Economic reports have been scant over the past 24 hours. Trump, trade, executive orders and a White House press briefing have provided wire feedstock for news and trade into European trade this morning. In the aftermath, the news has seen the US Dollar trade back down to its levels of last week, US Treasuries have been bid, while gold and base metals have made some gains, mostly it seems from US Dollar softness. US stocks have also been softer with the VIX up only slightly. With trade in the firing line, the Canadian dollar is a little surprisingly showing some signs of rallying, though that might be too strong a term, given it was from BoC-induced softness of a week back. NAFTA has not been abolished, but it’s been made clear it is going to be renegotiated.
To mark my 1250th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 10 points yesterday and is now ahead by 1283 points for January having made 1351 points in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
The Mexican Peso has also had a modest rally in the first part of the week: again, NAFTA has not been abolished or refashioned in a major way (yet?). There is still a high level of uncertainty over its future, White House spokesman Sean Spicer saying in a press briefing just before the New York close last night that NAFTA is going to be renegotiated with the President asking agencies and staff to begin working on the “wall”. Mexican President Pena Nieto has also been speaking last night, saying that he does not believe in walls, that he is seeking the US to respect the rights of immigrants. On trade, he has been speaking of the need to broaden and deepen Mexico’s trade relationship with other countries and regions, including TPP nations, the UK and conclude a deal with the EU this year.
The big trade news has been that the President has signed an executive order to end US participation in the Trans Pacific Partnership. On NAFTA, he is meeting with the Canadian PM and Mexican President to see how it can be renegotiated.
President Trump has been meeting with business leaders and has said that he will be cutting regulations by 75%, “hopefully more”, that would have been music to their ears. However, he also advised of a major border tax for companies’ products as a result of moving operations and jobs offshore. “If you go to another country” and cut US jobs “we are going to be imposing a very major border tax” on that product. “What we want to do is bring American jobs back”.
In the middle of all this, with the US Dollar undergoing something of a retracement, the AUD has remained supported in the mid to higher 75s, testing 0.7585 this morning and not far below that level as I go to press. Statements out of the White House press briefing looks to have spurred some renewed big dollar selling with discussion and questioning on trade, and Spicer reinforcing the guiding light of protecting American workers getting more traction.
With the USD on the back foot, base metals were modestly higher in London trade and similarly in NY trade. Gold is up by close to 1.0%, Treasuries are bid again across the curve, 2s down 4.5bps to 1.143% and 10s by 6.8bps to 2.399%. Iron ore firmed up again overnight, higher by 0.9% to $81.13, while both met coal and steaming coal gave up some ground. Oil has been softer again in the wake of an especially large rise in the Baker-Hughes rig count reported at the end of last week and an evident already apparent trend of rising US production as an offset to the promised OPEC cuts.
Just as I go to press it has been reported that the PBOC in China has raised its 1 Year Medium Term Lending Facility to 3.1%.
This morning on the economic front we have Markit German and Euro-Zone Manufacturing PMI and Services/Composite PMI at 8.30 am and 9.00 am respectively. This is is followed at 9.30 am by UK Public Sector Net Borrowing Requirement. At 2.45 pm we have US Manufacturing PMI. Finally we have US Existing Home Sales and the Richmond Fed Manufacturing Index at 3.00 pm.
The ECB’s Praet is due to speak at an economic panel in Rome at 4.00 pm.
March S&P 500
Yesterday was one of the most frustrating trading sessions for me in a very long time with so many markets coming within small margins of hitting my buy levels including the S&P which hit a low of 2251.50 thus missing my 2249 buy level before rallying 14 Handles and I am still flat. The S&P has closed between 2260/2270 for most of the past three weeks as volatility has just stopped. We know that this cannot last for much longer and that when we do break out of the wider 2240/2270 range which has contained the S&P for all of January that we are going to see an acceleration of the S&P in the direction of the breakout. The trend is still up until we break and close below the December 30 low at 2227.75 and today I will move my buy level slightly higher to 2247/2253 with a 2242 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2228/2233 with a 2223 stop. My only interest in selling the S&P is still on a rally higher to 2278/2283 with a 2288 stop.
EUR/USD
The Euro made a low at 1.0709 before rallying late in the New York session to a high at 1.0774 and I am still flat. The Euro is very overbought after its 430 point rally off its January 3 low at 1.0341 and is due a correction. The Euro is also trading at the top of its Daily Bollinger Band and Williams Index. For these reasons I will now lower my sell level slightly to 1.0810/1.0850 with a 1.0885 stop. I will leave my buy level unchanged at 1.0650/1.0690 with the same 1.0615 stop. A break and close below 1.0610 will put the bears back in control.
March Dollar Index
Frustratingly the Dollar made a low last night at 99.85 which just missed my 99.70 buy level before rallying overnight to sit at 100.25 this morning. Given how oversold the Dollar is trading I will now move my buy level higher to 99.60/99.95 with a 99.25 stop. I still do not want to be short the Dollar at this time despite the Downside Key Day Reversal and Downside Key Week Reversal from the first trading week of 2017.
March DAX
I am still flat the DAX which continues to trade in a narrow range. The DAX needs to break and close above the July 2015 high at 11810 to add to the bullish breakout. Today I will move my buy level higher to 11445/11495 with a 11410 stop. As the trend is still up I do not want to be short the market at this time.
March FTSE
Thankfully the FTSE which hit a low price at 7063 after I posted yesterday morning rallied and this move higher enabled me to cover my long 7095 position for a small gain at 7105 and I am now flat. As I mentioned yesterday the FTSE has strong resistance at the 7140/7150 which is a 10 year trendline and today I will leave my sell level unchanged at 7135/7165 with the same 7190 tight stop. With Sterling now severely overbought after its 550 point rally again the US Dollar since last Monday and due a correction we may well see the FTSE test my sell level. My only interest in buying the FTSE is on a dip lower to 6995/7040 with a 6960 stop.
Dow Rolling Contract
The McClellan Oscillator improved slightly yesterday but still closed with a negative -17 reading. I am still flat the Dow which continues to hold above last Thursday’s 19675 low print. Today I will move my buy level higher to 19660/16720 with a 19610 stop. Despite the negative price action over the past few weeks plus the fact that the MO is still in negative territory I still do not want to short the Dow especially as we are trading so near the key 19675 support from last week and the 19718 support from the last trading day in December.
March BUND
The Bund just missed my 162.40 buy level with a 162.45 low print before rallying over 90 points and I am still flat. I am impressed that the Bund was able to close over the 162.55/162.85 resistance level and today I will be a small buyer in this area with a 162.30 tight stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 162.00 with a 161.60 stop.
Gold Rolling Contract
There is still nothing remarkably different in the Commitment of Traders data and the Daily Sentiment Index. As a result Gold should continue to push higher despite the fact that we have already rallied $100 since the 1123 low from early December. I am still flat Gold and today I will raise my buy level slightly to 1195/1203 with a 1188 stop.
Silver Rolling Contract
After I posted yesterday Silver traded lower to my initial buy level at 17.10. I will add to this position on any further move lower to 16.85 with a 16.60 tight stop on this position. If Silver can break and close above last week’s 17.37 high it should accelerate to the upside.
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