Following a tumultuous Wednesday and Thursday, markets went out with something of a whimper on Friday. Stocks continued to rally in both Europe and the US, while Treasury Yields extended their post – FOMC falls. The US Dollar rallied small with every G10 currency giving back a little of their sharp mid-week gains – led by a 0.7% fall in the Kiwi. In FX, the narrow DXY Dollar Index added back 0.34% but was still well down 1.1% on the week following its Key Downside Reversal after the ECB rate cut the previous week. Meanwhile the broader BBDXY Index closed 0.25% higher on Friday but still down 1.3% on the week.
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 new and existing members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 20 points on Friday and is now ahead by 1805 points for March having made 2265 points in February and a record 3365 points in January.
EUR/USD drove the rise in the DXY, falling 0.42% to 1.1270 and this fall has continued this morning with the EUR/USD back trading at 1.1250 as I write this commentary. The AUD/USD ceded a little ground trading 0.75% lower at 0.7580 having been as high as 0.7650 while Cable (GBP/USD) is currently trading 0.5% lower after the resignation of the well know Conservative member Iain Duncan Smith.
In stocks, US Indices added 0.5% on average with the S&P500 +0.44% to a new closing high for 2016 at 2049.58, while the Dow closed 120 points higher at 17,602. In Europe the Eurostoxx50 added 0.55% though is still down 0.5% on the week. The VIX dropped a further 0.42 to 14.03 having traded on a 13Handle for part of Friday with a 13.75 low print. Remember it is only five weeks ago that the VIX was trading north of 34.
In US Interest Rates, Bonds modestly extended their post – FOMC rally, 2 year’s finish 3bps lower at 0.84% for a 12bps drop on the week and 10 year’s -2 bps lower at 1.87% having traded over 2.0% last Monday. The firmer Dollar has knocked Gold down to $1241 this morning from $1264 on Friday while Oil is currently also trading 1% lower this morning.
CFTC/IMM positioning data for the W/E 15 March shows overall USD speculative longs versus G10 currencies were further trimmed back just in front of the FOMC, to +43.2K from +55.3K. This was driven by significant pairing of shorts in Sterling to -13.6K from -49.0K the previous week in what was a week that saw incoming ‘Brexit’ polls reveal a shift in favour of the ‘remain’ camp (subsequently reversed). In contrast net EUR shorts were slightly extended in what was ECB week, -77.6K to -71.9K.
The main data note on Friday was the University of Michigan’s March US preliminary Consumer Sentiment which fell to 90.0 from 91.7 and beneath the 92.2 expected. Weaker stock markets at the beginning of March were blamed. More significantly in my mind was the 5-10 year inflation expectations reading rising to 2.7% from 2.5% as did the 1-year reading. Fed speak came from the ever-forthright James Bullard who is a current FOMC voter, and who said in prepared remarks that the US Central Bank’s inflation and employment goals have essentially been met and it would be ‘prudent’ to edge interest rates higher.
This morning on the economic front we have Euro-Zone Current Account and the UK CBI Trends at 9.00 am and 11.00 am respectively. At 12.30 pm we have the Chicago Fed National Activity Index. Finally at 2.00 pm we have US Existing Home Sales. Later this afternoon the Fed’s Lockhart will speak in Georgia on the US Economy.
June S&P 500
The S&P traded in a very narrow range on Friday ahead of the Quarterly Expiration which as I mentioned on Friday tends to be one of the most difficult trading sessions of the year to read. Late on Friday afternoon the S&P traded higher to my 2042 sell level and as I was already stopped out of my short Dow position I covered this traded shortly after the US Markets re-opened last night at 2037 and I am now flat. This morning the S&P has traded as low as 2031 before rebounding as I write this commentary. Interestingly and despite the 0.5% rally in the Dow and S&P on Friday the McClellan Oscillator fell 7 points to close at +187 from last Thursday’s +194 print. After the near 250 Handle rally in the S&P off its 1804 low print just five weeks ago this market is now overbought on both a Daily and Weekly basis but as I have mentioned countless times the Central Banks hold all the cards and will do whatever they have to do to prevent a stock market crash as every ‘bear’ has just been destroyed in this time. Today I will again look to sell the S&P on any further rally to 2044/2049 with a 2054 stop. Given how overbought this market is trading my only interest in buying the S&P is on a dip to 2017/2024 with a 2012 stop.
EUR/USD
No change as I am still a small buyer on any dip lower to 1.1170/1.1210 with a tight 1.1145 stop. Unfortunately the Euro twice missed my 1.1345 sell level on Thursday by a few points as yet again the Bollinger Band and Williams Index proved what a fantastic short-term trading too they both are.
June Dollar Index
No change as I am still a seller on any rally higher to 95.70/96.00 with the same 96.30 stop. I still do not want to be long the Dollar at this time especially following its second downside Key Day Reversal in less than a week.
June DAX
Unfortunately the DAX just missed my 9860 buy level this morning with a a 9890 low print before turning around and rallying strongly and as a result I am still flat. As I have mentioned countless times over the past weeks the DAX needs to break and close over 10200 for the market to look more positive. Today I will raise my buy level slightly to 9840/9880 with a 9790 stop. My only interest in selling the DAX is still on a rally to 10130/10190 with a wider 10250 stop.
June FTSE
My FTSE plan finally worked out this morning with the FTSE hitting my 6095 buy level before having a nice rally which enabled me to cover this position at 6125 as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the FTSE on any dip lower to 6065/6095 with a 6040 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately my short 17500 Dow plan did not work out well on Friday as I was stopped out of my position near the high of the day at 17580 and I am now flat. As I mentioned in my S&P commentary above the fall in the MO could be a warning sign that a correction in the US Markets is finally at or close to hand. Today I will again look to sell the Dow from 17650/17730 with a 17780 stop. Given how overbought the Dow is trading and despite the positive price action I do not want to be long the market at this time.
June BUND
The BUND just missed my 162.30 T/P level on my 162.65 short position before rallying on Friday. This morning the BUND thankfully opened lower this morning and I emailed my Platinum Members to cut this position at 162.45 and I am now flat. With the BUND subsequently trading higher I will again look to go short on any further rally to 163.10/163.40 with a 163.65 stop. I still do not want to be long the BUND after the significant Key Day Reversal 10 days ago following the ECB rate cut.
Gold Rolling Contract
Earlier this morning Gold hit my 1242 buy level. As I am already long Silver I will use any rally to 1248 to cut this position I will leave my stop unchanged at 1233.
Silver Rolling Contract
No change as I am still long Silver at 16.00 with the same 15.45 stop.
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