Markets ended the month of August with a sense of unease, as Canada and the US were unable to reach a deal for a NAFTA re-write. Both parties agreed to keep talking and negotiations will resume on Wednesday with a deal still expected, but unlikely to be reached until later in the month. Unhappy with the outcome, Trump took to Twitter on Saturday slamming Canada’s decades of abuse and again threatened to go back to pre-NAFTA if no deal is agreed. It remains to be seen if Trump can indeed cancel NAFTA without the US Congress support. In the meantime simmering in the background the consultation period over additional tariffs on $200bn of China imports ends this Thursday (September 6th) and if President Trump is unable to get his deals done, the concern is that he will ‘’double down’’ on his protectionist strategy.
To mark my 1650th 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@tradernoblecom for details
For anyone following my Platinum Service it made 25 points on Friday to close August with a gain of 599 points, 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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The US Dollar was the main beneficiary from these concerns on Friday with fragility in EM equity markets also playing a supporting role. The MSCI EM Index fell 0.20% on the day, ending the month of August down over 2%, its fifth consecutive monthly decline. In the end the USD closed the day broadly stronger with the AUD suffering the most within G10 pairs. Late on Friday night, news that Canada had failed to reach a deal with the US, dragged the AUD down just over 50pips to an intraday low of 0.7176, before a small recovery into the closed helped the pair end the month at 0.7192, its lowest monthly close since February 2016.
Currencies
The USD closed Friday with DXY up 0.35% and BBDX up 0.44%. AUD was the big G10 loser on the day, down 1% with EUR (1.1605), NZD ( 0.6620) and CAD ( 1.30) down around 0.60%. NOK managed to edge some gains against the USD (+0.26%) and CHF was essentially flat.
Despite a steady decline since reaching a high of just under 97 midway through August, the DXY index gained 0.62% in August and barring the safe haven JPY and CHF, the USD outperformed all other G10 currencies. SEK amid its political turmoil ahead of Sweden’s government elections next Sunday was the big underperformer (-4.33%) with AUD (-3.17%) and NZD (-2.87%) not far behind.
The pound was one of the top G10 performing currencies last week, up 0.89% and in part some of this performance was driven by positive Brexit News. Sterling closed the week at 1.2963, but over the weekend PM May said she would not compromise on the UK government’s Chequers plan and in response EU’s chief Brexit negotiator Michel Barnier has said he is “strongly” opposed to key parts of Theresa May’s proposals for a future trade deal. Moreover the weekend press reported a potential leadership spill. Sterling has opened lower today, down 50 pips to 1.2915 as we type and technically a move down to 1.2850 looks achievable near term.
Interest Rates
On Friday the UST curve steepened a little bit with the 2y rate easing 2bps to 2.628% while the 10y tenor climbed 0.5bps to 2.86%. In the August UST yields were lower with the move led by the back end of the curve resulting in the 2y10y curve flattening 6bps to 23bps. Core Global yields followed 10y UST yields with similar declines.
Equities
Tech shares and the NASDAQ were the outperformers on Friday with the tech heavy Index climbing 0.3% on the day, meanwhile the S&P and the Dow closed essentially flat. In Europe the Stxx 600 index fell 0.8% and in Asia the Shanghai Composite eased 0.46%.
Like Friday, US tech shares were the darlings in August with the NASDAQ up 5.71% while the S&P 500 gained 3%. August was a month to forget for Europe (EuroStoxx50 -3.76%) and Asia (Shanghai Comp -6.25%) as all major Indexes fell in August with the exception of the American Markets.
Commodities
Reports of increased US oil production weighed on WTI (-0.6%) and Brent (-0.5%) on Friday, but looking at the month as whole oil prices managed to record decent gains (Brent +4.27% and WTI +3.11%). Meanwhile trade induced woes has been the theme of the month for copper and LMEX with both over 1% lower on Friday and 6.4% and 3.8% respectively in August. Iron ore also had a bad month down 2.54% (and -0.1% on Friday).
Economics
– The Chicago PMI fell to a still-high 63.6 in Aug from 65.5 in Jul. That was a little above the 63 expected by consensus. The output and demand sub-indices increased a bit, and inventories improved, but employment weakened a little and businesses remained concerned about input price inflation with trade policy seen as one of the culprits.
– The final August reading of the University of Michigan Consumer Confidence Index rose 0.9 to 96.2 vs a 0.2 expected increase. Still the index has been on a steady decline after peaking at 101.4 in March.
– EZ CPI data for August missed by a tenth with Headline at 2.0% y/y (2.035% unrounded) and Core at 1.0% y/y (0.960% unrounded, so a low core print).
– Baker Hughes count of active US oil rigs in the rose by 2 to 862. So despite concerns of pipelines restrictions, drilling in the US remains at elevated levels.
– The US Energy Information Administration (EIA) reported US oil production jumped to 10.7m barrels a day in June, up from small pull back to 10.4m in May, keeping the uptrend in output.
– S&P placed Argentina’s B+ long-term and B short-term ratings on CreditWatch negative. The Agency noted that the ratings on Argentina reflect its weak fiscal and external profiles, limited monetary flexibility despite greater fluctuation of the peso, and growing debt burden, which is predominantly denominated in foreign currency.
– On Friday the US administration notified Congress of its intentions to sign a trade deal with Mexico in 90 days which could include Canada ‘’if it is willing’’. Under rules set by Congress, the President’s notification means the administration is now facing a 30-day deadline to provide a full text of the agreement.
– Unhappy with the failure to reach an agreement on Friday, President Trump on Saturday expressed his feelings on Twitter saying ‘’There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out, Congress should not interfere w/these negotiations or I will simply terminate NAFTA entirely & we will be far better off’’.
This morning on the Economic Front we have Euro-Zone and UK Manufacturing PMI at 9.30 am. With the US Closed for the Labor Day Holiday we have no other data of note to be released and markets should be quiet.
September S&P 500
The U.S. Markets had a strong August with the NASDAQ, S&P 500, Russell 2000 and Dow Transports hitting record highs. The S&P ended the month with a gain of 3%. Frustratingly on Friday the S&P just missed my 2889 buy level with a 2891.50 low print before having a nice 15 Handle rally into the close. The 20 and 50 Day Moving Averages should provide support on any pullback as U.S. stocks remain in uptrends as we head into the more seasonally dangerous month of September. That being said, Mid-Term election years usually end with a strong fourth quarter. Today the Futures Market closes at 4.30 pm London time before re-opening again at 11.00 pm. I will now raise my buy level to 2888/2895 with a 2882 stop. My only interest in selling the S&P is still on a rally higher to 2918/2926 with the same 2933 stop.
EUR/USD
The Euro got hit hard on Friday trading to a low of 1.1584. This move lower saw the market hit my 1.1615 buy level. I am still long and I will only add to this position on any further move lower to 1.1565 with a 1.1530 lower stop. This morning the Euro is rebounding and I will now lower my T/P level on this position to 1.1630. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September Dollar Index
I am still flat the Dollar and I am going to stay flat especially as the Dollar Index is closed today for the Labor Day Holiday. I will be back tomorrow with a new buy/sell level.
September DAX
Late on Friday the DAX traded lower to my 12310 buy level. Subsequently the DAX rallied 50 points into the New York close. Unfortunately as I wanted to be flat over the weekend I covered this long position at my revised 12315 T/P level and I am now flat. Despite the weaker Euro the DAX has traded ‘’heavy’’ over the past week which is a concern. The DAX has strong support from 12150/12230 and today I will be a buyer on any dip to this area with a 12085 stop. I still do not want to be short the market at this time.
September FTSE
The FTSE also got hit hard on Friday with the market trading to a low of 7410 and this move lower enabled me to buy the FTSE at 7440 before rallying overnight to my 7460 revised T/P level and I am now flat. Today I will again look to buy the FTSE on any dip lower to 7370/7415 with a 7335 stop. Just like the DAX above I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Even though the Dow closed August with a gain of 2.1% its highest close in six months, the Dow continues to underperform the other major Indices. The Dow has most likely been held back by its larger exposure to trade-sensitive stocks which are more vulnerable to trade tensions. I am still flat the Dow and today I will raise my buy level slightly to 25700/25850 with a 25610 stop. Meanwhile I will continue to be a small seller on any rally higher to 26160/26280 with the same 26350 stop.
September NASDAQ
The NASDAQ had the month’s biggest percentage gain at +5.7% which was its strongest August for 18 years as yet again anyone shorting these markets got slammed. I am still flat the NASDAQ and today I will now raise my buy level to 7570/7610 with a 7535 stop. The NASDAQ is overbought and has strong resistance from 7750/7600 where I will be a small seller with a 7635 tight stop.
September BUND
I am still flat the Bund and today I will now raise my buy level to 162.10/162.50 with a 161.70 stop. I still do not want to be short the market at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1182/1190 with the same 1175 stop.
Silver Rolling Contract
Thankfully we exited any long Silver positions last week at a price of 14.85 as the market had a nice sell-off over the last two days with Silver finally trading lower to my 14.40 buy level overnight. I am still long and today I will now lower my T/P level on this position to 14.55 with a 13.95 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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