US equities had another solid day, boosted by further declines in US Treasury yields while the VIX index continues to decline. The big dollar is little changed with the Canadian Dollar and Mexican Peso under pressure as NAFTA talks resume. Position squaring is probably one factor at play as the market awaits Fed Chair Powell’s first public appearance this afternoon at 3.00 pm. After solid gains on Friday, US equities have started the new week on a strong footing with the Dow closing 400 points higher for a 1.60% gain, while the S&P500 and NASDAQ both closed 1.15% higher. Meanwhile, equity volatility has continued to ease with the VIX index currently at 15.80, a week ago the index was at 20 and early in February it traded to an intraday high of 50.
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 25 points yesterday and is now ahead by 1966 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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Back then a spike in US Treasury yields was the trigger for the rout in US equity and now the decline in UST yields appears to be the main driver for the equity rebound. 2y and 10y UST yields are now on their third consecutive day of decline with the 10y note currently trading at 2.865%, after trading to an intraday low of 2.82%. Last week Wednesday, when US equities were on their knees, 10y UST were trading at 2.95%. Front end yields have also pared back most of last week’s move with the 2y tenor currently trading at 2.225%, 1bps down on the day.
In index terms the US Dollar is little changed over the past 24hrs and both DXY and BBXY indices are trading on the upper half of their past month range. NOK is the top performer in G10, up 0.22%. Oil prices might have been a supporting factor for NOK with both WTI and Brent up around half a percent, but the rise in oil prices was no help for the Canadian Dollar with Loonie the big underperformer over the past 24hrs, down 0.54%. The resumption of NAFTA talks amid a tense negotiating environment has not only weighted on the CAD, MXN has also come under pressure with the peso down 0.73%.
The AUD is little changed over the past 24hrs, the pair currently trades at 0.7850 almost exactly where it was this time yesterday. Yesterday the Aussie traded to an intraday high of 0.7893 boosted by news that China’s biggest steel producing region plans to extend its winter production curb. China’s top steelmaking city of Tangshan has proposed new restrictions on production once the current curbs expires in March in order to improve air quality. News reports suggested that the curb in production is likely to incentivise steel mills to concentrate on higher valued-added steel products amid their higher profit margins, if so this would be a positive for higher quality ores that Australia produces. Overnight iron fines 62% hit a 10 month high of $79.15, but later in the session the initial spike was retraced with the AUD following the move. .
The Euro is also little changed seemingly unfazed by comments from ECB President Draghi before European Parliament lawmakers. Draghi said further declines in unemployment and a pickup in wage growth should boost consumer-price growth, but that there is still a way to go. While the Euro-area economy is enjoying its fastest expansion in a decade, data this week will likely show inflation continues to undershoot the ECB’s target of just below 2 percent. Draghi also singled out the recent volatility in financial markets, including in the exchange rate, which he said deserves close monitoring with regard to its possible implications for price stability.
In the UK, Labour leader Jeremy Corbyn officially announced the party’s intention to remain a member of ‘’a’’ customs union after leaving the EU. He said ‘’I appeal to MPs of all parties…to join us in supporting the option of a new UK customs union with the EU’’. A small number of pro-EU rebel Conservative MPs have tabled an amendment to the government’s Customs Bill (to stay in the customs union) and in so doing have effectively sided with the opposition Labour’s own policy. Given Theresa May’s slim Parliamentary majority, one possible outcome is a government defeat in the Bill, which may then trigger a no confidence vote in the government. While I acknowledge the risks, I still remain constructive on Sterling for now as I expect a transitional arrangement to be agreed over the coming few months. Despite UK politics remaining in flux, Sterling was not overly affected overnight, and it might be a case of the market being fatigued by the constant barrage of Brexit-related headlines. Theresa May sets out her ideas for post-Brexit relations on Friday.
This morning on the Economic Front we have German CPI at 8.00 am and this is followed by Euro-Zone Money Supply at 9.00 am and Consumer Confidence at 10.00 am. Next we have US Durable Goods Orders, Trade Balance and Wholesale Inventories at 1.30 pm. At 2.00 pm we have the FHFA House Price Index. Finally at 3.00 pm we have the Richmond Fed Manufacturing Activity Index and the Conference Board Consumer Confidence Index. Also at 3.00 pm, new Fed Chairman Jay Powell testifies before the House Financial Services Committee in what is his first public appearance.
March S&P 500
The S&P is following my road map but the market is making it difficult to get a long position on board. On Friday I mentioned that if we closed over 2735 it would be a bullish breakout. Unfortunately the S&P just missed my 2746 buy level before rallying to a high so far at 2788. I am still looking for a move higher to 2810/2825 where I would expect a 40/50 point sell-off before subsequently rallying to new all-time highs. Longer Term traders may want to use any dip to play for this move which could well see the S&P eventually trade as high as 3200 over the coming months. Today I will now raise my buy level to 2752/2762 with a 2745 stop. I will be a seller on any rally higher to 2810/2825 with a wider 2835 stop. I will try and narrow this sell range as the market moves higher. I would expect some two-way volatility once Fed Chair Powell starts his Testimony at 3.00 pm.
EUR/USD
The last three trading sessions have been very frustrating with a number of my calls missing by small margins. Yesterday afternoon the Euro made a new low on the day at 1.2277 just missing my 1.2270 buy level before rallying to a rebound high at 1.2345 so far this morning. Today I will now raise my buy level to 1.2245/1.2280 with a 1.2215 stop. I still do not want to be short the Euro at this time.
March Dollar Index
No change as I am still a buyer on any dip lower to 88.80/89.20 with a the same 88.45 stop.
March DAX
Twice the DAX had nice sell-offs yesterday with the market missing my 12470 buy level by a few points before rallying above 12600 on the back of the stronger US Indices. With the Euro back trading near 1.2350 the DAX is struggling to maintain yesterday’s late gains. Today I will lower my buy level slightly to 12380/12440 with a 12320 stop. I still do not want to be short the DAX at this time.
March FTSE
I am still flat the FTSE which is testing key resistance at 7300 this morning. Today I will now raise my buy level to 7225/7265 with a 7195 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
After falling nearly 4000 points from its 27705 high on January 29 we are only less than 800 points from these highs this morning as yet again all short positions get slammed. Yesterday the Dow gapped higher for the third consecutive trading session to register a 400 point gain. After the Dow traded higher to my 25660 sell level we topped initially at 25690 before falling 70 points only to rally strongly in the last 30 minutes of trading. I used this sell-off to email my Platinum Members to exit any short position at my revised 25635 T/P level and I am now flat. I will now raise my buy level to 25150/25350 with a 25020 stop. I have to use wider buy ranges with smaller size to account for the increased volatility. The next strong resistance area for the Dow is from 25980/26080 and I will be a seller here with a 26175 stop.
March NASDAQ
I am still flat the NASDAQ which is now within touching distance of its all-time high as its whole sell-off has now been fully retraced. Today I will raise my buy level to 6830/6880 with a 6785 stop.
March BUND
I am still flat the Bund which initially sold off after I posted before following the US Treasury market higher. The Bund is selling off as I post and I will now lower my buy level to 158.55/158.95 with a 158.25 stop. The 158.80 level is strong support and I would expect the market to rally on any test of this area.
Gold Rolling Contract
Gold came close to my buy level before rallying and I am still flat. As I am long Silver I will now lower my buy level slightly to 1312/1320 with a 1303 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 1293 with a 1283 stop.
Silver Rolling Contract
Silver traded lower to my 16.55 buy level. I am still long and will lower my T/P level on this position to 16.75 which is just in front of the key resistance level at 16.80. If I manage to exit at this price level I will be back with a new update for my Platinum Members. Meanwhile I will add this existing position on any dip lower to 16.25 with a 15.90 stop.
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