The Trump-trade was reignited yesterday on the back of the President flagging an impending “phenomenal” tax announcement. That gave markets hope that Trump will at last provide long-awaited details on his fiscal plans (tax cuts and infrastructure spending). That saw equities surge, with the S&P500 hitting a new record high, while the US Dollar renewed its march higher. Bond yields also ended the day higher. President Trump’s comments followed a meeting with airline executives, where he stated that he will be announcing something “phenomenal in terms of tax and developing our aviation infrastructure” and that “lower[ing] the overall tax burden on American business is big league”. Equities responded positively to the news and were stronger across the board. The S&P500 rose 0.68% to a new record high, while the EuroStoxx was also up 1.2%. Financials continue to be outperformers, with US financials up 1.4%.
To mark my 1250th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 74 points yesterday and is now ahead by 565 points for February having made 1734 points in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Bond yields also rose on the news with US Treasuries up 5.9bps to 2.39%. German Bund yields rose 1.6bps to 0.31% while UK Gilt yields also rose, up 3.4bps to 1.25%. Aussie CGS followed the moves in Treasuries the previous day down 5.2bps to 2.64% while NZ GBs fell sharper on the back of the RBNZ meeting (see below), down 7.7bps to 3.18%.
The US Dollar was also supported by Trumps comments with the DXY up 0.4%. Major currency pairs were mostly lower by a similar degree with the Euro down 0.4% along with the Pound. The two underperformers on the day were the Kiwi (-1.1%) and the Yen (-1.2%). The Aussie performed a little stronger, down 0.25%. An upbeat speech by RBA Governor Lowe supported. Although Lowe’s optimism was already well flagged following Tuesday’s meeting, he did make a few comments on the currency noting that “it’s difficult to suggest the AUD is too high” and that the AUD was “pretty much” where it was last year.
The Kiwi’s decline followed yesterday’s RBNZ meeting where the RBNZ put the kybosh on the possibility of rate hikes in 2017. The MPS noted a “premature tightening of policy could undermine growth and forestall the anticipated gradual increase in inflation, raising the risks of declines in longer-term inflation expectations”. The MPS also noted the “exchange rate remains higher than is sustainable” and that a “decline in the exchange rate is needed”. The Kiwi fell 0.8% immediately after the announcement is down 1.4% since the announcement. In an interview with Reuters, Assistant Governor McDermott said the market reaction was “exactly what we wanted” and “we’re not trying to fake the market on the Kiwi”.
While markets are rallying on prospects of tax cuts, there still remains the danger of growing protectionism which Trump also implied when he noted “a lot of that [airline] competition is subsidised by governments, big league”. Further elucidation of Trumps policies – both stimulatory and protectionist ones – is also key for the Fed. The Fed’s Bullard (non-voter) was out yesterday afternoon playing down the prospects of a March rate hike noting that fiscal uncertainties are unlikely to get meaningfully resolved by March and that conditions for much higher inflation are not materialising. Bullard also made some comments on the Fed’s balance sheet, arguing for a “more natural normalisation process” whereby the Fed would stop the reinvestment of maturing bonds alongside the gradual rate hikes that are expected. By doing so, would allow the whole yield curve to adjust. The Fed’s Evens (voter) was also speaking, but did little more than reiterate the point of “gradual” rate hikes.
Economic data was sparse, US jobless claims remains at very low levels, with the weekly figure falling to 234k against a consensus expectation of 249k. The four-week rolling average figure is now at its lowest level since 1973 and suggestive of strong payrolls prints ahead.
In commodities, oil rose 1-1.3% with WTI at $53.03 and Brent at $55.65. Meanwhile after its huge $65 rally over the past two weeks Gold fell over $20 yesterday to close at $1224.
This morning on the economic front we have UK Trade Balance, Industrial Production and Construction at 9.30 am. At 1.30 pm we have US Import Price Index. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment and UK NIESR GDP Estimate.
March S&P 500
Despite the extreme overbought condition of the S&P, the market continues to rally helped yesterday by Trump’s new tax cuts to be revealed in the next two weeks. However these proposed tax cuts will still have to get approval in Congress and this will not be easy given what happened to the Immigration ban. As I have shown you over the past few weeks you can only be short this market for a few hours before buyers return and anybody consistently shorting this market is getting slammed. For my Platinum Members I emailed them yesterday afternoon to move their sell level in the S&P to 2308 which got filled before the close. Subsequently the S&P sold off overnight to my 2303 T/P level and I am now flat. For my Premium Members you would now be short at an average rate of 2307 and as we are trading at this price now I would cut this position and stand aside. The S&P has resistance at 2310 and a break of this level targets important resistance at 2317/2323 where I will look to sell the market again with a 2328 stop. My ultimate target measure from months ago was 2334 and if I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2333 with a wider 2341 stop. My only interest in buying the S&P is on a dip lower to 2293/2299 with a 2288 stop. Yesterday was the 38 consecutive trading session in which the S&P has not moved by more than 1% and is a new all-time record.
EUR/USD
I am still flat the Euro which is selling off as I write this commentary. I am still flat and today I will now lower my buy level to 1.0575/1.0615 with a 1.0545 stop. Given the fact that Trump is meeting Japanese PM Abe over the weekend I do not want to be short the Euro at this time as there is a fair chance he will try and talk the US Dollar lower.
March Dollar Index
I am currently flat the Dollar and I am going to stay on the sidelines ahead of the Trump/Abe meeting later this evening.
March DAX
Unfortunately the DAX missed my buy level before rallying 150 points since I posted yesterday morning and I am still flat. Thankfully we had no sell levels in this market as again anyone shorting this market is losing a lot of physical and mental capital. As I have said over the past few weeks the DAX needs to break and close below 11400 for me to turn bearish while a confirmed break and close over 11800 for three days will add to the bullishness. Today I will move my buy level higher to 11560/11610 with a 11520 stop. I still do not want to be short the DAX at this time.
March FTSE
The FTSE broke and closed over important support at 7160 yesterday evening and thankfully again we had no sell level in this market. Today I will now move my buy level higher to 7130/7170 with a 7095 wider stop.
Dow Rolling Contract
The beauty of my Platinum Service is the updated emails which my members receive during the day. This is especially true when circumstances change such as the Trump tax announcement and after the Dow hit my initial 20160 sell level I emailed my members to exit this trade at 20153 and I am now flat. After I sent the email the Dow traded between 20160/20170 for 10/15 minutes before accelerating higher. For my Premium Members you would now be short at an average rate of 20190 and with the market trading at 20215 as I write this commentary I would take my small loss here and stand aside. The Dow is extremely over valued and as I mentioned the other day if it were not for the 8 Dow stocks replaced in the Index since April 2004 the Dow would be trading under 13,000 today. This statistic is magnified by the fact that the McClellan Oscillator closed with just a positive 31 print last night despite all three major US Indices closing at new all-time highs. This is not sustainable but just like the S&P above we need a sell extreme that lasts for more than a few days. The Dow is now marching higher to my major resistance at 20400/20550. Today I will again look to sell the Dow from 20320/20380 with a 20430 stop. I have to respect the positive price action despite all my medium term concerns for this market and I will now move my buy level higher to 20070/20120 with a 20015 stop.
March BUND
My Bund plan worked well with the market eventually hitting my 164.40 sell level before selling off this morning to a 168.82 low print giving my Premium Members a tidy profit. For my Platinum Members I cut this position at my revised 164.23 T/P level and I am now flat. Today I will again look to sell the Bund on any further rally to 164.35/164.75 with a 165.05 stop. Remember this sell range is where the 200 Day Moving Average comes in and which held the market well yesterday.
Gold Rolling Contract
Gold had bad trading session yesterday but at least so far is holding the key 1220 support level. As I was already long Silver I waited to buy Gold which I did at 1224 with the same 1215 stop. I will now lower my T/P level on this position to 1230.
Silver Rolling Contract
Silver traded lower to my 17.60 buy level. I am still long and I will add into this position on any dip lower to 17.30 with a 16.95 stop.
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