There is no doubt that whichever way you cut it, last Friday’s Non-Farm Payrolls was a shocker. Looking at the spectrum of forecasts ahead of the release, the 38K print for May was 52K lower than the lowest forecast surveyed by Bloomberg while consensus was at 160K. Adding salt to the wound, the previous two months readings were revised down by a net 59K and although the Unemployment Rate fell to 4.7% from 5%, this was due to people leaving the workforce rather than an increase in hiring as shown by the participation rate which fell to 62.6% from 62.8%. Meanwhile Average Earnings came in line with expectations, growing at 0.2% in May, leaving the annual growth rate unchanged at 2.5%.
To mark my 1075th 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 95 points on Friday and is now ahead by 325 points for June. The previous three months saw gains of 1532, 2175, and 2265 points respectively. Since I started this service over 12 months ago it has averaged a Monthly gain of 2200 points.
Friday’s US data disappointments was not limited to the Employment Report, as 90 minutes after the NFP the market got another kick in the guts with the US Non – Manufacturing ISM Report showing a fall in May to 52.9 from April’s 55.7. The details of this report was also soft. The Employment Index fell to 49.7 from 53, New Orders slowed to 54.2 from 59.9 and Business Activity eased off to 55.1 from 58.8.
While currency and bond markets were mostly range trading ahead of the NFP Report, US equity markets were drifting higher. The NFP Report triggered a US Dollar sell-off against all G10 and most Emerging Market currencies. The Yen, NZD and SEK were at the top of the G10 leader board closing up around 2.2% while the AUD and EUR were close behind with a 1.9% gain. Sterling was again hit hard on more negative ‘Brexit’ Poll news and this trend has continued this morning with EUR/GBP back trading with a 79 handle. Remember it was only 10 days ago that we were trading at 0.7550.
US equities ended Friday in negative territory with the S&P closing down 0.3% after staging yet another recovery late in the trading session. This rally was presumably on the view that lower for longer Fed is good for equities as long as the US economy does not fall off the wagon. The fall in European equities was larger with the DAX closing down over 1% on the back of the stronger Euro.
Core Global Yields also ended Friday lower and unsurprisingly the largest falls were recorded in the front end of the US Treasury Curve with 2 year and 5 year both closing a hefty 12bps lower at 0.77% and 1.23% respectively. The 10 Year Treasury closed 10bp lower at 1.7%. Meanwhile the Bund got hit for 6bps to closed with a yield of just 0.05%. It is interesting to note that the yield for German 5 year Bond is now -0.4% which is just incredible.
As for Commodities, oil prices were relatively steady, with WTI and Brent closing at $48.9 and $49.84 respectively losing just 0.3%. Gold was the big winner closing up almost 3% at $1242.
Over the weekend the Fed’s Mester who is a know hawk said the Fed should raise Interest Rates gradually despite the weak jobs data while this morning the Fed’s Rosengreen said US getting closer to reaching conditions for a rate hike.
This morning on the economic front we already had the release of German Factory Orders which came in very weak at -2% versus -0.5% expected. We have German Construction PMI at 8.30 am. This is followed at 9.30 am by Euro Zone Sentix Investor Confidence. Finally we have the US Labour Market Conditions Index Change at 3.00 pm.
Later at 5.30 pm the Fed Chair Janet Yellen will speak on Economic Outlook and Monetary Policy and it will be really interesting to hear her views on last Friday’s NFP data. This speech will definitely move markets.
June S&P 500
My continuing theme that you can only be short these equity markets for a few hours certainly proved to be the case again on Friday given the huge rally off the early afternoon lows. Unfortunately after the S&P traded lower to my average 2092 buy level I was stopped out of this position almost at the low print of the day at 2084 and I am still flat. For anyone who used my 5 Handle Rule to re-buy the S&P this certainly worked well with the market closing just under 2100 after a huge 16 Handle rally in the last hours of trading. I was speaking at the London Forex Expo and had to do a live panel discussion over the NFP which took up most of the afternoon especially given the awful headline number and thus I was not able to use my 5 handle rule myself. The market will probably stay quiet to firm ahead of Yellen this afternoon and today I will again use any dip lower to 2087/2092 to buy the market with a 2082 stop. Despite the worsening economic situation the price action is still telling me not to short the S&P at this time.
EUR/USD
Very frustrating as my view of a slowing US economy and thus a weaker US Dollar is certainly proving to be correct so far but unfortunately the Euro just missed my 1.1110 buy level with a 1.1136 low print before having a 220 point rally and I am still flat. The fact the Euro closed over 1.1290 is very bullish and today I will now move my buy level higher to 1.1280/1.1320 with a tight 1.1245 stop.
June Dollar Index
Just like the Euro above the Dollar Index also just missed my sell level on Friday and I am still flat. Today I will now lower my sell level to 94.60/94.90 with a 95.25 stop. I still do not want to be long the Dollar at this time.
June DAX
As I was already long the S&P, FTSE and Dow I did not buy the DAX on Friday especially with the Euro rallying so much as this is really bad for the Euro if this trend continues. The fact that the German Bund is almost trading in negative territory tells you all you need to know about how weak the German economy is. This was re-enforced again by the awful German Factory Orders data release earlier this morning. I am still flat the DAX and today my only interest in buying the market is on a dip lower to 9950/10010 with a 9895 wider stop.
June FTSE
My FTSE plan worked well as shortly after the NFP data was released the FTSE was trading at my 6180 buy level. The market only fell another 30 points before turning around and this rally enabled me to cover this position at my revised 6220 T/P level and I am now flat. Today I will again look to buy the FTSE on any dip lower again to 6160/6190 with a 6135 tight stop. I still do not wan to be short the FTSE especially with Sterling so weak.
Dow Rolling Contract
My Dow plan worked we as shortly after I was stopped out of my S&P position the Dow was trading near the bottom of my buy range at 17700. Subsequently on the back of the much weaker Dollar the Dow had a nice rally which enabled me to cover this long position at my 17810 T/P level and I am now flat. This morning I will again look to buy the Dow on any dip lower to 17700/17760 with a 17640 stop.
June BUND
Finally the Bund is coming close to going negative and today I will use any further rally to 165.50/165.80 to go short with a 166.20 stop.
Gold Rolling Contract
Unfortunately Gold just missed my 1202 buy level with a 1207 low print before having a nice $35 rally and I am still flat. Today I will now raise my buy level to 1220/1227 with a 1212 stop.
Silver Rolling Contract
My long 16.15 Silver position finally worked out on Friday with the market trading higher to my 16.40 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 15.90/16.30 with a 15.60 stop.
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