The US Dollar has slowly, but surely continued its rebound while equities on either side of the Atlantic fell for a second consecutive day. In Europe, all equity sectors ended the day in negative territory while losses in the US were led by the energy and materials sectors. Mixed US data and a soft lead from Asia, reflecting concerns over global outlook, appear to have been the major contributors to the risk off sentiment yesterday. Concerns over the global growth outlook were also compounded by weakness in commodities. While oil prices ended yesterday’s trading session unchanged, commodities in general had a negative and somewhat volatile day, as Iron ore and Copper dropped 5.2% and 1.0% respectively while the GS Metals Index closed 2.5% lower.
To mark my 1050th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes 1/4 updated emails throughout the trading session. This offer is open to new and existing members and if anyone is interested 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 10 points for May, having made 2175 points in April. The previous three months saw gains of 2265 points for both February and March following a record 3365 point gain in January.
The US Dollar initially lost ground following the softer than anticipated ADP Report, but a better than expected ISM Services print helped the currency moved higher once again. Looking at the Leader Board the US Dollar outperformed all G10 and Emerging Market Currencies with the Brazilian Real the only exception. Gains in the BRL were boosted by a $44bn civil lawsuit on BHP and Vale following the deadly dam collapse at their mine last year.
The ADP Report showed that private payrolls rose 156K in April which was well below the 195K consensus. This was the lowest print in 3 years and while the lag relationship with US Non-Farm Payrolls numbers is well known, for many analysts this big miss raises downside risk for tomorrow’s NFP data. The April ISM Services print alleviated some of those concerns with the headline Composite Index rising to 55.7 from 54.5 and above the 54.8 expected. Importantly the Employment Index accelerated from 50.3 to 53, while there was also a healthy jump in New Orders to 59.9 from 56.7.
Of note as well March Factory Orders came in above forecast at +1.1%m/m versus +0.6% expected and the Trade Deficit for the same month narrowed to $40.4bn from $47bn. Both data prints suggest that there will be an upward revision to US Q1 GDP number due for release on May 27.
Overnight we had comments from Fed Member Kashkari who said that the US Economic outlook showed continued moderate growth while the China released its latest Caixin Services PMI which came in slightly weaker at 51.8 from 52.2 last month. The RBA also announced that its Governor Stephens will step down after 10 years and he will be replaced by Philip Lowe.
This morning on the economic front the ECB will publish its Economic Bulletin at 9.00 am. This is followed at 9.30 am by UK Markit Services/Composite PMI. At 12.30 pm we have US Challenger Jobs Cuts and this is followed at 1.30 pm by the Weekly Jobless Claims and the Bloomberg Consumer Comfort. Finally the Fed’s Bullard will speak at a Santa Barbara Economic Conference at 4.30 pm.
June S&P 500
My S&P plan worked well as yesterday shortly after the US Markets opened the S&P traded lower to my 2042 buy level before having a nice spike to 2053 which enabled me to cover this position at 2046. The reason I covered this position too early was because I was already long both the DAX and FTSE and I had to reduce some of my risk. I am still flat and I would expect the market to be relatively quiet ahead of tomorrow’s NFP data which is expected to show another +200K increase. Goldman Sachs Equity Analyst was on the news-ires yesterday afternoon stating that as long as Interest Rates remain low then stock markets will continue with their high artificially high value which again emphasises my point about how difficult it is to short the market for more than a few hours despite the worsening economic situation. There is no doubt the 2040/2045 area is now very strong support as four times in the last week we have tested this level only to find buyers. Today I will again look to buy the market on any dip lower to 2043/2048 with a 2037 stop which is just below yesterday’s low print. I still do not want to be short the market ahead of tomorrow’s NFP data.
EUR/USD
No change as I am still a buyer on any further dip lower to 1.1390/1.1430 with a 1.1355 tight stop as the Euro continues to trade heavy having traded above its Daily Bollinger Band and at the top of its Williams Index last Monday and which saw me go short the Euro for the first time in many months. I will still be a seller on any spike higher to 1.1560/1.1600 with a 1.1630 stop which is just above Monday’s 1.1620 high print.
June Dollar Index
After the Dollar fell from a high at 100.69 last December to last Monday’s 91.80 low print the Dollar was due a bounce especially as the market had traded below its Daily Bollinger Band and in danger of breaking and closing below its August 2015 low before we saw a nice rally. This rally continues yesterday and there is no doubt the Dollar has at least put in a short-term bottom. Today I will raise my buy level to 92.40/92.80 with a wider 91.75 stop. Given how oversold the Dollar has traded since the March ECB Meeting I do not want to be short the Dollar at this time.
June DAX
My DAX plan worked well yesterday with the market trading lower to my 9840 buy level before having a nice rally over 9900 which enabled me to cover this position at my 9890 T/P level and I am now flat. There is no doubt the DAX is oversold after its move lower over the past two weeks with the 9750/9800 area still key support. Today I will again look to buy the DAX on any dip lower to 9750/9800 with a tight 9720 stop. Despite the negative price action I do not want to be short the DAX at this time.
June FTSE
There is no doubt the FTSE is the weakest of the major Indices that I follow. The worsening economic situation is not helping and yesterday after the FTSE traded lower to my 6070 buy level I emailed my Platinum Members to exit this position at 6095 and I am still flat. Today I will again look to buy the market on any further dip lower to 6040/6070 with a 6010 stop.
Dow Rolling Contract
Unfortunately shortly after I posted yesterday morning I was stopped out of my long 17750 position for a small loss at 17690 and I am still flat. Subsequently the Dow traded lower to a 17608 low print before the market regrouped and traded higher helped again by comments from Goldman Sachs analyst Cohen. Ahead of tomorrow’s NFP data I will again look to buy the Dow on any dip lower to 17580/17640 with a 17530 stop.
June BUND
No change as I am still short from Monday in small size at 165.65 with the same 163.20 stop.
Gold Rolling Contract
Gold had a volatile trading session yesterday after trading over $1300 on Tuesday. Gold to me is very dangerous at these levels as remember in early January we were trading under $1050 and is due a decent correction after this huge run higher. I will not short Gold as long term I see Gold making new highs again especially if we continue with this artificially injected so called economic growth which as we have seen is practically non existent. Today I will be a small buyer on any further dip lower to 1250/1258 with a 1243 stop.
Silver Rolling Contract
No change as I am still long Silver at 17.50 from last Monday with the same 17.60 T/P level as I want to try and be flat ahead of tomorrow’s NFP data.
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