Yesterday was a rather contained trading session with most attention centred on the first slab of this week’s US Treasury supply deluge with the US back on line after the long weekend. The US Dollar has re-captured some more ground in the face of the Treasury auctions, the market seemingly putting to one side any widening deficit concerns, for now anyway. Major currencies have generally lost a little ground against the USD, though remain well within recent ranges. For example, the AUD, is just below 0.7850 this morning after trading just over 0.79 figure yesterday,. The Bloomberg spot US Dollar Index closed 0.57% higher.
To mark my 1525th 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 160 points yesterday and is now ahead by 1710 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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Yesterday has been a mix of fortunes as far as stocks are concerned. European stock indexes were generally higher, but the FTSE lagged, BHP Billiton and HSBC marked down after announcing results. In the US, the tech sector leading the way, the Nasdaq outperforming, tech stocks among a minority of sectors supporting the S&P that closed in the red in the last hour. Among under-performing stocks on the day, Walmart shares came in for some large selling, stock down 9.4% for the session after reporting declining online sales growth. Meanwhile yesterday was a very light trading session for any economic data.
The market has been focused on the heavy wave of US T-bill and Treasury Bond issuance this week, the start of a step-up increase in supply ahead from the widening of the US Budget Deficit. Additional Treasury supply is also coming to the market courtesy of the Fed gradually reducing the size of its balance sheet and the US fiscal deficit widening. In the lead up to the auction, US Treasury yields had been pushing up during the Asian trading session, the 10-year Treasury yield then last night rising to a high of 2.925%, before drifting back down to 2.89% just ahead of the 3-mth and 6-mth T-bill auction. That’s about where it sits as I go to print.
The auctions were centred on shorter-term securities, most with maturities less than one year, $28bn of Two Year note and the remainder shorter term among $179bn auctioned. The bid-cover ratio for the 3-month auction was not great but it improved for the 6-month auction, indirect bidders for that tranche up to 60%, this group including foreign central banks, a positive.
In the aftermath of the overnight global dairy auction, the NZD has also traded in a tight range, drifting a little lower against the USD along with other major currencies. The overnight GDT dairy auction was expected to show a fairly flat result and that was the case, with the average price index down 0.5% and whole milk powder prices up 0.3%. This follows strong price gains earlier this year. One currency that has outperformed to an extent has been sterling, with more chatter around the prospects for a bespoke trade deal with the EU.
With China out for another day, the full extent of the Australian Dollar’s commodity price support will not be again fully evident until tomorrow onward. There will though be a lot of focus on today’s wage price index for Q4 after it undershot expectations in Q3 when the expectation was that it then might have been boosted by the 1 July 3.3% increase in the minimum wage. It is conceivable that flow-through could have been delayed and thus spill over into Q4. Most analysts look for steady 0.5% growth (also steady at 2.0%). A 0.6% print might not bolster RBA wage rise hopes too much, the Bank having noted in its SoMP that Q3 might have been depressed somewhat by ‘’temporary’’ factors.
Meanwhile the Euro is testing its key 1.2310 support as I go to print while European Equities are again outperforming the US Markets.
This morning on the Economic Front we have German and Euro-Zone Manufacturing and Composite/Services PMI at 8.30 am and 9.00 am respectively. This is followed at 9.30 am by UK Employment. Average Earnings and the Public Sector Borrowing Requirement. At 12.00 pm we have US MBA Mortgage Applications and this is followed at 2.45 pm by US Manufacturing /Services PMI. Finally at 3.00 pm we have Existing Home Sales.
The Fed’s Harker speaks on Economic Outlook at 2.00 pm while the Bank of England Governor is due to speak in London at 2.15 pm.
March S&P 500
Thankfully the volatility continues for the US Stock Markets with the S&P trading lower to my 2715 buy level before rallying almost 20 Handles. Unfortunately I covered this position too early at my revised 2717.50 T/P level before emailing my Platinum Members to re-buy the S&P again at 2710 with a 2716 T/P level which were both filled as the market got hit into the close. As mentioned in my Economic Commentary above the S&P continues to underperform the German DAX and other main European Indices and unless the S&P can break and close over the key 2750/2775 resistance level then we could be in for a decent move lower. Today I will now lower my sell level to 2740/2750 with a 2758 stop. My only interest in buying the S&P is on a dip lower to 2692/2702 with a 2686 stop.
EUR/USD
This morning the Euro traded lower to my 1.2310 buy level before rallying to my revised 1.2320 T/P level and I am now flat. The Euro has strong support from 1.2240/1.2285 and today I will be a buyer in this area with a 1.2205 stop. I still do not want to be short the Euro at this time as I expect the Euro to rally strongly after this move lower runs its course.
March Dollar Index
The Dollar has rallied as expected without me being able to get a long position on board and I am still flat. I am reluctant to chase this market much higher from here and will only raise my buy level to 88.85/89.25 with a 88.50 stop. The Dollar has strong resistance from 90.15/90.50 and today I will be a seller in this area with a 90.85 stop.
March DAX
Unfortunately the DAX just missed my 12310 buy level with a 12326 low print before rallying nearly 200 points. This move higher was helped by the weakness in the Euro. Today I will only raise my buy level slightly to 12270/12325 with a 12230 stop.
March FTSE
My FTSE plan worked well with the market trading lower to my 7170 buy level shortly after I posted yesterday morning before rallying to my 7195 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7120/7155 with a 7090 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Late in the New York session the Dow traded lower to my 24930 buy level with a 24880 low print before rallying back above 25000 overnight. As I did not want to have a long position on board overnight I covered this position at my revised 24970 T/P level and I am now flat. This morning the Dow is opening weaker and I will now look to buy the market on any dip lower to 24740/24820 with a 24665 stop. I am not going to chase this market lower and will have no sell level for the Dow today.
March NASDAQ
No change as I am still a buyer on any dip lower to 6530/6575 with a 6490 stop.
March BUND
Unfortunately the Bund just rallied after I posted yesterday morning as this market continues to outperform the US T Bond. Even though the Yield is very low there is a lot of appetite for the Bund with strong buying anytime the market trades below 158.00. Today I will raise my buy level to 158.00/158.40 with a 157.60 stop.
Gold Rolling Contract
Gold continues to weaken as expected. I am still flat and I will now lower my buy level to 1306/1314 with a 1299 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 15.80/16.20 with the same 15.50 stop.
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