Yesterday was a relatively quiet trading session in markets with US politics dominating the headlines. The much awaited Trump’s tax plan was short on new details and given the light economic calendar there has not been a lot to influence markets. US equities closed essentially flat after selling off in the last hour of trading from earlier near all-time highs. In a similar fashion US Treasury Yields have mostly traded sideways, but again more recently they have drifted lower with the 10y yield currently at 2.30%, 3bps below where I marked prices 24 hours ago. Meanwhile the USD has made small gains against most currencies with commodity currencies the underperformers in G10.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 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 50 points yesterday and is now ahead by 1240 points for April, having made 1335 points in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
While in theory Trump’s tax plan should be risk and growth positive, the muted market reaction is probably a reflection of the lack of new detail in yesterday’s announcement as much of the key proposals were already known. Some of the key changes include a reduction of Corporate Tax from 35 to 15%, impose a one off tax on overseas profits and then move the US into a territorial tax system (based on taxing businesses on revenues and costs incurred in the US), no border tax adjustment, reduce individual tax brackets from 7 to 3 (10%, 25% and 35% respectively), eliminate Estate Tax (death tax) and reduce most deductions for individuals, leaving mortgage interest and charitable deductions.
Overall question marks remain on whether the tax plan has enough Congress support to pass in its current form, there is also uncertainty on whether these changes are going to be permanent or temporary, given that as it stands it is unclear if the tax cuts will pay for themselves or result in a larger Budget Deficit by the end of 10 years. Notably as well, the tax reform announcement did not include any details on infrastructure spending, something that was initially seen as a potential way to garner Democrats support.
In something that appears to be a rush to get things done before the end of the first 100 days of his presidency. Politico reported the Trump administration is considering an executive order to end NAFTA, causing a negative reaction to the Mexican peso (-1.74%) and CAD (-0.33%). Meanwhile AXIOS has reported the White House is considering putting forward a health care vote this Friday and of course we still have the government shut down deadline on Friday too. US politics are set to keep as busy over the next 48 hours.
Looking at currencies in more detail, the NZD (-0.91%) and AUD (-0.81%) are at the bottom of the G10 leader board. Both currencies have endured a steady decline in the past 24 hours, NZD has now broken below the 0.69 mark for the first time since March 14th ( currently trading at 0.6890) and the AUD is at 0.7484, after trading to a low of 0.7455. The decline in the AUD started with yesterday’s CPI’s release suggesting the market was disappointed with the lack of price pressures even though the numbers were more or less in line with expectations and market forecasts too.
Canada’s Retail Sales were the only notable data release yesterday (-0.6% m/m vs 0% exp.) and the softer than expected outcome probably also played into the Canadian Dollar’s underperformance.
This morning on the economic front we already had the release of German GFK Consumer Confidence which came in better than the 9.9 expectation with a 10.2 print. At 10.00 am we have Euro-Zone Economic Confidence and Business Climate Indicator. Next we have the highlight of the day namely the ECB meeting which will be announced at 12.45 pm and again like Japan, a no change in policy is unanimously expected. The fact that a Le Pen – Mélenchon (both Euro-sceptics) outcome was averted in the first round of the French election and that Macron, a pro-European centrist, is in pole position to win, is no doubt a positive for the ECB. Economic activity indicators are also at a six year high, but with the inflation wobble in March I suspect the Bank and President Draghi will look to keep things stable and wait until the June meeting to make any shift to its forward guidance. A tight lipped Draghi at the press conference (1.30 pm) could hamper EUR gains, but he could find it hard not to talk the economic outlook up. Also at 1.30 pm we have the US Weekly Jobless Claims, Durable Goods, Wholesale Inventories and Advance Trade. Finally we have Pending Home Sales at 3.00 pm and the Kansas City Manufacturing Activity Index at 4.00 pm.
June S&P 500
For the second consecutive trading session the S&P just missed my buy level before rallying strongly ahead of the Trump Tax Cut announcement and when this resulted in no new initiative the S&P spent the rest of the trading session selling off, to close flat on the day. I was hoping that the S&P would hit the March 1 High at 2400 as I was looking for a negative Double Top at this price level but unfortunately we stopped just short. The S&P is now overbought after the huge 70 handle run up over the past week and today I will now lower my sell level slightly to 2399/2408 with a 2414 stop which is just above the top of the Weekly Bollinger Band at 2412 as mentioned in yesterday’s commentary. I will also lower my buy level slightly to 2371/2376 with a 2366 stop.
EUR/USD
Yesterday was another trading session of small margins for my calls with the Euro just missing my 1.0850 buy level with a 1.0855 low print before subsequently trading to an overnight high at 1.0920. I am going to stay flat until we get the ECB Rate announcement and Dragi press conference out of the way on what promises to be a lively trading session. I do not believe that Dragi will be happy with the firmness of the Euro and may well try to talk it down. If he does I will look to buy the Euro from 1.0800/1.0840 with a 1.0760 stop. Given how over extended the Euro is trading I will still be a seller into the 500 Day Moving Average at 1.10 with my sell range unchanged from 1.0980/1.1020 with a 1.1045 tight stop.
June Dollar Index
I am still flat the Dollar which came close to my 98.65 buy level yesterday. Ahead of the ECB Meeting I will now lower my buy level in the Dollar to 97.90/98.35 with a 97.60 stop. A break and close below 98.00 will be negative opening up the possibility of a move lower to 95.00 over the coming weeks.
June DAX
The DAX also came close to my buy level yesterday at 12425 before rallying into the close and I am still flat. There is no doubt that the firmness in the Euro is finally holding the DAX back. Given the fact that I expect a lot of volatility surrounding the Dragi press conference I will now lower my buy level in the DAX to 12340/12395 with a 12295 stop. Despite the strong Euro I still do not want to be short the Dax at this time.
June FTSE
The FTSE continues to trade sideways which it has done since the rally stopped on Monday afternoon. I am still flat the market and today I will now lower my sell level slightly to 7245/7280 with a 7305 tight stop. My only interest in buying the market is on a dip lower to 7125/7155 with a 7095 stop.
Dow Rolling Contract
I am still flat the Dow which continues to underperform both the S&P and NASDAQ despite its 600 point rally over the past week. Today I will now lower my sell level slightly to 21120/21180 with a 21225 stop. Remember a break and close above the March 1 all-time high at 21169 is short-term positive. I will now raise my buy level higher to 20830/20900 with a 20775 stop.
June BUND
My Bund plan worked well with the market trading higher after I posted to my 161.10 T/P level on my long 160.95 position from Tuesday. Subsequently I emailed my Platinum Members to re-buy the Bund at 160.95 which was filled after lunch before the market hit my 161.30 second T/P level and I am now flat. The Bund has strong support from 160.40/160.80 and today I will again look to buy the market on any dip to this area with a 160.05 stop.
Gold Rolling Contract
Unfortunately Gold also missed my 1258 buy level with a 1259.70 low print before rallying back above 1270 and I am still flat. I am not going to chase this market higher especially as I am long Silver and so I will leave my buy level unchanged from 1252/1258 with the same 1247 stop.
Silver Rolling Contract
Yesterday Silver traded lower to my second buy level at 17.40 with a 17.29 low print. This new long position averages my Silver trade to 17.53. I am still long with Silver now down 7% after the sentiment extreme reading was reached last week. Silver has now closed lower for 7 out of the past 8 trading sessions and is due a bounce. I will leave my T/P level unchanged at 17.80 with the same tight 17.15 stop. If I am stopped out of this position I will be a more aggressive buyer on any further dip lower to 16.70/17.00 with a 16.45 stop.
I am speaking this evening at 6.00 pm in IG Dublin Office and you may attend by registering on the following link
Please find the registration page for our upcoming event: https://www.ig.com/uk/market-triggers-after-brexit
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