In a cautiously optimistic speech, Fed Chair Janet Yellen said that she still sees the need for a gradual policy tightening, but walked away from her previous timing guidance that a rate increase would be appropriate over the coming months. Ms Yellen acknowledged the softness of the May NFP Report, but also noted that ‘one should never attach too much significance to any single monthly report’, adding that ‘I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones’.
To mark my 1100th 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 none of my trades got hit yesterday leaving the Platinum Service still 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.
Ms Yellen’s speech did not elicit a big market reaction, but helped settle the mood following the big moves seen post payrolls on Friday. US equities ended the day up between 0.5% and 0.65% with energy stocks leading the way on the back of gains in oil prices. Brent climbed +1.5% while WTI closed 1.8% higher boosted by reports of a fall in Nigeria’s production with rebel groups threatening further disruption.
In currencies, the US Dollar had a mixed 24 hours with the smart trade being long CAD/JPY which is up a cool 1.8%. The CAD benefited from the big moves in oil prices, gaining 0.95% against the US Dollar, while the Yen fell back 0.8% as stocks rallied. Overnight the big move was the AUD after the RBA left Interest Rated unchanged at 1.75% which sees the AUD trading at 0.7430 this morning up from 0.7365 at the New York close. Sterling had another volatile trading session with the latest ICM Poll showing 48% of Britons would vote to leave versus 43% who want to stay. Cable fell to an intra day low of 1.4365 before recovering to close at 1.4455, and this recovery has again continued overnight with Cable trading at 1.4510 having spiked to a 1.4660 high earlier. Sterling will stay volatile until we get the ‘Brexit’ vote in two weeks.
Core Global Bond Yields unwound some of their post NFP gains. 10 Year Bunds climbed 2bps to 0.08% while US Treasuries rose 3bps to 1.73%. Gold finished unchanged at $1244.
As for economic data releases, unsurprisingly the Fed’s Labour market conditions fell by 4.8% in May and April was revised to -3.4% from -0.9%.
The Fed’s Lockhart and Rosengren were also on the news wires ahead of Yellen and their comments were fairly similar. Lockhart noted that the May jobs report and Brexit justify patience. He also said that growth remains moderate and we need to see how the data looks after Brexit. In similar vein, Fed President Rosengren noted how quickly the Fed hikes depends partly on whether last week’s dismal NFP Report was an ‘anomaly’. Rosengren still expects enough growth to justify gradual rate hikes.
This morning on the economic front we already had the release of German Industrial Production. This came in stronger than expected at +0.8% which helping the DAX to post a large gain so far this morning. At 10.00 am we have Euro -Zone GDP and this is followed at 1.30 pm by US NonFarm Productivity and Unit Labour Costs. Finally at 8.00 pm we have US Consumer Credit.
June S&P 500
My theme that you can only be short the market for a few hours certainly proved to be the case yesterday with the S&P now trading an incredible 30 Handles higher of the post NFP low on Friday. As I have mentioned countless times the S&P has very strong resistance between 2100 and 2134 and a break and close over 2134 opens up the possibility of a move higher to 2200/2240 which given the current valuation and earnings is insane but as Keynes famously said ‘markets can remain illogical longer than I can remain solvent’ and this is certainly very true of the current situation. I am still flat the S&P and today I will try to go short on any further rally higher to 2122/2228 with a wider 2135 stop. I will also move my buy level higher to 2098/2104 with a 2093 tight stop.
EUR/USD
Unfortunately the Euro just missed my 1.1320 buy level yesterday with an afternoon spike low at 1.1325 before trading higher and I am still flat. The price action is continuing to tell me to buy the dip and today I will now raise my buy level to 1.1310/1.1340 with a 1.1270 stop.
June Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 94.30/94.70 with a 95.10 stop. I will also look to buy the Dollar on any further sell-off over the coming days to 92.10/92.50 with a 91.70 stop which is just below the early May low print before we had a near 400 point rally.
June DAX
There is no doubt the DAX is one of the most difficult markets to trade and get an edge in as the volatility at times is incredible. Thankfully we had no sell level yesterday with the market now trading 200 points higher than when I posted 24 hours ago. The DAX has resistance from 10340/10390 and today I will be a small seller in this area with a 10430 tight stop. Given the strength of the Euro I do not want to be long the DAX at this time.
June FTSE
The FTSE market also rallied strongly yesterday helped by the weaker currency over the past few days. I am still flat and today I will now raise my buy level to 6230/6260 with a 6195 stop as finally the FTSE has broken and closed with a meaningful gain over 6200 which should now as very strong support on any test lower.
Dow Rolling Contract
Incredibly the Dow is now trading over 300 points higher of its post NFP low print helped by the much weaker US Dollar. Just like the other markets yesterday thankfully we had no sell levels and all shorts since last Friday have again got slammed. Yes this market is extremely overvalued and due a massive correction but until the charts tell us to start to put on a more macro short position we have to wait. Nearly every analyst that I follow is short the stock market but to me the most important criteria is the price action and this continues to be positive. Given the extent of the rally from Friday I will look to sell the Dow from 18050/18110 with a 18170 stop. My only interest in buying the Dow is on a dip lower to 17820/17880 with a 17765 stop.
June BUND
No change as I am still a small seller on any rally higher to 165.40/165.70 with a 166.10 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1220/1227 with a 1212 stop.
Silver Rolling Contract
Silver traded lower to my 16.30 buy level overnight. I am still long and I will now raise my stop on this position to 15.75.
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