Friday was another choppy day for equity markets, although the S&P500 managed to end on a positive note. US Treasury yields nudged higher, with oil prices falling another 3%. Equity market volatility continued on Friday, with US stocks trading within a 4% range and ending on the positive side of the ledger (+1.5% for the S&P500) while the VIX index traded a 28-41 range and closed the week at 29. There was not much on the economic calendar, with the market wobbles reflecting a continuation of fear, or not, that the big bull run for equities has ended.
To mark my 1500th 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 in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 340 points on Friday and is now ahead by 1012 points for February having made 879 points in January, 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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President Trump signed a two-year Budget agreement that boosts Federal spending by $300b, temporarily finances the government through to 23 March, and suspends the debt ceiling for a year. Economists said that it added about 0.4 percentage points to growth this year, at a time when the labour market is already tight, thereby adding to inflationary pressures and the case for the Fed to consider four rather than three rate hikes this year.
However, that was not how the market traded, with the probability of three rate hikes for the coming year reduced further and the 2-year Treasury rate down 3bps to 2.07% with the short end of the curve being sensitive to the turbulence being seen in the equity market and some pondering about how the Fed might react to the increased market volatility. There was a notable steepening of the curve, with the 10-year rate ending the day at 2.85%, up 3bps, with one eye on the increased fiscal deficit and extra government borrowing that will ensue. Still, there was evidence that equity market volatility was a factor in the session, as the 10-year rate traded a wide 2.78-2.86% range, with yields highly correlated to the intra-day S&P500 moves.
In the currency market, the USD held on to its gains seen earlier in the week and was relatively flat for the session. Currency market volatility remained modest, considering the turbulence seen in equity markets. Sterling was the worst performer as Brexit headlines were in focus and weaker than expected UK Industrial Production and Trade data did not help. The EU’s chief negotiator Barnier warned that a Brexit transition deal was ‘’not a given’’ if disagreements with the UK persisted. He also pointed out that come Brexit day the UK will leave behind some 750 international agreements the EU has struck on behalf of its Member States on the date of the withdrawal. My view remains that the UK government will deliver on a transition deal out of self-preservation, for if a transition deal is not agreed to, the government would likely fall. Sterling fell by 0.6% to 1.3825.
The AUD and NZD ended the week on a positive note, being the strongest of the majors for the session, highlighting that this is not an ordinary bout of risk appetite reduction we are seeing. The market sees the current risk-off episode as largely an issue confined to the equity market, perhaps a reflection that share prices were just simply over-cooked, and has little to do with changed expectations about the global growth outlook. The RBA said in its Statement on Monetary Policy that the economy was way-off full employment and inflation returning to the mid-point of the target, signaling policy will stay on hold. This was a familiar refrain and there was little reaction for the AUD. The AUD closed the session up 0.4% to around 0.7810.
Canada saw a record drop in part-time employment that coincided with a 20% increase in the Ontario minimum wage. The soft employment, higher wages combo only saw some passing volatility in CAD, while another 3% sliced off oil prices did not help sentiment.
This morning on the Economic Front we have no data of note from either the Euro-Zone or UK. The only data due from the US is the Monthly Budget Statement at 7.00 pm.
March S&P 500
My S&P plan worked really well with both my 2535/2550 buy range and 2635/2655 sell range getting filled within a few hours of each other in what turned out to be another volatile trading session. The bulls needed to bring this market back from the brink as a break and close below 2530 last Friday would have seen the market on ‘’Crash Alert’’. The S&P traded lower to my 2550 buy level before rallying to my 2560 T/P level. The good part about Friday is no matter where you bought the S&P in my buy range you would still have a had a nice gain as the market did not come near my 2525 stop level. Subsequently late in the session the S&P rallied to my 2635 sell level with a 2638 high print before falling 20 points and this sell-off enabled me to cover this short position at my 2627 T/P level and I am now flat. Last night the S&P gaped higher and we are now trading at 2635 this morning again proving that when you are short you have to take your gain quickly before it evaporates. On Friday the McClellan Oscillator closed at a still oversold -223 print while the Fear & Greed Index closed at 10 which is still Extreme Fear and only two points higher than last Thursday’s close. The S&P has strong resistance from 2648/2668 and today I will be a small seller in this area with a 2678 stop. I do not believe that we are just going to rally straight back up as there was a lot of technical damage done last week plus a lot of traders are trapped long above the market and will therefore be a seller on rallies. I will also be a small buyer on any dip lower to 2603/2613 with a 2595 stop.
EUR/USD
My Euro plan also worked well on Friday with the Euro trading lower to my 1.2215 buy level with a 1.2205 low print, before rallying back to 1.2295 this morning. Unfortunately as I had so many ‘’open’’ positions at the time I was filled at 1.2215 on Friday I did not have time to keep an eye on the Euro and I covered this position for a breakeven and I am still flat. Today I will again look to buy the Euro on any dip lower to 1.2180/1.2225 with a 1.2140 stop.
March Dollar Index
No change as I am still a buyer on any dip lower to 89.35/89.75 with the same 89.10 stop.
March DAX
My DAX plan also worked well with the market initially trading the whole of my 12050/12120 buy range for an aver buy level at 12085 before stopping just shy of my 11995 stop level. Subsequently the DAX rallied 150 points and I used this rally to exit at my revised 12105 T/P level and I am now flat. The DAX made a new low 11900 before rallying nearly 400 points again proving how difficult it is to be short any stock market for any length of time. Today I will again look to buy the market on any dip lower to 12090/12160 with a 12030 stop.
March FTSE
The FTSE had another volatile trading session after the market traded lower to my 6960 buy level I unfortunately covered this position at my revised 6985 T/P level as I had so many open positions on board and I am now flat. If you bought the market and held on then this worked really well with the FTSE trading at 7110 this morning. Given the extent of the rally off Friday’s low I this we have put in a tradeable bottom for now and today I will again look to buy the market on any dip lower to 6990/7040 with a 6945 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I said on Friday that the Dow has major support at 23400/23600 and the low was 23350 before we rallied over 1000 points. Unfortunately after the Dow traded lower to my 23550 buy level I covered this position for a nice gain at 23675 but it could have been so much more but when you have so many positions hitting at the same time you have to reduce your risk and I am still flat. The Dow has strong resistance from 24520/24680 and today I will be a small seller in this area with a 24780 stop. The Dow has strong support from 23850/23980 and today I will be a buyer in this area with a 23750 stop.
March NASDAQ
The NASDAQ traded the whole of my buy range on Friday for an average buy level at 6250. My stop was too tight at 6190 and I was stopped out near the low of the day which is frustrating especially when you see the NASDAQ trading at 6450 this morning. I am going to stay flat the NASDAQ today and observe as I do not see an edge to this market with a good risk/reward trade.
March BUND
NO change as I am still a buyer on any dip lower to 157.05/157.45 with a 156.70 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold looked like we would break lower on Friday before rallying overnight and I am still flat. Today I will raise my buy level slightly to 1295/1305 with a 1288 stop.
Silver Rolling Contract
I am still long Silver at 16.47. I now have this position on board too long and will lower my T/P level to 16.50. If this happens I will be back with a new update for my Platinum Members. I will also raise my stop on this position to 16.15.
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