The post-Minutes US growth upgrade enthusiasm saw the US Dollar hold its ground through the London session, but Treasury yields began to reverse course through the day session yesterday, perhaps setting the scene for a USD pull-back today.
It was not a day of top tier US data, but US Jobless Claims in the February payrolls survey week remained extremely low at 222K against 229K the previous week and below the consensus pick (230K). US equities closed in the black, if off their intra-day highs. There were hints that the ECB will change their forward guidance at upcoming meetings, the next on 8 March. Markets are very much taking in their stride the prospect of an uncertain upcoming election in Italy (March 4) and that Germany is yet to form a coalition.
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 65 points yesterday and is now ahead by 1929 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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China came back on line yesterday, the Shanghai and Shenzhen Indexes both up handily (Shanghai by 2.17%); Shenzhen +1.89%), Dalian iron ore futures up a net small amount for the day (0.65%), but Chinese Rebar Futures were off a similar amount. Elsewhere, base metals made further gains overnight, while oil more than reversed Wednesday’s falls after a report showing lower US stockpiles against expectations of an increase. Gold was little changed.
Wednesday’s release of the January FOMC meeting noted the Fed having increased their growth forecasts since December after signs of positive domestic growth, the upbeat global economy, a rallying stock market, and of course the tax cuts. Since then, US Average Earnings and core CPI data surprised on the upside, implying more upside risks to the Fed’s expectation of three rate rises this year, a new set of the ‘’dots’’ coming at the 21 March meeting. US yields moved higher after the minutes, with the 10 year rate hitting 2.95% although these moves reversed overnight, the 10 year rate is back to 2.919%. The short end of the US Treasury curve has been reasonably stable and the market continues to price three rate hikes for this year.
Data out of Europe was marginally softer than expected, the second estimate of UK economic growth revised down a tenth to 0.4%/1.4% from the initial estimate of 0.5%/1.5% though seemingly from a net export drag, including stronger import volume growth. Sterling had a brief look at somewhat lower levels in the aftermath of the GDP update, but the renewed softness in the USD lifted all boats, including Sterling. It was a not dissimilar story for the Euro dipping a little after the release of a slightly below expectations German IFO Survey for February, though it remains at strong levels. The Business Climate Index came in at 115.4, down from 117.6. In perspective, it was 111.2 a year earlier and it is well north of its long run average of 102.4.
The market was also tuned in to the release of the ECB Minutes of its January 24-25 meeting. The main takeaway seems to have been that the groundwork is being laid, ever so at a glacial pace -for a tweaking of the guidance on the timing of ending QE (the economy is doing that too), a further iteration likely at the upcoming 8 March meeting. There is still no absolute clarity about whether to signal an end to QE in September when the current buying is scheduled to have run its course. Some at the January meeting were ready to remove a pledge to expand the bond-buying programme if needed, but even that did not win the day.
In the FX space, there was an acknowledgement it has been a combination of EUR strength and ‘broad weakness of the USD’ but also EUR strength ‘to a lesser extent in nominal effective (TWI) terms’. The minutes noted ‘although the past appreciation of the Euro had so far had no significant negative impact on Euro area external demand, volatility in FX markets represented a further risk that required monitoring.’ Some sensitivity to the currency remains given lower than targeted inflation.
This morning on the Economic Front we already had the release of German GDP which came in as expected with a +0.6% print. At 10.00 am we have Euro-Zone CPI. This is followed at 1.30 pm by Canadian CPI. This afternoon the Fed will release its Semi-Annual Monetary Policy Report to Congress ahead of Fed Chairman Powell’s Testimony next week. Finally we have the ECRI Weekly Index at 3.30 pm.
March S&P
It is very difficult to maintain a short position in the S&P as every dip keeps being bought. Yesterday after I posted the S&P had a small sell-off before rallying over 40 Handles to a high just above 2730 reversing Wednesday’s late sell-off. This move higher had me short at an average rate of 2718 and having nearly being stopped out of this position I covered at my revised 2716 T/P level. Subsequently the S&P traded to a low at 2698 before again attracting buyers to rebound to a high at 2728 overnight. The best way to trade this volatility is in small stake size with a wider stop. This move higher overnight saw the S&P hit my 2725 second sell level as emailed to my Platinum Members. As I want to get all members on the same page I have now cut this position at 2722.50 and I am now flat. If the S&P can break and close over 2735 this evening then we should see some follow through next week to my 2775/2800 resistance level before a more sustained sell-off ensues. Today I will raise my buy level to 2693/2703 with a 2686 stop. My only interest in selling the S&P is on a further rally to 2737/2744 with a 2749 stop.
EUR/USD
No change as I am still a buyer on any dip lower to 1.2210/1.2245 with the same 1.2180 stop. My only interest in selling the Euro is on a rally higher to 1.2450/1.2490 with a 1.2530 stop.
March Dollar Index
The Dollar traded lower to my 89.95 T/P level on my 90.15 short position shortly after I posted yesterday morning and I am now flat. Today I will be a buyer from 89.10/89.50 with a 88.75 tight stop. I will also look to sell the Dollar on any further rally to 90.40/90.80 with a 91.25 stop.
March DAX
Unfortunately the DAX just missed my 12245 buy level with a 12280 low print after I posted yesterday morning before rallying 250 points and I am still flat. Thankfully we continue to have no sell levels in the DAX as no matter what the news the buy the dip mantra continues. The DAX has good support from 12310/12370 and today I will be a buyer in this area with a 12270 stop which is just below yesterday’s low print. I still do not want to be short the market at this time.
March FTSE
I am still flat the FTSE and today I will now raise my buy level to 7145/7180 with a 7110 stop.
Dow Rolling Contract
It looks like a 300/500 point movement in the Dow is now a regular occurrence on a Daily basis, so we have to trade in smaller size with wider stops otherwise you are going to get stopped out all the time. I am still flat the Dow as the market just took-off after I posted yesterday morning before we had a sell-off mid-afternoon only to reverse these losses overnight. Thankfully we had no sell levels in the market. The Dow has strong support from 24850/24950 and today I will be a buyer here with a 24780 tight stop. The Dow has strong resistance at 25500 and I will now be a seller from 25525/25625 with a 25690 stop.
March NASDAQ
I am still flat the NASDAQ which traded the weakest of the main US Indices yesterday. I will now raise my buy level to 6670/6715 with a 6640 tight stop. I still do not want to be short the NASDAQ at this time.
March BUND
No matter how weak the US Bond Market is trading the Bund refuses to sell-off as every dip below 158.00 sees strong buying. Of course the low yield on the Bund is madness but you have to respect the price action in the market. I am still flat and today I will now raise my buy level to 158.45/158.85 with a 158.10 stop which is just below yesterday’s 158.18 low print.
Gold Rolling Contract
I am still flat Gold and today I will raise my buy level slightly to 1305/1315 with a 1297 stop. Gold has strong support from 1290/1300 and I would expect a strong rally to ensue on any test of this area.
Silver Rolling Contract
Silver again traded sideways to higher which it has pretty much don for most of the last four weeks. I still do not trust this market and today I will leave my buy level unchanged from 15.85/16.25 with the same 15.50 stop.
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