After some mis-communication in March, ECB President Mario Draghi chose his words especially carefully and stuck to his script at his post ECB press conference yesterday lunch time. He retained his easy rhetoric but eyed some improvement in the balance of growth risks. In his careful choice of words, he spoke of “moving to a more balanced growth configuration”, noting though that risks are still titled to the downside. The ECB left policy rates and QE asset purchases unchanged, pledging to maintain rates at present or lower levels. The Euro briefly popped above 1.09 but relented, seemingly taking Draghi outlook at face value. I expect that the rhetoric will change at the June 8 meeting to more decidedly signal the improvement that is underway, especially in the Eurozone. By then also the French Presidential election will be out of the way.
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 New Platinum Service it ended the day flat yesterday as none of my calls were executed in what turned out to be a very quiet trading session. My Platinum Service is 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.
Draghi noted that the risks predominantly emanate from global factors, growth dispersion between the EZ economies at the lowest for two decades. On that score, April confidence surveys for the Eurozone were stronger than expected, the key Business Climate component the highest for six years. German and Spanish CPIs released yesterday pointed to slight upside risk for this morning’s EZ CPI, Germany’s up from 1.5% to 2% and Spain’s from 2.3% to 2.6%, last month skewed lower by shifting Easter timing.
Yesterday was a lacklustre session, European stocks down 0.24% (Eurostoxx 600), and US markets closing flat. The USD has barely budged, while US Treasury bond yields have eased ever so slightly, 10y yields teetering just below 2.30%. The VIX is lower and gold steady. Oil has eased while AU bulk commodities are little changed.
The March US Advanced goods Trade Balance was pretty much in line with expectations, while March Durable Goods Orders were a touch softer than expected, even with a slight upward revision. The Atlanta Fed downgraded its contemporaneous GDPNow estimate for today’s US Q1 GDP from 0.5% to 0.2%. Even allowing for a clear evident residual seasonality in US Q1 GDP in recent years to the tune of 0.8%, such an estimate implies an underlying read of ~1%, still low. The Bloomberg consensus finalised last week was 1.0%.
The Australian Dollar has been still range bound, trading this morning at around 0.7465/70, continuing the downtrend evident this week. RBA Governor Lowe was speaking at a dinner last night at the “Renminbi Global Cities Dialogue”, restricting his remarks to the internationalisation of the Chinese Renminbi. He did note at one point in his speech that housing prices in some Australian cities had been affected by the inflow of Chinese money. That’s as close as he delved into the Australian domestic scene, days away from Tuesday’s RBA Board meeting.
This morning on the economic front we have UK GDP, Index of Services and BBA Loans For House Purchase at 9.30 am. This is followed at 10.00 am by Euro-Zone CPI. Next at 1.30 pm we have US GDP, Employment Cost Index and Personal Consumption, while at 2.45 pm we have the Chicago Purchasing Manager’s Survey. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
June S&P 500
In yet another trading session of small margins the S&P just missed my 2376 buy level with a 2378 low print before rallying strongly ahead of a small sell-off overnight and I am still flat. As you know all ‘’Open Gap’s in the S&P get filled at some stage whether it takes a day/week or even a few months but if we go back to last Friday’s Chicago close at 2346 to Monday’s Chicago afternoon low at 2366 this is an extremely large Gap to leave unfilled. If for whatever reason the S&P does sell-off over the coming days to 2347/2353 I will be an aggressive buyer in this area with a 2342 stop. If I am taken long at this buy level over the coming days I will have a T/P level at 2361. The first time a large Gap like this gets filled we tend to see a large rally initially on any attempt before the market subsequently has a second dip to fill the Gap when again you can be a buyer but the difference on any second attempt is that you are not looking for the same points return on any long position as you would have on the first dip to this buy area. I am expecting a lot more volatility this afternoon given the amount of key US Economic data to be released and for this reason I will only raise my buy level slightly to 2371/2377 with a 2366 stop. I will still look to sell the S&P on any rally higher to 2397/2403 with a 2408 stop. If I am taken long I will have a T/P level at 2382. If I am taken short I will have a T/P level at 2391.
EUR/USD
Unfortunately for the second consecutive trading session the Euro missed my 1.0840 buy level with a 1..0851 low print before rallying back above 1.09 and I am still flat. Looking at the Daily Chart which shows the Gap Opening from last Sunday night following the result of the French Election, the Euro will have difficulty in breaking last week’s high at 1.0777 which should now act as strong support on any sell-off. Today I will now raise my buy level to 1.0820/1.0860 with a 1.0795 stop. If I am taken long I will have a T/P level at 1.0895. If I am stopped out of this trade or we see the Euro trade below 1.08 today or over the coming days I will be an aggressive buyer from 1.0740/1.0780 with a 1.0710 stop. If I am taken long at my second buy level I will have a T/P level at 1.0845. Given how overbought the Euro is trading I will still be a small seller on any rally higher to 1.0990/1.1030 with a 1.1055 stop. Remember the 1.10 area is where we have the 500 Day Moving Average and should we test this key resistance level I will be looking for a decent sell-off initially before we eventually break and close over 1.10. If I am taken short I will have a T/P level at 1.0960.
June Dollar Index
I am still flat the Dollar and today I will now raise my buy level slightly to 98.25/98.65 with a 97.90 tight stop. Remember a break and close below 98.00 is bearish with a target price of 95.00 over the coming weeks. If I am taken long I will have a T/P level at 98.95.
June DAX
Following last Monday’s large Gap opening, the DAX has traded sideways since which is not surprising given the strength of the Euro. I have no doubt that the ECB is in the final stages of QE and as I mentioned in my Economic Commentary above I would expect the ECB to start talking a different game at its next meeting on June 8 which coincidentally is the same day as the UK Election. I am not going to chase the DAX higher and I will leave my buy level unchanged at 12340/12390 with the same 12295 stop. Despite my concerns for the DAX I still do not want to be short the market at this time. If I am taken long I will have a T/P level at 12430.
June FTSE
Again looking at the Daily Chart at last night’s lecture the FTSE is the one market that looks vulnerable to a downside move especially after the large Red Candle following the announcement of the UK Election 10 days ago. I am still flat the market and today I will now lower my sell level to 7215/7245 with a 7275 stop. If I am taken short I will have a T/P level at 7185. My only interest in buying the FTSE is on a dip lower to 7110/7140 with a 7085 tight stop. If I am taken long I will have a T/P level at 7165.
Dow Rolling Contract
The Dow traded to a low of 20932 which just missed my 20900 buy level and I am still flat. Despite the 600 point rally in the Dow this week the market continues to underperform both the S&P and NASDAQ as the earnings from both IBM and Goldman Sachs continue weigh on the market. However for me to turn bearish of the Dow it needs to break and close below 20600. Today, given the expected volatility later I will now lower my buy level slightly to 20790/20855 with a 20740 stop. If I am taken long I will have a T/P level at 20900. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 20620/20680 with a 20575 stop. If I am taken long a second time I will have a T/P level at 20750.
June BUND
Unfortunately the Bund also missed my 160.80 buy level with a 161.01 low print before rallying over 100 points and I am still flat. The Bund should have strong resistance at last Friday’s close at 162.50 and today I will be a small seller on any further rally to 162.40/162.70 with a 162.95 tight stop. If I am taken short I will have a T/P level at 162.10. In light of yesterday’s aggressive move higher I will now move my buy level higher to 161.00/161.40 with a 160.70 stop. If I am taken long I will have a T/P level at 161.70.
Gold Rolling Contract
Gold is acting better than Silver at this point which is understandable given the geo political risks that exist especially on a Friday ahead of a military weekend. I am still flat Gold and today I will leave my buy level unchanged from 1252/1258 with a 1247 tight stop. If I am taken long I will have a T/P level at 1264.
Silver Rolling Contract
Silver has now closed down 8 of the past 9 trading sessions, is severely oversold and due a bounce. On top of this Silver is trading at the Bottom of its Daily Bollinger Band and Williams Index. I am still long Silver at 17.53 and given the fact that we have had a decent month I am now going to lower my stop to 16.75 which is just below the 16.80 key support level from which we had an upside Key Day Reversal following the last Fed Meeting in March. I will lower my T/P level slightly on this position to 17.70. If I manage to T/P on this trade I will be back with a new update.
With the UK and all of Europe closed on Monday for the May Day Holiday my next Daily Commentary will be on Tuesday morning. However if any of my American calls not hit today subsequently get hit on Monday I will be back with an update (or 2) for my Platinum Members.
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