An improvement in risk appetite has helped global equity markets recover most of its losses from last Monday with the Nikkei again a notable exception. FOMC Minutes revealed an April hike was discussed, but a cautious approach appears to be well entrenched. A pick up in oil prices contributed to the positive mood, but the strength in the Japanese Yen continues to weigh on Japan’s equity market especially with USD/JPY trading with a 108 Handle this morning.
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 made 185 points yesterday and is now ahead by 475 points for April, having made 2265 points in each of the previous two months following a record 3365 points in January. Since I started this service last June it has made over 22,500 points.
The March FOMC Minutes revealed that Fed officials debated an April hike, but ‘several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate’. Overall and consistent with recent Fed officials’ commentary, the Minutes gave the impression of a split committee and while an April hike looks to be off the table, a June hike is still alive.
While Fed Chair Yellen appears to have strong support for her cautious approach with the Minutes noting that a lower path of the Federal Funds Rate ‘was broadly shared across participants, especially for the first two years of their forecasts’, the committee appears to be more split on the inflation and growth outlook. For now however the Minutes gave the impression that a cautious approach is still well entrenched. The probability of a 25bps June hike is currently sitting at 17.5%, assuming a stable Labour market, US inflation data and a recovery in the global economy will dictate the timing of the next Fed hike.
The release of the FOMC Minutes did not seem to elicit an immediate reaction from US Equity and Treasury markets. That said, half an hour later US Indices restarted their upward trend with the S&P500 closing up 1.05% with the Dow lagging for a 0.65% gain. European Indices also closed in positive territory led by the FTSE which closed 1.16% higher.
In currencies the Yen has continued its ascendency against the US Dollar with the USD/JPY making a new 18 month low this morning at 1.0875. The Yen strengthening has occurred against a backdrop of improved risk appetite, suggesting the market may be losing confidence on the Bank of Japan’s ability to reflate the Japanese economy. Commodity currencies lost some ground against the US Dollar while Sterling is again at the bottom of the G10 leader board closing down 1.77% as ‘Brexit’ concerns continue to weigh. Euro/GBP is now trading at 0.81 up from a 0.69 low in mid-December.
Meanwhile oil prices rose after a huge fall in Oil Inventories and comments from Kuwait that a production freeze was still possible.
In other news the Fed’s Bullard said a growth slowdown in the first Quarter could weigh on the Central Bank’s plan to raise interest rates gradually, even as noted inflation has picked up. Meanwhile the Fed’s Mester noted that slow rate rises provide insurance against downside risks. Both of these comments saw the US Dollar fall with the EURO/USD trading at 1.1450 this morning.
June S&P 500
My June S&P plan worked really well since I posted yesterday morning with both my buy and sell levels getting hit as the idea of only been short the S&P for a few hours continues to pay dividends as just when the market was looking like it could roll-over the S&P rallies helped again by the continued weakness in the US Dollar. Shortly after lunch the S&P and Dow both hit my buy levels. After I went long the S&P at 2037 I unfortunately covered this position too early at 2041 as the DAX was very near my buy level at the time and I had expected to be filled but the DAX ended up missing my buy level buy just a few points. Overnight the S&P rally continued with the market hitting my 2062 sell level before selling off this morning on the continued strength in the Yen and I have now covered this position at 2058.50 and I am now flat. Today I will again look to sell the S&P on any further rally to 2068/2073 with a 2078 stop. I will also look to buy the market on any dip lower to 2043/2049 with a tight 2037 stop. If I am taken long and subsequently stopped out of this position I will use my ‘5 Handle Rule’ to go long again with a stop below whatever new low is printed.
EUR/USD
My Euro plan also worked very well yesterday with the Euro trading lower to my 1.1330 buy level shortly after the US Markets opened. Subsequently the Euro rallied back above 1.14 but just like the S&P above I covered my long position too early at 1.1350 as emailed earlier to my Platinum Members and I am now flat. As we had a slow start to April which thankfully has picked up over the past two days I will use all opportunities to take profit when available for small risk, which in my opinion makes tradernoble so successful. I still believe the Euro is heading back to at least 1.20 over the coming months enhanced by fact that we now sit comfortably above the 1.1300/1.1350 support level. Today I will again look to buy the Euro on any dip lower to 1.1350/1.1380 with a 1.1320 stop which is just below yesterday’s low print. Despite the Euro trading near overbought levels I do not want to be short the Euro at this time.
June Dollar Index
Unfortunately the Dollar just missed my 95.25 sell level with a 95.10 high yesterday and I am still flat. The Dollar is beginning to accelerate lower helped by its downside Key Monthly Reversal in March. Despite the fact that the Dollar is very oversold I do not want to be long the market at this time especially as we have now broken some key technical levels to the downside. Today I will lower my sell level to 94.85/95.15 with a 95.40 stop.
June DAX
As mentioned above the DAX also just missed my 9530 buy level with a 9537 low print and I am still flat. There is no doubt the stronger Euro is weighing on the DAX but as I said over the past few days I still would not be short the market. It will be interesting to see what Dragi has to say given the DAX underperformance and the strengthening Euro which is certainly not on his agenda at this time. Today I will move my buy level higher to 9580/9630 with a tight 9535 stop.
June FTSE
My FTSE plan worked well as just after I posted the equity markets were falling with the FTSE hitting my buy level at 6035 before subsequently having a nice rally which enabled me to cover this position at my 6070 T/P level and I am now flat. This morning the FTSE is trading higher helped by the much weaker Sterling which has now weakened by over 17% since mid-December against the Euro. Today I will again look to buy the FTSE on any dip lower to 6065/6095 with a 6035 tight stop. Naturally I do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan also worked well yesterday with the market trading lower to my 17570 buy level before having a nice rally which enabled me to cover this position at my revised 17625 T/P level as outlined to my Platinum Members and I am now flat. I am surprised that the Dow did not rally further especially when the Dollar started to weaken. Today I will again look to buy the Dow on any dip lower to 17570/17630 with a 17520 stop which is just below yesterday’s low print.
June BUND
No change as I am still a seller on any rally higher to 164.30/164.50 with a 164.80 stop.
Gold Rolling Contract
I am still flat Gold which continues to trade in a narrow range. The weaker Dollar is trying to support Gold but as I mentioned yesterday I am now convinced that Gold will rally past its recent high from early without trading lower first. Today I will leave my buy level unchanged at 1193/1201 with a 1185 stop.
Silver Rolling Contract
Unfortunately Silver just missed my 14.90 buy level with a 14.91 low print and I am still flat. Today I will raise my buy level slightly to 14.70/15.00 with a 14.35 stop.
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