Short sterling positions were dealt another blow yesterday by a blockbuster rise in UK Retail Sales in July where the weather and the low currency has seen a very good month for the High Street. There was a large bounce-back in UK Retail Sales in July, ex-autos sales up 1.5% (against +0.3% for consensus), sales even stronger including autos, up 1.4%. The UK Statistician said weather boosted sales just as the wet weather in June had kept shoppers at home. The lower GBP also helped, overseas shoppers taking the opportunity to take advantage of a higher degree of purchasing power. The ONS also reported that prices were continuing to fall in annual terms, the implied deflator for total sales down 2.0% y/y, as shoppers swooned at the prospect of yet more bargains.
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 new and existing members and if anyone is interested please email me on bryan@tradernoble.com
For anyone following my Platinum Service it made 90 points yesterday and is now ahead by 821 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.
Sterling had been getting a modicum of support during the Asia session, trading around 1.3050, but spiked higher by a full cent on the back of Retail Sales to over 1.3150, trading at around 1.3170. With a relatively steady to somewhat lower AUD – that couldn’t make further headway above 0.77 yesterday.
The US Dollar has been drifting further lower overall and despite USD-supportive comments from Fed President John Williams (and Janet Yellen confidant) taking heart from a return to strong jobs growth. “In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later …… (and) allow a smoother, more gradual process of normalization.” Inflation is on course to meet our 2 percent goal ….. we’re not quite at our target, but the strength of the labour market should help us along. Under these conditions, it makes sense for the Fed to gradually move interest rates toward more normal levels”.
Bill Dudley has also been speaking again and he said that it’s the jobs number that drives rate hike timing decisions; he also favours more reliance on jobs rather than GDP. He did say a return to strong (GDP) growth in Q3 would make him more inclined to tighten, “but not necessarily”. Always caveats and caution it seems. Despite stocks having a better session and oil higher again (energy stocks rose 1.78%), US Treasury yields drifted somewhat lower in response, the US Dollar going along for the ride. Jobless claims remained low, but the employment and new orders components of the Philly Fed survey for August (that overall improved to +2 from -2.9, as expected) provided more excuses to sell Dollars.
This morning on the economic front we have UK PSBR at 9.30 am. We have no data due from the US with Canadian CPI and Retail Sales the afternoon highlight.
September S&P 500
My S&P plan worked well with the market hitting my 2177 buy level before having a nice rally to 2185 which enabled me to cover this position at my revised 2181 buy level and I am ow flat. This is probably the slowest July and August in many a year for volatility so I decided to do some research on the VIX. The all-time low for the VIX was on 27 December 1993 when the VIX closed at 8.89. With the VIX trading near 11 we are not that far away from these lows. However despite all these facts stacking up for a sell-off in stocks until we get a sell-extreme that lasts for more than a few days this market is still a buy on dips. I still believe that Fed Chair Yellen in afraid to hike rates and in my opinion has lost all creditability with her in-action over the past eight months. Today I will again look to buy the S&P on any dip lower to 2175/2180 with a 2169 stop. I still do not want to be short the S&P at this time.
EUR/USD
Thankfully we have not been short the Euro over the past few weeks which as expected has rallied sharply. However it is frustrating when days like Wednesday when the market misses your buy level by just six points before subsequently rallying strongly. The strong UK Retail Sales data yesterday proves how beneficial it is to have a weak currency and I certainly believe the Fed are quietly engineering a weaker US Dollar. Today I will now move my buy level higher to 1.1280/1.1315 with a 1.1235 stop which is just below the post-FOMC low print at 1.1241 on Wednesday. If the Euro can break and close over its strong resistance at 1.1440 for a few days then this opens up the possibility of a move higher to at least 1.22 and possibly as high as 1.31 over the coming months.
September Dollar Index
I am still flat the Dollar which has closed lower for seven of the past eight trading sessions. Today I will again lower my sell level to 94.70/95.10 with a 95.40 stop.
September DAX
Unfortunately the DAX just missed my 10540 buy level with a 10544 low print before rallying nearly 80 points and I am still flat. There is no doubt the stronger Euro is hurting the DAX. However I still do not want to short the DAX in this environment as all equity markets apart from the Nikkei are a buy on dips. Today I will leave my buy level unchanged 10480/10540 with the same 10435 tight stop.
September FTSE
Although the FTSE traded lower to my 6855 buy level before bouncing, I emailed my Platinum Members to cut this position at the same price mainly due to the strength of Sterling. The FTSE is still overbought having bounced over 1000 points since its post Brexit low on June 24 and is due a correction. Just like the other major Indices I do not want to be short preferring instead to continue to look to buy the dip. Today I will now lower my buy level in the FTSE to 6805/6835 with a 6775 stop. The 6770/6800 should act as strong support and we should initially see a rally off this area before sellers return.
Dow Rolling Contract
My Dow plan worked well yesterday with the market hitting my 18530 buy level with a 18529 low print before having a nice rally which enabled me to cover this position at my 18580 T/P level and I am now flat. Given that today is the Monthly Expiration for the Options Market it is another reason not to be short as these options do not expire until 9.00 pm this evening. Today I will again look to buy the Dow on any dip lower to 18475/18535 with the same 18425 stop.
September BUND
The Bund has again rallied off the 166.50/166.80 now major support and in the process of this rally the market has left a buy extreme. I am still flat the market and today I will now raise my buy level to166.90/167.20 with a 166.45 wider stop.
Gold Rolling Contract
Gold continues to trade in a narrow range and today I will again leave my buy level unchanged at 1315/1323 with the same 1307 tight stop.
Silver Rolling Contract
No change as I am still long above the market at 19.85 with the same 19.40 stop.
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