Equity markets which have been on a tear to the upside are finally starting to show some signs of fatique. After making new record highs on Tuesday, the S&P and Dow have struggled to make new gains while in Europe the EurStoxx Index closed in negative territory for the first time in five days. Sterling and Commodity linked currencies have given back some of their previous day’s gains, while core Global Bond Yields have edged a little lower. Meanwhile Oil prices have given back all of their gains yesterday from Tuesday’s large move to the upside.
To mark my 1100th issue of Tradernoble 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 90 points yesterday and is now ahead by 810 points for July having made 2550 points in June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2200 points.
In recent days risk sentiment has been buoyed by the expectation of further stimulus and lack of new news yesterday appears to have taken the wind out of the market’s sails. Expectations of stimulus needs to be backed up with some action and now the risk of disappointment is starting to rise. For one, the Bank of England when it meets later this morning, it is not a given that they will cut interest rates and there is still no clarity on the size, type and timing of Fiscal and Monetary stimulus in Japan. Adding to the uncertainty, US corporate earnings season starts in earnest this evening when JP Morgan Chase kicks off the Bank sector reports.
Looking at currencies, the SEK and CAD are sitting at the top of the G10 Leader Board, up 0.72% and 0.56% respectively. The CAD’s performance was boosted by the Bank of Canada upbeat assessment on the outlook for the Canadian economy while the BoC left rates unchanged as widely expected. The CAD still outperformed despite the fact that oil prices fell 3% yesterday.
Sterling is at the bottom of the Leader Board falling -0.7% as the Pound came under pressure in the last few hours of trading following Theresa May’s announcement of a very anti-EU/Eurosceptic UK Government, effectively dashing any hopes of a Parliament referendum overrule. It was announced late last night that Anti – Brexit supporter Phillip Hammond is to take over as Chancellor of the Exchequer from George Osbourne who resigned his post earlier in the day.
Late last night the Fed’s Harker who is President of the Philadelphia Fed said he expects two rate hikes this year while the Beige Book produced no new shocks.
This morning we have no data of note from the Euro-Zone while all the market’s attention will focus in on the outcome of the Bank of England Meeting at 12.00 pm. The market is currently pricing in an 83% chance of a 25 bps rate cut. It will be interesting to see if the Bank of England expands its QE or will they wait until the Aug 4 meeting. At 1.30 pm we have the US Weekly Jobless Claims and PPI. This afternoon the Fed’s Lockhart and George will speak on the economy.
September S&P 500
My S&P plan worked well with the market trading higher to my 2152 sell level before having a nice sell-off to 2140. This sell-off enabled me to cover my short position at my 2146 T/P level and I am now flat. Today I will continue to look to buy the market on any dip lower to 2130/2135 with a 2124 stop. I will again look to sell the S&P on any rally higher to 2156/2162 with a 2166 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2118 with a 2112 stop.
EUR/USD
Finally my long 1.1080 Euro position worked out as the market had a nice rally to 1.1120 shortly after lunch and this rally enabled me to cover my long position at my 1.1110 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1000/1.1040 with a 1.0970 stop. Despite the negative price action I still do not want to be short the Euro at this time.
September Dollar Index
No change as I am still a seller on any rally higher to 96.75/97.05 with the same 97.40 tight stop.
September DAX
The DAX struggled yesterday after its huge move up over the past few trading sessions. I am still flat and today I will leave my sell level unchanged at 10060/10120 with a 10160 stop. I still do not want to be long the DAX at this time.
September FTSE
I am going to stay flat the FTSE until we get the Bank of England rate announcement and QE expansion out of the way at 12.00 pm. If the FTSE rallies following the announcement I will still be small seller from 6710/6750 with a 6780 stop especially as the market is so overbought at this stage given its post ‘’Brexit’’ 16% rally. Given this rally I still do not want to be long the FTSE at this time especially with a new Chancellor on board.
Dow Rolling Contract
The Dow has closed up nine out of the past eleven trading sessions thus creating an extended trend. Interestingly the McClellan Oscillator which closed with a positive reading of 193 on Tuesday fell to +139 yesterday despite the Dow closing slightly higher. I am still flat the Dow and today I will leave my sell level unchanged at 18440/18500 with an 18560 tight stop. Given how over extended the Dow is trading I do not want to be long the Dow at this time, preferring instead to buy the S&P on dips.
September BUND
I am still flat the Bund which has rebounded strongly off its 166.50 now major support. Today I will raise my sell level to 167.70/168.10 with a 168.40 tight stop. Even though the Bund has had a nice rally off this 166.50 support area I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold remains over-bought and over-believed and I am still flat having stopped myself out of my latest 1337 long position for a small loss at 1334. The 1300/1310 area should act a strong support for the precious metal at this stage and today I will leave my buy level unchanged at 1311/1319 with the same wider 1298 stop.
Silver Rolling Contract
With sentiment remaining so high as shown by the Daily Sentiment Index reading I am reluctant to chase this market higher and I am still flat. Today I will leave my buy level unchanged at 19.10/19.60 with an 18.70 stop.
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