Today I will look to buy the DAX from 9780/9840 with a 9730 stop.
March FTSE
My short 6180 FTSE position worked well with the market trading at 6115 this morning which enabled me to cover this position at my 6150 T/P level and I am now flat. Today I will look to buy the FTSE on any further dip lower to 6055/6085 with a 6030 stop. I do not want to short the FTSE here ahead of the FOMC tomorrow.
Dow Rolling Contract
My Dow plan worked very well yesterday with the market trading higher to my 17260 sell level with a 17277 high print before getting hit hard overnight and is currently trading 100 points lower. If you are still short I would look to cover this position here especially with the FOMC Meeting tomorrow as I would expect the market to have limited downside from here. Unfortunately I emailed my Platinum Members to raise their sell level from my initial sell range at 17260 and we did not get hit and are still flat. Today I will raise my buy level to 17030/17090 with a 16970 stop. I do not want to be short the market ahead of the FOMC tomorrow.
June BUND
Frustrating the BUND missed my 162.25 sell level by 3 points after I posted yesterday morning and I am still flat which is annoying as the BUND subsequently traded 100 points lower and I am still flat. Today I will lower my sell level slightly to 161.95/162.25 with a tight 162.55. I still do not want to be long the BUND after last Thursday’s huge Key Day Reversal.
Gold Rolling Contract
My fear that Gold was trading heavy certainly played out yesterday but unfortunately after lowering my buy level to 1235.50 I was still stopped out of this position overnight at 1229 and I am now flat. Today I will again look to buy Gold on any further dip to 1215/1223 with a 1208 stop.
Silver Rolling Contract
The move lower in Silver has seen the market hit my 15.28 buy level. I am still long and today I will raise my stop on this position to 14.85.
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