Broad based US Dollar weakness and higher oil prices have again boosted risk assets over the past 24 hours with energy and material shares the outperformers in both Europe and the US. Commodities are higher across the board while commodity related currencies sit at the top of the G10 leader board with the Japanese Yen the only currency weaker against the US Dollar. While energy and materials helped equity Indices move higher, Goldman Sachs better than expected results despite a 60% fall in income also boosted bank shares. In contrast weaker results from Netflix and IBM dragged Technology shares lower with the NASDAQ Index bucking trend ending the day lower at -0.4%.
To mark my 1050th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service 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 150 points yesterday and is now ahead by 1260 points for April, having made 2265 points in each of the previous two months after a record 3365 points in January.
RBA Governor Stephens gave a speech in New York which had an international rather than a domestic focus. The speech was a strong call for greater fiscal action as well as an admission that Monetary Policy has reached its effective limit. Stevens argued that Central Banks can only do so much – Monetary Policy can only solve monetary issues and fiscal policy – infrastructure spending – should be revisited to boost growth further. So although the speech had a medium term focus, it also portrayed the view that the Governor is a reluctant interest rate cutter. Also the fact that Stevens omitted any comments on the Australian Dollar may suggest the recent rise in the AUD is not yet at a level where the RBA thinks it could complicate the rebalancing in the Australian economy towards non-mining activity.
On that point it is interesting to note the broad US Dollar weakness yesterday has helped the AUD/USD trade back above 78 cents for the first time in 10 months. The pair briefly broke above the figure, but softer US Housing data where Housing Starts fell 8.8% in March to its lowest level since last October boosted the case for a lower for longer Fed, thus weakening the US Dollar along the way.
News that the Abe Government is considering a postponement of the planned sales tax increase due to the Kumamoto earthquake appears to have contributed to Yen weakness since yesterday morning.
The positive tone to yesterday’s trading session pushed core Global Bond Yields higher with the softer than expected US Housing Starts triggering a brief rally in US Treasury Yields. In Europe 10 Year Bund Yields ended the day 1bp higher at 0.16%.
This morning on the economic front we have UK Unemployment and Average Earnings at 9.30 am. This is followed at 12.00 pm by US MBA Mortgage Applications. Finally at 3.00 pm we have US Existing Home Sales.
June S&P 500
The idea that the Cash S&P would break 2100 proved to be correct as it enabled me to go short the June S&P at 2096 before the market had a nice fall on the much weaker than expected Housing Starts which saw the S&P trade as low as 2086 and this enabled me to cover my short position at my 2086 T/P level and thus make up for the previous day’s loss and I am now flat. I do not expect too much to happen ahead of tomorrow’s key ECB Meeting and Dragi press conference. Yes the S&P is extremely overvalued and trading at the top of its Bollinger Band and Williams Index but that does not mean we cannot trade higher first before selling off. The market has the May 2015 all-time high at 2134 in its sites and a break and close over 2130/2140 could well open up a further move higher to 2200 over the coming weeks. Today I will again look to go short on any further spike higher to 2099/2104 with a 2109 stop. Given how overbought the S&P is trading and the fact that we are so near all-time highs I still do not want to be long the market at this time.
EUR/USD
There is no doubt the much weaker US economy is weakening the Dollar while at the same time giving the Dow a boost. This is what makes the ECB Meeting and especially the Dragi press conference that follows. It will be very interesting to hear his take on the stronger Euro which is now over 550 points higher than at the last ECB Meeting. My own view is if he tries to weaken the Euro tomorrow then it will be a good time to buy. Today I will move my buy level higher to 1.1270/1.1310 with a 1.1240 stop.
June Dollar Index
I am still flat the Dollar and today I will lower my sell level to 94.90/95.20 with a 95.50 stop.
June DAX
My fear that the DAX would just explode once the key 10100/10200 major resistance level was broken proved to correct. Thankfully we had no sell level yesterday as the market rallied despite the weaker than expected ZEW Survey. The 10200 level should be good support now for any sell-off and today I will now move my buy level higher to 10190/10250 with a 10150 tight stop. Despite the DAX trading outside the top of its Bollinger Band I do not want to be short the market ahead of the ECB tomorrow.
June FTSE
My June FTSE also worked well with the FTSE trading higher to my initial 6360 sell level before having a nice 50 point sell-off which enabled me to cover this position at my 6320 T/P level as outlined earlier to my Platinum Members and I am now flat. Given how strong the 6400 area of resistance is I will again look to sell the market on any further rally higher to 6380/6410 with a tight 6435 stop. Despite the positive price action I do not want to be long the market at this time.
Dow Rolling Contract
My Dow plan also worked well with the market hitting my 18070 sell level shortly before lunch before just like the S&P above fell on the back of the weaker Housing Starts and this enabled me to cover this position at my revised 18020 T/P level and I am now flat. I will continue with my strategy of selling spikes in the market especially as the S&P is trading at 24 times its last 12 months earnings. This is not sustainable on a long-term basis despite the intervention of the Fed. One thing for certain when this bubble eventually bursts it will be horrific. Today I will again look to sell the Dow on any further rally higher to 18110/18170 with a 18220 stop.
June BUND
The Bund just missed my 163.70 sell level yesterday with a 163.60 high print before selling off and I am still flat. Today I will leave my sell level unchanged at 163.70/164.00 especially ahead of the ECB Meeting tomorrow.
Gold Rolling Contract
The weaker Dollar just saw both Gold and Silver explode to the upside yesterday with Gold back above $1250. I am still flat and today I will now raise my buy level to 1225/1235 with a 1217 stop.
Silver Rolling Contract
My pick of the year trade to be long Silver certainly kicked in yesterday with Silver now up over 25% from its January low print. I am still flat Silver and today I will now raise my buy level to 16.40/16.70 with a 15.95 stop.
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