Equities and non – US Dollar currencies continue to bask in the afterglow of Janet Yellen’s Tuesday Evening’s speech and the associated re-pricing of Fed tightening expectations. The US Money Market has now less than one 25-point increase in the Fed Funds target range priced in by end – 2016. Shorter dated US Bond Yields and money market rates are lower with 2 and 5 year Treasuries off over 2bps, but 10 year Treasuries are 2bps higher versus Tuesday’s close.
To mark my 1050th 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 lost 5 points yesterday but is still ahead by 2235 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 22,000 points.
Extension of Tuesday’s US equity market gains is fairly broad based with IT and Financials leading the way, while Utilities were the only sector to close in the red. All the main US Indices closed up 0.5% for a new closing high for 2016, and bringing the gains since Ms Yellen’s speech hit the tapes to 1.5% for the S&P.
Economic news has been sparse. The ADP US Employment Survey came in at 200K versus a market expectation of 195K, which does nothing to dislodge expectations for a Non-Farm Payroll print tomorrow of close to 200K. Catching a little attention though was German inflation data where the HICP measure lifted to 0.1% y/y from -0.2% in February and above the 0.0% expected. This is though unlikely to prove enough to lift Pan Euro-Zone C PI out of negative territory when reported later this morning.
In currencies, the German data did give a very temporary lift to the Euro that was already travelling north in the context of broad-based US Dollar losses, but lost ground temporarily alongside most currencies in mid-afternoon for no apparent reason. It is commodity and high yielding EM currencies that dominate the FX leader board especially as the South African Rand, Malaysian Ringgit and Columbian Pesos surged.
Outperformance for commodity-linked currencies might seem slightly surprisingly given that commodity prices are for the most part a little softer, albeit oil received a small boost from a smaller than expected rise in US inventories in the past week. Rather than look at commodity prices, we are better off observing that as US equity markets move ahead, the VIX measure of downside volatility risk in the S&P 500 continues to leak lower. Having broken below 14 post-Yellen, it has flirted with a 12 Handle. At 13.06 it is at its lowest since October 2015. Remember it is only six weeks ago that the VIX was trading at 34.
This morning on the economic front we already had the release of German Retail Sales with came in very weak at -0.4% versus +0.4% expected, while the previous month was revised down to -0.1% from +0.7%. At 8.55 am we have German Unemployment and this is followed at 9.30 am by UK GDP and the Current Account. This is followed at 10.00 am by Euro-Zone CPI. Next the US will release its Challenger Job Cuts and the Weekly Jobless Claims at 12.30 pm and 1.30 pm respectively. Finally we have the ISM Milwaukee at 2.00 pm and the Chicago Purchasing Manager Index at 2.45 pm.
June S&P 500
I am not having much luck with my S&P fills this week as yesterday after the US markets opened the S&P traded to a high of 2064.50 just missing my 2065 sell level before having a nice 14 Handle sell-off and I am still flat. I must confess I am amazed how quickly and how low the VIX has fallen as mentioned at length above and definitely the risk/reward is now turning to the sell-side. The high of the S&P on December 30 2015 was at 2067.25 before the market subsequently went into free-fall and I had hoped we would hit this level yesterday before the market started to head south. Today is both Month and Quarter end and we will see a lot of re-balancing in the market making it difficult to go short. I will lower my buy level slightly to 2037/2044 with a 2032 stop, while I will also lower my sell level slightly to 2063/2068 with a 2073 stop as we wait for the very important NFP data tomorrow.
EUR/USD
I am still flat the Euro as the market traded in a relatively narrow range yesterday after its large move higher post Yellen on Tuesday evening. Today I will raise my buy level slightly to 1.1260/1.1290 with a 1.1230 stop. Meanwhile I will leave my sell level unchanged at 1.1410/1.1450 with the same 1.1480 stop. It is amazing that the Euro is trading near the same levels it did 12 months ago but the recent series of upside Key Day Reversal may soon see the Euro break higher to the 1.18/1.20 major resistance level over the coming weeks.
June Dollar Index
No change as I am still a seller on any rally higher to 95.40/95.70 with a 96.10 stop. I still do not want to be long the Dollar at this time.
June DAX
Yet again the DAX traded higher into the major 10100/10200 resistance level before selling off this morning on the weaker German Retail Sales data and I am still flat. Today I will lower my buy level slightly to 9910/9960 with a 9870 stop. I still do not want to be short the DAX at this time as I still believe we will break through this major 10100/10200 resistance level.
June FTSE
Yesterday saw the FTSE trade higher as Fund Managers bought the market for the Month and Quarter end. As I have mentioned over the past few weeks the weaker Sterling is having a positive effect on the FTSE making me reluctant to sell the market. I am still flat and today I will leave my buy level unchanged at 6055/6085 with the same 6025 stop.
Dow Rolling Contract
Unfortunately and as expected I was stopped out of my short 17690 position at 17750 before the market traded to a high of 17792 which just missed my 17840 second sell level and I am still flat. This morning the Dow is following the DAX lower and today I will again look to sell the Dow on any move higher to 17770/17840 with a 17900 wider stop. The lower VIX is telling me that this market is due a decent correction especially as the volumes over the past two weeks for this aggressive move higher has been very weak.
June BUND
My BUND plan worked well yesterday as the market traded higher to my 163.65 sell level shortly after I posted before having a nice sell-off to 163.12 which enabled me to cover this position at my revised 163.40 T/P level and I am now flat. This morning the Bund is rallying on the weaker equity markets and today I will again look to sell the market from 163.70/164.00 with a 164.40 stop.
Gold Rolling Contract
I did not like the price action in Gold yesterday as shortly after the market hit my 1231 buy level I emailed all my Platinum Members to cut their position at 1234 especially as we were already long Silver. With the US Dollar selling-off Gold should have gone higher and this was the main reason that I cut my position. Today I will again look to buy Gold on any dip lower to 1212/1219 with a 1204 stop which is just below the early Monday morning low print at 1205.
Silver Rolling Contract
No change as I am still long at 15.25 with the same 14.80 stop.
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