Though markets were on tenterhooks yesterday awaiting President Trump’s decision on whether the US would pull out of the 2015 Iran nuclear agreement, the decision to do so when it came ‘’ an immediate hard’’ exit and known a few hours before the formal 2pm Washington time announcement drew only limited market response, consistent with the notion it was mostly ‘’in the price’’ already. That may be so, but its early days in terms of how the decision will play out in terms of heightened geopolitical stress in the Middle East, even if any physical reduction in Iranian crude oil exports is limited.
To mark my 1580th 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. To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total. This offer represents a 38% discount and is open to both new and existing members. 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 108 points on Friday and is now ahead by 543 points for May, having made 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notifications.
All of the other five signatories to the 2015 agreement (UK, France, China, Russian and Germany) appear to remain committed to the deal. The UK, Germany and France have said so while Russia says the US pull out ‘’won’t end its existence immediately’’ and that it will continue to develop bilateral ties with Iran as well as being open to the French proposal for an enhanced nuclear deal. China is expected to ignore any re-imposed sanctions and indeed is a potential buyer of more Iranian oil after Saudi Arabia has of late been lifting the premium it charges China on top of the Brent crude benchmark price.
Overall, this further example of US isolationism is something that can continue to erode foreign investor enthusiasm for owning US assets over time, if not right here and now.
The ‘’no, yes’’ volatility in expectations as to what Trump would do on Tuesday saw the Brent crude benchmark trade as low as $73.10 and as high as $76.18 (the latter just below Monday’s new cycle high of $76.34). It ended the NY session at $75.63. WTI crude currently sits just below $70 at $69.71, about $1 back from Monday’s highs. The S&P 500 lost about 0.5% on news of the pull-out but has since recouped all of the loss, keeping the VIX below 15. US Treasury yields were higher into then lower out of the formal announcement, to currently be 2bps up on the day at 2.97%.
In currencies the US dollar has continued to advance, with some support seemingly drawn from Fed chair Jay Powell’s remarks in Zurich. His comments reinforced the Fed’s message that more rate rises are coming (no surprise there). Powell said the market was ‘’reasonably well aligned’’ with the Fed’s tightening plans while noting that ‘’overall U.S. domestic financial conditions have gotten looser’’ despite the Fed’s six rate hikes (something I have been stressing for a while now and which plays in favour of more not fewer rates hikes down the track that currently discounted). Powell came across as very relaxed about the ability of other countries to weather higher US rates, in particular Emerging Market economies (though Central Bankers always say that, don’t they?).
On EM specifically, the Argentine Peso has recovered somewhat after making new lows earlier in the day, after President Macro announced the country had sought a (reportedly $30b) flexible credit line from the IMF. The credit line is seen as a precautionary tool to reassure markets and hopefully to ‘’short circuit’’ the rapid depreciation in the peso.
Also assisting the USD was the breach of seemingly key levels on some currencies (e.g. 1.19 on EUR/USD and later 1.1875). GBP/USD has so far rejected an earlier push below $1.35. Further USD short covering probably had just as important a role to play as Powell’s comments, which have not really told us much we did not already know.
Both AUD and NZD have made new 2018 lows in the past few hours, at 0.7434 and 0.6954 respectively, amid fresh USD strength and with commodity prices mostly below Monday’s highs.
Yesterday after I posted we had the Australian Budget. As expected, the centrepiece of this year’s Budget is increased infrastructure spending (currently put at A$24.5bn over 10 years), reductions in both personal and company tax and the Baby Boomer package (aimed to allow pension aged residents to fund their retirement in their own homes). Also we have the government committing to a tax to GDP ratio of 23.9% (likely to be triggered by around 2021/22). The latter is largely political but probably means that without significant spending restraint future surpluses will be marginal. Hence there is little to no room for the Budget to adapt to any economic downturn while retaining the projected surplus and indeed little macro policy flexibility. This, combined with doubts as to whether the projected surpluses will in reality be realised, has been reflected in S&P refusing to lift its negative outlook on Australia’s AAA rating.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 12.00 pm we have US Mortgage Applications and this is followed by PPI at 1.30 pm. Finally at 3.00 pm we have Wholesale Inventories.
June S&P 500
The good part about yesterday’s trading session was that no matter where you bought the S&P in my buy range you made points as we bottomed at 2652.25 before rallying 20 Handles into the close. I bought the S&P at 2660 before covering this position at 2663. Subsequently I emailed my Platinum Members to re-buy the S&P at 2653 before covering this position too early at 2656.50, primarily because I had lower buy levels in some of the other Indices below. I am still flat and if the S&P can continue to build value in the 2652/2672 area then I am expecting the S&P to move higher and challenge the key 2700/2720 resistance level. Today I will again look to buy the S&P on any dip lower to 2653/2663 with a 2645 wider stop. Given the significance of the key 2700/2720 resistance area I will now raise my sell level to 2704/2714 with a 2722 stop.
EUR/USD
Yesterday after the Euro traded the whole of my 1.1840/1.1880 buy range for an average long position at 1.1860, I emailed my Platinum Members to exit this position at my revised 1.1885 T/P level. Subsequently I emailed them again to re-buy the Euro at 1.1860 with a revised 1.1878 T/P level. Thankfully both prices were filled and I am now flat. This morning the Euro is on the defensive again as the market approaches the key 1.1750/1.1800 support level. This support level is key as a break and close below here is a sell signal for 1.1570 and possibly 1.13. For the Euro to regain its mojo it needs to break and close over 1.1990 and if this happens it will be a buy signal. Given the significance of this key support level coupled with how oversold the Euro is trading I will again look to buy the market on any dip lower to 1.1770/1.1815 with a 1.1735 stop. I no longer want to be a seller of the Euro at this time.
June Dollar Index
As both my buy levels hit in the Euro yesterday I waited to sell the Dollar which I did at 93.05. The market just missed my 92.75 T/P level and I am still short. Today I will now raise my T/P level on this position to 93.00. If this happens I will then stand aside. Meanwhile I will not add to this position and my stop will remain unchanged at 93.60.
June DAX
I am still flat the DAX which having traded weak for most of yesterday has opened higher this morning. Today I will raise my buy level to 12760/12830 with a 12710 stop. I still do not want to be short the DAX at this time.
June FTSE
Cable continues to hold its 200 Day Moving Average and now strong support from 1.3500/1.3500 and this is weighing on the FTSE after its huge run higher over the past few weeks. I am still flat and today I will leave my sell level unchanged from 7580/7620 with a 7655 stop. Given how overbought the FTSE is trading I do not want to be long the market at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my 24150 buy level with a 24193 low print before rallying 200 points into the close and I am still flat. Today I will raise my buy level slightly to 24050/24220 with a 23970 stop. Meanwhile I will leave my sell level unchanged from 24570/24720 with a higher 24795 stop.
June NASDAQ
My NASDAQ plan worked well with the market trading lower to my 6775 initial buy level with a 6770 low print before having a nice rally into the close. Unfortunately I lowered my buy level for my Platinum Members to 6750 over the Trump speech and this was not filled and I am still flat. Today I will now look to buy the market on any dip lower to 6740/6790 with a 6695 stop.
June BUND
The Bund did not last long above the key 159.00 pivot area with the market trading below at 158.50 this morning. This is bearish and could be the start of a major move lower. Today I will now lower my sell level to 158.90/159.30 with a 159.65 stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold traded to a low at 1306 before rallying $10 on after the Trump speech. However this morning Gold is back on the defensive as it looks to test the key 200 Day Moving Average at 1303. I am still flat and as I am back long Silver again I will now lower my Gold buy level to 1284/1292 with a 1277 tight stop.
Silver Rolling Contract
Silver traded lower to my 16.35 buy level yesterday before rallying to a so far rebound high at 16.54. In hindsight we should have taken our gain yesterday especially with Silver back trading at my buy level this morning. I will now lower my T/P level on this position to 16.50 and I will only add to this trade on any move lower to 15.95 with the same 15.75 stop.
Recent Comments