It has been a quiet end to the month of May, nevertheless the month has ended with a few themes raising question marks over the near term outlook for markets. US equities have managed to post positive returns for the month, but they have closed the day with small losses weighed down by financial and energy shares. The USD has also closed lower (DXY -0.29%), and has ended the month down between 1.5% and 2% in index terms amid US political uncertainty and question marks over the likelihood of further Fed hikes. Oil prices have also drifted lower as investors have become increasingly sceptical over the ability from OPEC and friends to reduce global crude output. Meanwhile uncertainty over the election outcome in the UK has also kept the pound under pressure as doubts begin to rise over PM May’s ability to win the election.
To mark my 1350th 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 email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 67 points yesterday to finish May with a gain of 1071 points, having made 1276 points in April, 1335 in March, 1481 in February and 1735 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.
US equity Indices have been dragged lower by a selloff in financial and energy shares. Banks shares came under pressure after J.P. Morgan Chase and Bank of America reported a decline in Q2 revenues blaming tranquil markets for the decline in trading activity. Energy shares have also come under the pressure following the move lower in oil prices (+/-2%) as investors questioned the effectiveness of the production cuts amid reports of Libya increasing production and investment banks reducing their year-end price forecasts.
The fall in oil prices has seen commodity linked currencies underperform the USD with the AUD at the bottom of the G10 leader board. The Aussie’s under performance was compounded by declines in iron ore (- 2.5%) and Meth coal prices (-15.1%). The pair currently trades at 0.7430, close to the overnight low of 0.7425. Meanwhile NZD is marginally lower (-0.08%) and continues to find the air quite thin above the 71c mark. That said, relative to other commodity link currencies, NZD has not only been the best performer on the day, it has also been the outstanding outperformer for the whole of May, up 3.16%. NZD was due for an outperformance after a couple of months baffling weakness.
After yesterday’s news of a YouGov/Times poll that suggested the Conservatives could lose 20 seats in the upcoming June General Election in the UK, the pound traded to a low of 1.2776 yesterday morning. Since then, however, it has staged an impressive recovery climbing to a yesterday afternoon high of 1.2912 aided by two more polls reporting a convincing lead by the Conservatives in the order of 10-15 percentage points.
The Euro is back above 1.12 with much of the performance reflecting USD weakness on the back of lower UST yields (10y UST traded down to 2.19% and are currently at 2.2045%), softer US equity markets and news that former FBI director will say President Trump asked him to back off Flynn probe in his testimony to the Senate committee next week. Earlier in the yesterday’s trading session, the Euro zones May flash HICP came in at 1.4%, down from 1.9% and against the f/c of 1.5%. The Euro hardly moved on the news given expectations for a low print had been set a day earlier following softer than expected numbers from Germany and Spain.
Meanwhile the Fed’s Kaplan said that he still sees 2 more hikes in 2017, however he did admit that “progress on inflation has been slow and uneven, I think it merits careful scrutiny in the months ahead”.
This morning on the Economic Front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 12.30 pm by the latest US Challenger Job Cuts. Next we have the ADP Employment Change at 1.15 pm and the US Weekly Jobless Claims at 1.30 pm. Finally we have US Manufacturing PMI at 2.45 pm and at 3.00 pm the ISM Manufacturing and Construction Spending.
Speaking wise we have a host of speakers from both the ECB and the Fed throughout the day.
June S&P 500
My S&P plan worked well with the S&P trading lower to my 2403 buy level before rallying to an initial rebound high at 2410 and this rally enabled me to cover this position at my revised 2406 T/P level given the number of positions that hit at the same time and I am now flat. There is no doubt that the longer the Dow stays below its March 1, high at 21.169 (which is now three months) the larger the negative divergence between both Indices and this will eventually lead to a downside break in the markets. With the US Payroll data due tomorrow the market will probably hold in until we see what this key data brings to the table. Today I will again look to buy the S&P on any dip lower to 2399/2405 with a 2394 stop. My only interest in selling the S&P is still on a rally higher to 2423/2429 with a 2434 stop.
EUR/USD
Unfortunately the low for the Euro was 1.1160 thus missing my 1.1130 buy level and I am still flat. Today I will now raise my buy level to 1.1140/1.1175 with a 1.1110 stop. I will also raise my sell level to 1.1290/1.1330 with a 1.1365 stop. The longer the Euro holds this 1.12 support level the better the chances of the Euro accelerating to my 1.20 target level sooner rather than later.
June Dollar Index
Shortly after the US Markets opened the Dollar traded lower to my 96.85 buy level following the release of the weaker than expected US PMI data. The Dollar subsequently traded to a 96.78 low print before rallying and I used this rally to cover this position at my revised 96.97 T/P level and I am now flat. If the Dollar continues to sell-off we will soon again see single digit readings for the Daily Sentiment Index which should lead to a more sustained rally. Today I will again look to buy the Dollar on any dip lower to 96.25/96.60 with a 95.95 tight stop.
June DAX
The DAX which has traded in a narrow boring range for much of the previous two weeks attempted to rally yesterday morning before running into a wall of resistance. I am still flat the market and today I will now raise my buy level to 12495/12545 with a 12455 tight stop. Despite the strong resistance above the market I still do not want to be short the DAX at this time.
June FTSE
The FTSE again missed my buy level before trading higher and I am still flat. I am not going to chase this market higher and I will leave my buy level unchanged at 7440/7470 with the same 7410 stop, especially given the sleuth of economic data due today from both sides of the Atlantic.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 20945 buy level before rallying nearly 100 points. As I wanted to finish May on a positive note coupled with the fact that so many of my positions hit at the same time I unfortunately covered my long Dow position at my revised 20965 T/P level and I am now flat. The only good part of my exit was by the time I was able to email my Platinum Members due to internet problems at my end the Dow was spiking higher which hopefully gave everyone a better exit point. Today I will again look to buy the Dow on any dip lower to 20910/20970 with a 20860 stop. I still do not want to be short the Dow at this time.
June BUND
Yet again the Bund traded in a narrow range and I am still flat. Today I will lower my buy level slightly to 161.50/161.80 with a 161.25 tight stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
I am still flat Gold which tried to rally above 1270 before running into strong resistance ahead of the 4.5 year mega trend line at 1280. Today I will raise my buy level slightly to 1248/1255 with a 1242 stop.
Silver Rolling Contract
When Silver initially missed my 17.25 buy level I emailed my Platinum Members to buy the market at 17.32. I am still long and will only add to this position on any move lower to 17.00 with a 16.70 stop.
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