It has been a quiet past 24 hours for the markets ahead of what could be a stormy Thursday with the ECB, UK election and former FBI Director Comey’s testimony all occurring on the same day. US equities have closed the day marginally in negative territory, tension in Qatar have so far failed to ignite big moves in oil prices and US Treasury yields are a little bit higher while in currencies the AUD is the G10 outperformer. US and European equity markets have begun the week in a tentative fashion with travel and insurance companies coming under a bit of selling pressures following the weekend terrorist attack in London. Meanwhile energy stocks are little changed despite rising tension in the Middle East.
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 contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it was flat for the second consecutive trading session as none of my calls got executed in what turned out to be one of the quietest trading sessions of the year to date. The Platinum Service is still down 22 points for June, having made1071 points in May, 1376 in April, 1335 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.
The USD is a little bit stronger against most G10 currencies with Sterling and the Australian Dollar the two notable exceptions. After yesterday’s better than expected Australian Q1 GDP partials (inventories and profits) the risk of a negative Q1 GDP growth outcome on Wednesday has diminished and in the process it has helped the AUD outperform. Yesterday’s news of Saudi Arabia, Bahrain, UAE and Egypt suspending diplomatic relations with Qatar and banning flights to and from the country, could be an additional factor helping the AUD. Qatar is the biggest LNG exporter in the world and any disruptions to their exports could trigger an increase in LNG demand from Australia. The fall in oil prices yesterday might also reflect concerns over OPEC and friends ability to implement the extended agreement to curb production. AUD has been on a steady rise, reaching an overnight high of 0.7498 and is currently trading at 0.7486.
Sterling’s outperformance appears to have been driven by yet another poll despite a softer than expected Services PMI (53.8 vs 55.8 prev.). A Guardian/ICM poll shows Conservatives have an 11-point lead over Labour and it suggests that the Tories lead remains in double digits. The pound climbed to an intra-day high of 1.2940, but it has drifted lower over the past few hours and is currently trading at 1.2906.
Price action in the Euro has also been somewhat interesting. The Euro is 0.21% lower against the USD with softness in the pair seemingly triggered by a Bloomberg survey showing 90% of analysts expect the ECB to upgrade its risks around the Euro area recovery to ‘’balanced’’, but analysts are split as to whether the Bank will remove its easing bias on interest rates, with the majority now expecting that to occur next month. I still see the EURO ultimately heading higher over the balance of the year.
10y UST yields are have ended the NY session at 2.1817%, about 1.5bps higher relative to where I marked prices 24 hours ago. Yesterday the ISM Non-Manufacturing Index printed marginally below expectations at 56.9 vs 57.1 forecast, but the interesting bit in the report was the rise in the Employment Index. The index jumped to 57.8, its highest level since July 2015 and after two months of unexpectedly weak sub-52 readings. The rebound in the Employment index supports the view that that the recent softer Non-Farm Payrolls and earnings prints are largely driven by temporary weather and seasonality effects. Stronger numbers should be expected over the coming months.
This morning on the Economic Front we have German and Euro-Zone Services/Composite PMI at 8.55 am and 9.00 am respectively. This is followed at 9.30 am by the Euro-Zone Sentix Investor Confidence and Retail Sales. Finally at 3.00 pm we have the US JOLTS Jobs Openings and the Labour Market Conditions Index Change.
June S&P 500
Yesterday was one of the quietest trading session in many months with the S&P trading for the most part in a 3 Handle range as the market goes on hold ahead of Cormey’s Testimony to the Senate on Thursday. Normally the sell in May and go away for stocks was firmly rejected last month with the VIX closing at it’s lowest May print ever at 10.86 beating is previous record for May of 12.27 in 1995. The 10.86 print was the lowest overall VIX since 1990. There is no doubt this coming Thursday and the FOMC Meeting next Wednesday will be key for the next direction of the market, but as I have mentioned countless times until we get a sell extreme that lasts for more than a few days and breaks some key levels being short is a waste of capital. Today I will now lower my buy level slightly to 2422/2428 with a 2417 stop. My only interest in selling the S&P is still on a rally higher to 2460/2472 with the same wider 2480 stop.
EUR/USD
I am still flat the Euro which missed my initial 1.1230 buy level with a 1.1235 low print before rallying. Today given the extreme DSI reading towards the Euro I am going to lower my buy level slightly to 1.1180/1.1220 with the same tight 1.1155 stop. Meanwhile I will leave my sell level unchanged from 1.1310/1.1350 with a 1.1385 stop.
June Dollar Index
I am still flat the Dollar and today I will now raise my buy level slightly to 96.10/96.45 with a 95.80 stop. Given the low sentiment towards the Dollar I still do not want to be short the Dollar at this time even though I believe the Dollar will be weaker by the end of the year.
June DAX
With sentiment at extreme levels towards the DAX as mentioned in yesterday’s commentary I will now look to sell the DAX on any further rally higher to 12950/13010 with a 13050 tight stop. I will also look to buy the DAX on any dip lower to 12640/12690 with a 12590 stop.
June FTSE
Unfortunately the FTSE missed my 7500 buy level with a 7507 low print before rallying into the close and I am still flat. With the Conservatives well ahead in the latest Poll, I would expect Sterling to strengthen which should put pressure on the FTSE. For this reason I will now lower my buy level slightly to 7450/7480 with a 7425 tight stop. Despite my concerns for a rally in Sterling I still do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 21050/21110 with a lower 20995 stop. I still expect the Dow to have trouble initially in breaking the 21300 resistance level and today I will leave my sell range unchanged at 21310/21370 with the same 21420 stop.
September BUND
I have now rolled to the September Contract which is trading 200 points higher than the June Contract. The Bund has strong resistance at the 165.10 area and today given the huge premium in rolling forward to the September Contract I will now look to sell the Bund from 164.85/165.20 with a 165.45 stop. I do not want to be long the Bund at this time as I want to see how the market reacts to the 200 point differential between the two contracts.
Gold Rolling Contract
As I am still long Silver I will leave my buy level in Gold unchanged from 1260/1267 with the same 1254 tight stop. I was surprised that we did not see some follow through in Gold yesterday especially given the heightened level of terrorism.
Silver Rolling Contract
No change as I am still long Silver form last Friday at 17.58 with the same 17.25 stop. If I am stopped out of this position I will be a more aggressive buyer on any further dip lower to 16.80/17.15 with a 16.45 stop.
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