News that President Trump had fired his controversial Chief Strategist, Steve Bannon, only provided a short-lived rally to US equities. After recording sharp losses on Thursday, major US equities ended Friday marginally down and recorded their second week of negative returns. While gold was unchanged and the VIX sneaked back down to a 14 handle, the Japanese Yen still benefited from a safe haven bid and after trading in a weekly range of 2.16%-2.28%, 10y US Treasury Yields ended the week at 2.1939%, close to the bottom of the range. US stock Indices were marginally lower on Friday, but ended little changed on the week. The softer USD on Friday and stronger commodity prices helped AUD move back above 79c and NZD edge back above 73c.
To mark my 1400th 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 60 points on Friday and is now ahead by 721 points for August. Having made 1096 points in July, 1023 in June, 1076 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
The lack of key data releases and major corporate earnings news contributed to Friday’s quiet trading session with major US equity Indices trading in and out of positive territory. News that President Trump had fired his divisive Chief Strategist, Steve Bannon, provided a short-lived equity rally with US equities heading south once again in the last hour of trading.
In theory the departure of Steve Bannon elicited an initial positive reaction in risk assets as the news was interpreted as a step towards imposing some order within the White House. From a market perspective, however, Bannon’s departure doesn’t change Trump’s strong views on immigration, border security and trade protection. Hence, the latter observation probably explains the short-lived market reaction in the end.
The Dow Jones closed Friday – 0.4% to 21674.51, recording a weekly decline of -0.8%. The S&P500 was – 0.18% on the day and -0.65% on the week while the NASDAQ closed Friday at -0.09%, – 0.64% on the week.
US Dollar Indices ended marginally lower on Friday (DXY – 0.2%, BBDX -0.34%), but both managed to end the week slightly higher (DXY +0.39% and BBDXY +0.11%). In G10, barring CHF, the US Dollar was softer across the board with commodity linked currencies the big winners. CAD and NOK led the way, up 0.81% and 0.77% respectively, boosted by decent gains in oil prices. After I posted on Friday the Australian Dollar moved back above 79c (0.56% on the day) and NZD climbed above 73c (0.43%).
Meanwhile the EURO closed the week at 1.1761 and USD/JPY ended at ¥109.18, its lowest level since late April. The USD/JPY traded to an intraday low ¥108.60, taking out the previous intraday low of ¥108.74.The April low of ¥108.13 is now a key support level with a break below this level opening the potential for a move all the way down to ¥106.5.
On Friday, 10y UST yields traded in 2.1608% to 2.2097% range and ended the week at 2.1939%. The lows were reached when London and Europe were still trading and then news of Steve Bannon departure and better than expected Consumer sentiment data lifted US yields later in the NY session.
Oil prices surged on Friday following a Reuter’s report of an Exxon Mobil refinery shut down in Baytown, Texas. (The 560k barrel-a-day plant is the second-largest refinery in the US). WTI closed Friday at $48.51, up 3% while Brent closed the week at $52.72, up 3.3%.
As for other commodities, gold was little changed at $1284.43 after failing to sustain a move above $1300. Copper was flat and iron ore had a good day, up 3.4% and closing the week at $77.94.
CFTC data showed net short positioning against the USD vs G10 declined last week from -125k to -104k. The overall move was dominated by a 14k reduction in EUR longs to 70k, 8.6k reduction in NZD longs to 25k and 11k reduction in CAD longs to 51k. AUD longs were extended by 1.6k to 59.6k. Ignoring the 60.7k high two weeks ago, AUD longs are now the highest since Apr 2013.
As for economic data releases, US August preliminary Michigan Consumer Index jumped to 97.6 from 93.4, above the 94 expected by consensus. This was the index’s highest reading since January. Meanwhile 5-10 year expectations slid to 2.5%, essentially reversing the 2.6% rise in July. Canada July CPI prints at +1.1% y/y vs +1.2% expected. But the average of the Bank of Canada’s three core inflation measures was 1.5%, rising from a 1.4% in June.
This morning on the Economic Front we have UK Public Finances at 9.30 am. Finally at 1.30 pm we have the Chicago Fed National Activity Index.
Later today the UK government plans to release two papers on its Brexit plan, Europe’s reaction will be important for the pound.
September S&P 500
The S&P having just missed my initial 2418 buy level with a 2419.50 low print subsequently rallied to my 2438 sell level on the news that Trump had sacked Bannon. After the market dipped I covered this position at my 2434 T/P level and I am now flat. The S&P had a bad close falling to 2425. However in spite of the late sell-off the McClellan Oscillator improved slightly closing at -146 compared to Thursday’s -178 print. If the S&P can hold its 100 Day Moving Average at 2414 then we may well rally back to the 2440/2450 resistance zone ahead of the key resistance at 2460. Today I will now look to buy the S&P on any dip lower to 2414/2420 with a 2409 stop. Given how oversold the S&P is trading plus the fact that the MO improved I do not want to be short the market at this time.
EUR/USD
I am still flat the Euro which traded in a narrow range on Friday as we approach the last 10 days of the European Holiday season. Today I will move my buy level higher to 1.1640/1.1680 with a 1.1610 stop. My only interest in selling the Euro is still on a rally higher to 1.1810/1.1850 with the same 1.1880 stop.
September Dollar Index
No change as I am still long from last Thursday at 93.50. I will only add to this position on any further move lower to 93.10 with the same 92.90 stop.
September DAX
The DAX traded better than the US Indices on Friday despite the firmer Euro. This price action has to be respected and as a result I will now move my buy level higher to 12010/12070 with an 11960 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 11920 with an 11860 stop.
September FTSE
I am still flat the FTSE and today I will move my buy level slightly higher to 7250/7280 with a 7225 stop. Given the weakness of Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my 21630 buy level with a 21642 low print before rallying 140 points and I am still flat. Even though the Dow sold off into the close I will still raise my buy level to 21580/21640 with a 21535 stop. Meanwhile I will continue to look to sell the Dow on any rally higher to 21840/21900 with a 21950 tight stop.
September BUND
Given the late weakness in the US Treasury Yields I will now lower my sell level in the BUND to 164.45/164.80 with a 165.05 stop. Given the insane yield in the Bund I still do not want to be long the market at this time.
Gold Rolling Contract
We are at a critical juncture in Gold as the market is so far unable to close above its June 6 closing price at 1294.38 which is the highest close over the past 9 ½ months. Gold did break 1300 on Friday but had a weak close in New York. I am still flat the market and today I will leave my buy level unchanged from 1268/1274 with the same 1263 tight stop.
Silver Rolling Contract
My long 16.90 Silver position worked well with the market trading higher to my 17.10 T/P level. Subsequently I emailed my Platinum Members to re-buy Silver and this was filled at 16.90 after the US markets re-opened last night. I will only add to this position on any move lower to 16.60 with the same 16.45 tight stop. I will now lower my T/P level on this position to 17.10.
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