While European equities had a mixed session, US counterparts managed to close with minuscule gains. The US Dollar is flat in Index terms and US Treasury yields are higher on the back of mostly solid US data releases. After Monday’s comments by President Trump, that ‘’it is just not the right time to talk [to China] right now”, yesterday Commerce Secretary Wilbur Ross said the US was focused on sorting out trade agreements in ‘’our own neighbourhood’’ before moving onto China. The Australian Dollar trades a bit softer amid market concerns over the lack of US-China trade talks progress while CAD and MXN give mixed signals on NAFTA. CAD outperforms on hopes Canada will join Mexico on agreeing a new NAFTA deal, but MXN more than reverses its recent gains amid concerns a new NAFTA deal may not get over the line.
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For anyone following my Platinum Service it was made 25 points yesterday and is now ahead by 413 points for August, having made 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
CAD (+0.25%) and CHF (+0.345%) are the big performers over the past 24 hours with the USD little changed in Index terms over this period. CAD appears to be benefiting from hopes that Canada will agree to a revised three way NAFTA deal. While there remain a number of sticking points between Canada and the US, including the protections afforded to the Canadian dairy sector, the market seems to be viewing recent developments positively for now.
MXN in contrast is down 1.69%, more than reversing gains achieved over the past couple of days and it is now back trading above 19. MXN underperformance can be attributed to numerous reports (examples here <https://www.theglobeandmail.com/business/commentary/article-a-new-nafta-isnt-even-close-to-the-finish-line/ > and here<https://www.washingtonpost.com/opinions/has-trump-ended-nafta-not-just-yet/2018/08/27/5ba466f2-aa35-11e8-a8d7-0f63ab8b1370_story.html?noredirect=on&utm_term=.0a737e82c293 >) suggesting the preliminary trade agreement with the US is far from complete and it still needs US Congress approval. In a nutshell it seems that many contentious issues remain unresolved and there is a very tight timeline that needs to be followed if a NAFTA deal is to be ratified by the current US Congress.
The EUR initially moved up towards resistance near 1.1750, but it has since retraced back towards 1.1680(+0.2% on the day). Meanwhile, the Pound weakened 0.2% against the USD with the lingering risk of a ‘’no-deal brexit’’ continuing to hang over the market. Theresa May quoted the head of the WTO in saying “he said about a no-deal situation that it would not be a walk in the park, but it would not be the end of the world”, and she added ‘’I have said right from the beginning that no deal is better than a bad deal.” The market’s concern is that a no-deal brexit is being gradually destigmatized and can no longer be ruled out
Bonds
Unlike the USD, US Treasury yields showed a bit of life in a day where US data releases were mostly better than expected. The July Trade Deficit was worse than expected, but Consumer Confidence and the Richmond Fed Manufacturing survey beat expectations (see more below). US Treasuries sold-off another 3bp and the curve steepened a touch. 10yrs are at 2.88% – still well within the 2.80-3.01% range that has held since early June. A 5y note auction met reasonable demand.
Earlier in the session, Italian yields rose to fresh recent highs of 3.20% following comments from one of the two Deputy Prime Ministers (Di Maio) that he could not rule out Italy breaching the 3% EZ budget deficit limit with the 2019 Budget. In addition Italian stocks fell after the other Deputy PM Salvini was involved in a stand-off on immigration over the weekend. Italian Finance Minister Tria has since said the country plans to keep reducing its debt to GDP ratio and is not planning to breach the 3% deficit limit.
Equities
US equities managed to record small gains for the day, after trading in and out of positive territory for most of the day. The S&P500 briefly rose above the 2900 mark for the first time ever, but closed the day at 2897. European equities had a mixed session, Japan equities recorded small gains and the Shanghai composite closed with a small loss.
Commodities
Brent crude dropped 0.3% to $75.96 a barrel and WTI fared worse, losing 0.44% ending the NY session at $68.53. Metal prices did OK with the LMEX index climbing 0.92% and aluminium was the outstanding performer gaining 1.84%. Copper gained 0.48% on the back of reduced risk of supply concerns amid positive wage resolution in a Chilean mine.
Economics/ Politics
– US Goods Trade Deficit a little worse than expected in July at -72.2bn against expectations of -69bn. Census Bureau notes this was driven mostly by slightly lower exports (Exports were $140bn in July, $2.5bn less than in June).
– US Richmond Fed Manufacturing very positive in August, rising to 24 in August from 20 in July. So overall still no evidence of tariff/trade war talk weighing on businesses. Note that skilled labour is becoming more difficult to find, with the availability of skills needed dropping to its lowest level on record.
– US Consumer Confidence still elevated with the Conference Board Measure 133.4 in August from 127.9 in July and is the highest level since October 2000.
– Steven Mnuchin is “not at all concerned” about the flattening yield curve, and said Fed Chair Powell is doing a “phenomenal” job at the Fed
– Economist Richard Clarida won Senate confirmation to be vice chairman of the Federal Reserve. Clarida, a Columbia University professor and global strategic adviser at PIMCO, received backing Tuesday in a vote of 69 to 26. In a separate voice vote, the Senate confirmed him to the remainder of a 14-year term as board governor that expires in 2022 (Bloomberg).
This morning on the Economic Front we already had the release of German GFK Consumer Confidence which came in at 10.5 versus 10.6 expected. At 12.00 pm we have US MBA Mortgage Applications and this is followed at 1.30 pm by GDP and Personal Consumption Expenditures (PCE). Finally we have Pending Home Sales at 3.00 pm.
September S&P 500
The S&P just missed my 2909 sell level with a 2906.25 high print before selling off to a low of 2894 before the market recovered some of these losses into the Chicago close and I am still flat. Today I will again raise my sell level slightly to 2911/2919 with a 2926 stop. I will also raise my buy level to 2880/2888 with a 2873 stop. The release of GDP will be key to today’s market action but remember most traders are on vacation and will not return to their desks until next Tuesday following the Labor Day Holiday on Monday.
EUR/USD
Unfortunately the Euro just missed my 1.1740 sell level with a 1.1733 high print before selling off 60 points and I am still flat. Today I will leave my sell level unchanged at 1.1740/1.1780 with the same 1.1820 stop. Remember the 1.1800 area is crucial as a break and close over this level for a few days is bullish for a move higher to the 1.22/1.23 next resistance area. Meanwhile I will leave my buy level unchanged from 1.1570/1.1610 with a 1.1535 stop.
September Dollar Index
The Dollar traded sideways for most of yesterday’s session and I am still flat. Today I will leave my sell level unchanged from 95.20/95.60 with a 96.05 stop. As I mentioned yesterday the Dollar has strong support from 93.20/93.60 and I will continue to be a buyer on any dip to this area with a 92.80 stop.
September DAX
After the DAX made an initial recovery high at 12595 the market spent the rest of yesterday’s trading session in a narrow range and I am still flat. I do not want to chase the market higher and today I will leave my buy level unchanged from 12380/12445 with the same 12320 stop.
September FTSE
Frustratingly the FTSE juts missed my 7585 buy level with a 7589 low print subsequently rallying and I am still flat. Today I will lower my buy level slightly to 7535/7575 with a 7495 lower stop. Despite the FTSE underperforming the other major Indices I still do not want to be short the market at this time.
Dow Rolling Contract
No change as I am still short the Dow in very small size at 26000 with the same 25980 T/P level/ I will continue to look to add to this short position at a price level of 26200 and if this sell level is triggered I will then raise my T/P level to 26060. If any of the above scenarios happen I will be back with a new update for my Platinum Members.
September NASDAQ
No change as I am still short the market at 7550 with the same 7610 stop. It looks like this stop will get hit and if it does I will be a more aggressive seller on any further rally to 7650/7700 with a 7740 stop. Meanwhile I will now raise my exit position on this 7550 short position to 7565. If any of the scenarios happen I will be back with a new update for my Platinum Members.
September Bund
I am still flat the Bund which again traded with a 162 Handle for the second consecutive trading after weeks of trading with a 163 Handle. However I am not going to chase the market lower and I will leave my sell level unchanged from 163.10/163.60 with a 164.05 wider stop.
Gold Rolling Contract
Late in the New York session Gold traded lower to my 1200 buy level. As I did not want to have a position on board overnight I covered this trade for a small gain at 1201 and I am now flat. With Silver trading heavy I would advise anyone who is still long Gold to exit their position here at 1204 and go flat. Given the fact that Gold has rallied $50 off its 1160 August low we may well see some profit taking before the next phase of higher prices commences. Today my only interest in buying the market is on a dip lower to 1182/1190 with a 1175 stop.
Silver Rolling Contract
Thankfully Silver rallied to my 14.95 T/P level on my latest 14.80 long position and I am now flat. As mentioned in my Gold commentary above Silver has traded heavy over the past few months. Yesterday after Silver made a high of 14.99 the market sold off 35 cents for a 2.5% fall. Silver has strong support from 14.00/14.40 and this area needs to hold or we could well see a further acceleration to the downside. One level of comfort for the bulls is the low Daily Sentiment Reading. Today I will be a buyer in this area with a 13.70 tight stop.
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