Well while tight ranges remains the theme ahead of payrolls on Friday equity markets have ended the last month of winter on a downbeat mood with US and European indices down between 0.15% and 0.6%. The sharp fall in oil prices appears to have been the trigger with Brent and WTI falling around 3% on the back of news that US crude oil stockpiles increased to another record high.
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 32 points yesterday to finish August with a 1727 point gain 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.
In currencies it was another mixed trading session for the US Dollar, USD/JPY has made a decisive move above ¥103 and the Dollar is also stronger against the CAD, dragged lower by the move in oil despite the fact that Canada’s Q2 GDP growth printed above expectations (0.6% vs 0.4%). Meanwhile NZD and GBP are the outperformers, both up 0.42%. The NZD’s outperformance is somewhat notable given the mild pull back in risk appetite (the VIX index climbed to 13.43 from 13.12). At the margin yesterday’s robust ANZ survey which showed a pickup in activity indicators could have been a supporting factor for the Kiwi, but the survey also showed a mild fall in inflation expectations, so that would have been a mitigating factor too. In contrast the AUD is practically unchanged at 0.7518 and although yesterday it traded mostly sideways, it is interesting to note that it briefly dipped below the 75 cent mark for the first time since 2 August.
US Treasury Yields traded in a narrow range with data releases seemingly having very little impact. ADP August private payrolls rose 177k – close to the 175k consensus and it had little impact on the expected 180k print for payrolls on Friday.
We had a few Fed speakers yesterday, but their comments had little to no impact on markets. Chicago Fed President Evans (dove) said he sees a protracted period of low rates ahead, weak growth implying lower real rates over the long run. The Fed’s Rosengren (who has been more hawkish) said Fed’s employment, inflation mandates likely to be achieved relatively soon. Rate hike timing depends partly on financial stability and somewhat faster hikes could reduce the severity of the next economic downturn.
On other news, Brazil’s senate has voted (61/20) to impeach president Rousseff, ending almost 14 years of ruling by the Workers party.
This morning on the economic front we already had the release of Chinese Manufacturing which came in better than expected. This has so far led to a higher open in European Equities after yesterday’s falls across the board. At 8.55 am we have German Manufacturing and this is followed by Euro-Zone and UK Manufacturing PMI at 9.00 am and 9.30 am respectively. At 12.30 pm we have US Challenger Job Cuts. Next at 1.30 pm we have the US Weekly Jobless Claims, and Nonfarm Productivity/Unit Labour Costs. Finally at 3.00 pm we have Construction Spending and ISM Manufacturing.
At 5.00 pm the ECB’s Nowotny speaks in Austria, while at 5.25 pm the Fed’s Mester speaks in Kentucky.
September S&P 500
Initially after I posted yesterday morning the S&P rallied and I used this rally to exit my 2173 long position for a small gain at 2175. Unfortunately I emailed my Platinum Members to re-buy the S&P again on any dip lower to 2165/2170. Subsequently the market got hit shortly after the US Markets opened which resulted in me going long the S&P at an average rate of 2167.50 before getting stopped out of this position near the low of the day at 2161 and I am now flat. Some of my members emailed me to ask about my ”5 Handle Rule” but as I was already long both the Dow and FTSE at the time I told them we had enough risk on board. However for anyone who did use the ”5 Handle Rule” it would have put you back long again at 2164/2165 and this would have worked out fine with the move higher late in the session which has carried through overnight on the better than expected Chinese PMI data. There is no doubt that the 2155/2160 level is now strong support and it will take a break and close below here before I will start to look to set up a short position. With the NFP data tomorrow ahead of the long Weekend in America where all US Markets are closed on Monday, it is difficult to be short given how quickly all sell-off’s are reversed again emphasising my point that you can only be short these stock markets for a few hours before aggressive buying returns. Today I will again look to buy the S&P on any dip lower to 2165/2172 with a 2157 stop which is just below last Friday’s 2157.50 low print. Despite the McClellan Oscillator closing with a negative -90 print yesterday I still do not want to be short the market at this time.
EUR/USD
No change as I am still a small buyer on any dip lower to 1.1085/1.1115 with the same 1.1055 tight stop. Remember the 1.1070/1.1100 is strong support for the Euro which continues to trade in a verey narrow range over the past 18 months. I will leave my sell level unchanged at 1.1195/1.1235 with the same 1.1265 stop.
September Dollar Index
I am still flat the Dollar which cam close to my buy level. Today I will now lower my buy level slightly to 95.35/95.65 with a 94.95 stop. Given the fact that we had the upside Key Day Reversal for the US Dollar last Friday, I still do not want to be short the Dollar at this time.
September DAX
My DAX plan worked well with the market hitting my 10555 buy level before having a nice 70 point rally. Unfortunately I covered my long position too early at my revised 10572 T/P level as I had too many open positions at the time plus I wanted to protect the points made for August thus the early exit. Hopefully you did better with the DAX trading at 10640 this morning. The DAX continues to trade the strongest of the main Indices at this time mainly due to the weak Euro. Today I will again look to buy the DAX on any dip lower to 10540/10590 with a tight 10495 stop. As long as the Euro stays weak I do not want to be short the DAX.
September FTSE
My FTSE plan worked well with the FTSE trading lower to my 6770 buy level before having a nice rally overnight (remember the FTSE re-opens at 1.30 am) and this rally enabled me to cover my long position at my revised 6795 T/P level and I am now flat. Given the fact that we are starting anew month today it is another excuse not to be short and today I will now look to buy the market on any dip lower to 6780/6810 with a 6740 stop which is just below yesterday’s low.
Dow Rolling Contract
As I was already long the DAX, FTSE and S&P I waited to buy the Dow which I did at 18345. The Dow subsequently made a low at 18328 before rallying strongly into the close. This rally enabled me to cover my long position at my revised 18380 T/P level and I am now flat. Hopefully you did better with this morning’s so far aggressive move higher. These equity markets will continue with the theme of ”buying the dip” until it ends. I certainly believe that we are not going to go through the next 6 weeks for the September/October time frame without at least one decent sell-off but what ever low occurs over this time-frame will set up a fantastic buying opportunity for the rest of the year. Today I will again look to buy the Dow on any dip to 18320/18380 with a 18265 stop.
September BUND
I am still flat the Bund and today I will again look to buy the market on any dip lower to 166.60/166.90 with a 166.35 tight stop. Remember the 166.60 is the key pivot and support level to watch.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1289/1295 with a tight 1283 stop. Gold is trying to break the key 1300/1310 support level but if we do crack this level I still believe after the initial washout that Gold should rebound to test this key area before then subsequently trying to trade lower.
Silver Rolling Contract
No change as I am still flat Silver and today I will leave my buy level unchanged at 18.20/18.50 with the same 17.95 tight stop.
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