Yesterday was a trading day that saw US stocks, Bonds and the US Dollar all decline, after Fed Officials stoked speculation over interest-rate increases despite evidence of uneven growth in the World’s largest economy. The S&P 500 Index retreated from a record high after New York President William Dudley said borrowing costs could be boosted as soon as next month, while Atlanta Fed Chief Dennis Lockhart said he is confident growth is accelerating, setting the stage for at least one hike this year.
To mark my 1150th 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 101 points yesterday and is now ahead by 651 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
Yields on two-year Treasury Notes, which is the coupon most sensitive to Monetary Policy expectations climbed as the US Dollar paired losses to a drop of more than 1% versus major peers. Oil rose above $46 a barrel on optimism over a potential output freeze.
Markets were not helped by comments from Dudley that markets are ‘’too complacent’’ about the need for a gradual increase in short-term interest rates over the next year or so. The probability of a rate increase by the end of 2016 edged up to 52% on the Fed Official’s comments, from 45% a week ago.
European markets also had a weak trading session as the German ZEW Sentiment Reading came in much weaker than expected. However despite the weak ZEW, the Euro broke key resistance above 1.1220/1.1240 to trade back above 1.13. The EuroStoxx 600 closed 0.8% lower following a 1.8% drop in the Nikkei on the back of the stronger Japanese Yen which traded as low as .9950 against the US Dollar. This Yen strength does not suit the Japanese Government with a number of officials hitting the news wires expressing that they are watching markets closely.
In other markets Sterling reversed much of Monday’s close with a 1.3% rally against the US Dollar, while oil closed at its highest level in over five weeks, bolstered by a weaker Dollar and speculation that OPEC talks next month could result in a deal to stabilise prices via a freeze on output.
This morning on the economic front we have UK Average Earnings and Unemployment at 9.30 am. At 12.00 pm we have US MBA Mortgage Applications. This is followed at 3.30 pm by the EIA Weekly Fuel Production and Crude Oil Inventories. Finally at 7.00 pm we have the latest FOMC Minutes.
September S&P 500
My S&P plan worked well yesterday with the market hitting my 2178 buy level before having a rally to 2183. This rally enabled me to cover my long position at my revised 2181 T/P level and I am now flat. Today I will again look to buy the S&P on any dip lower to 2167/2173 with a 2162 stop. My only interest in selling the S&P is still on a rally higher to 2191/2196 with a 2202 stop.
EUR/USD
Finally the Euro is breaking higher as the Foreign Exchange Market comes to the realisation that the Fed may only do one rate hike this year despite what Dudley and Lockhart said yesterday and over the previous few months. Apart from Employment most of the rest of the US economy is stagnant. Thankfully we have not been short the Euro and today I will use any dip lower to 1.1200/1.1235 to buy the market with a 1.1160 stop. I still do not want to be short the Euro at this time.
September Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 95.80/96.20 with a 96.55 stop. I still do not want to be long the Dollar at this time. Remember the Dollar has huge support at the 92.00 level which is the low from early May. A break and close below 92.00 will be very bearish and will see the Dollar finally accelerate to the downside.
September DAX
My DAX plan also worked well with the market trading lower to my 10630 buy level on the ZEW news before rallying back above 10700. This rally enabled me to cover this position at my 10670 T/P level and I am now flat. Today I will again look to buy the DAX on any dip lower to 10530/10590 with a 10480 stop. Despite the negative price action I still do not want to be short the DAX at this time unless we can take out its key support level at 10340. If we close below here then I will look to set up a short position.
September FTSE
I am still flat the FTSE which finally closed lower after a series higher closes. Today I will now lower my buy level to 6820/6850 with a 6785 stop. The strength in Sterling is the main reason that I am lowering my buy level. I still do not want to be short the market at this time.
Dow Rolling Contract
Very close to the New York close the Dow hit my 18540 buy level with an 18531 low print. As I want to be flat overnight especially as there is so much concern with the stronger Japanese Yen, I emailed my Platinum Members to cut this position too early at 18550 and I am now flat. Today I will again look to buy the Dow on any dip lower to 18420/18480 with a wider 18350 stop. Given the weakness of the US Dollar I do not want to be short the market at this time. Interestingly as the main US Indices made a series of new all-time highs over the past month the McClellan Oscillator continues to trade in negative territory again emphasising how weak the internals of the market are.
September BUND
Initially the Bund just missed my 167.60 T/P level after the German ZEW was released. Subsequently I emailed my Platinum Members to cut this position at 167.49 and I am now flat. Late yesterday the Bund followed the US Treasury market lower testing the key 166.50 pivot point. Today I will try to buy the Bund again on any further dip lower to 165.75/166.15 with a 165.40 stop.
Gold Rolling Contract
Gold continues to trade in a narrow range with the odd spike that quickly gets reversed. I am still flat and today I will leave my buy level unchanged at 1313/1321 with the same 1305 stop.
Silver Rolling Contract
Silver again traded lower to my 19.85 buy level. I am still long and this is the main reason that I am not raising my buy level in Gold above. Today I will now raise my stop on this position to 19.40. Remember a break and close below 19.00 will be bearish.
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