A new Italian coalition government between the Five Star and the League is now done, Prime Minister designate Conte proposing and announcing an alternative (less immediately contentious) candidate for Finance Minister, Giovanni Tria, head of the Economy Faculty at Rome’s Tor Vergata University. Tria’s previously stated views have called for a debate on the Euro in Italy and in the wider EU. Both parties are intimating that there are no plans to leave the Euro or exit the EU, calming market nerves at least for now, and markets taking a positive read through from pro-Euro Italian polls released yesterday. Italian yields pulled back further on all this news. Euro-exiting news has faded, at least for now, backed up by these pro-Euro polls.
To mark my 1600th 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 175 yesterday, to finish May with a gain of 1927 points, 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
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The two polls were taken on Wednesday showing Italians overwhelmingly favour staying in the Euro, the Piepoli poll showing 72% want to stay in the Euro (23% to leave) and a Euromedia poll showing 60% want to stay, 24% to leave. Note also that Euro-sceptic Savona is to be in the Cabinet as a minister for European Affairs. The market will need to keep an eye on the path ahead still with a fiscal expansion planned to address Italy’s economic under-performance.
The US data flow might have been a better tonic for the tone of investment markets (as developments in Italy have been) had it not been for trade tensions resurfacing. US Commerce Secretary Wilbur Ross announced that the 25% steel and 10% aluminium tariffs on the EU, Mexico and Canada would re-apply from July 1.Yesterday, Ross blamed not enough progress in dealing with the EU on trade issues and a lack of progress in re-writing NAFTA. Both the CAD and the MXN weakened on the news, US bonds yields are ever so marginally higher while US equities are in negative territory again after Wednesday’s recovery.
While playing to their political constituency, this announcement drew some strong negative responses from within the Republican Party, Senate Finance Committee Orrin Hatch calling it a tax on Americans, another Republican drawing protectionism parallels with the Great Depression. The EU, Canada, and Mexico all responded strongly, the EU for example saying they could target products including Harley-Davidson and Levis.
The US data points were generally growth-friendly without letting the inflation genie out of the bottle. The April Personal Income and Spending Report revealed real consumer spending growth of 0.4% in the month after 0.5% in March, the Atlanta Fed upping its concurrent estimate of GDPNow to a meaty 4.7% for Q2, a nice rebound after this week’s downward revision to Q1 back to 2.2% from 2.3%. The core PCE deflator rose a rounded 0.2% in April, the rounded estimate ahead of the 0.1% expected, though it was a low 0.2% at 0.157% and essentially unchanged from the 0.155% for March, annual growth in line with expectations at 1.8%. EC core CPI though did pop surprisingly higher, up to 1.1% in May from 0.7%, above the higher 1.0% tipped. Elsewhere on the activity side in the US, Weekly Jobless Claims remained super low at 221K in the last week of May ahead of Non-farm Payrolls this afternoon, while the Chicago PMI for May came in at a strong 61.7, up from 57.6, also ahead of the national Manufacturing ISM out later today.
Through all of this, the AUD has been trading through it post-Italy troubles range, pivoting around the mid 0.75s with no key market moving data today, but plenty next week including the RBA, Retail Sales, GDP (and pre-GDP partials). Base metals rose while Chinese iron ore and steel rebar futures rose yesterday. Coal prices are higher too, steaming coal above $US110/t. Brent was little changed, as was gold.
This morning on the Economic Front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 1.30 pm by US Non-Farm Payrolls, including the Unemployment Rate and the all-important Average Earnings. Finally we have Manufacturing PMI at 2.45 pm, followed by Construction Spending and the ISM Manufacturing at 3.00 pm. It promises to be another volatile trading session.
June S&P 500
My S&P plan worked well yesterday with the market trading lower to my 2714 buy level shortly after the US Markets opened before rallying to my revised 2417 T/P level. Subsequently I emailed my Platinum Members to re-buy the S&P again on any dip lower to 2707 with a 2712 T/P level with both trades then getting filled and I am now flat. Yesterday morning the S&P was firm, trading at a high of 2728 before eventually testing the 2700 support level only to have a small rally into the close. Today I will again look to buy the S&P on any dip lower to 2687/2697 with a 2681 stop which is just above the 50 Day Moving Average. As today is the start of a new month I do not want to be short the market at this time. Remember a break and close over 2740/2745 is a strong buy signal for next week.
EUR/USD
The Euro just missed my 1.1610 buy level with a 1.1640 low print before rallying into the New York close as the market tries to correct its severely oversold condition. Today I will raise my buy level slightly to 1.1580/1.1630 with a 1.1540 stop. The Euro has strong resistance from 1.1775/1.1825 and today I will be a small seller on any rally to this area with a 1.1855 tight stop.
June Dollar Index
No change as I am still flat the Dollar which finally had a decent rally as flagged by the Daily Sentiment Index with its latest reading of 94% which is the highest since December 2016 when the DSI printed 96% bulls. Today I will now lower my sell level to 94.55/95.05 with a 95.35 stop. I still do not want to be long the Dollar at this time.
June DAX
After a firm morning the DAX turned sour with the market eventually trading lower to my initial 12670 buy level. I was not happy with the price action and I emailed my Platinum Members to exit any long position at 12685 and I am still flat. The DAX has good support from 12470/12530 and today I will be a buyer on any dip to this area with a 12420 stop. Despite the DAX closing again below the key 12800 resistance level I still do not want to be short the market at this time.
June FTSE
Twice after I posted yesterday the FTSE came close to my 7640 buy level before subsequently having a strong rally and I am still flat. With Sterling finally looking like it may have put in at least a short-term bottom the FTSE may find it difficult to rally from here. As a result I will now be a seller on any rally higher to 7735/7775 with a 7805 stop. My only interest in buying the market is on a dip lower to 7560/7600 with a 7515 stop.
Dow Rolling Contract
My Dow plan worked well yesterday with the market trading lower to my 24450 buy level with an initial low of 24382 before spiking higher to my aggressive T/P level at 24530 and I am now flat. Yesterday’s gain in the Dow certainly recovered any loss in the Dow on Wednesday. The Dow has strong support from 24150/24280 and today I will be a buyer on any dip to this area with a 24080 stop. The last three Sunday re-opening for the US Futures Markets in both the S&P and Dow have seen strong openings and as a result I do not want to be short the Dow at this time.
June NASDAQ
The NASDAQ just missed my 7050 sell level with a 7025 high print before selling off and I am still flat. Today I will lower my sell level slightly to 7045/7090 with a 7125 stop. My only interest in buying the NASDAQ is still on a dip lower to 6870/6910 with a 6830 stop. Remember a break and close below 6850 is at least a short-term sell signal for next week.
June BUND
Frustratingly the Bund just missed my 160.90 buy level with a 160.95 low print before the market rallied 130 points and I am still flat. Today I will now raise my buy level to 160.80/161.20 with a 160.45 stop. I still do not want to be short the Bund at this time despite the insanely low yield.
Gold Rolling Contract
I am still flat Gold which is really struggling to break its initial 1310 resistance level. As I am still long Silver I will now lower my buy level to 1278/1286 with a 1271 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.50 with the same 16.70 T/P level and 15.90 stop.
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