Fed Char Janet Yellen did her return testimony yesterday afternoon, this time to the Senate. What has caught the market’s attention is the inevitable interest from Congress in her views on, and conceivable policy responses to, current financial market turmoil. She was asked about the was possibility of negative interest rates from for the Fed, saying that in light of European and other Central Bank actions, the Fed was taking a close look at negative rates in the event that it might be considered. The Fed is doing a lot more research on whether it would work and be right for the Fed if the event was ‘needed’. She also said the Fed was surprised by the size of the fall in oil prices and the extent of the strength in the US Dollar since 2014 was not ‘something we anticipated’.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and ¼ updated emails throughout the trading day. This offer is open to both existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 200 points yesterday and is now ahead by 1325 points for February having made 3365 points in January. Since I started this service last June it has generated a return of over 18000 points.
There was nothing there deflecting the market from the view that the Fed is on hold for longer and that is how the market yesterday in what was a deeper ‘risk off’ sentiment. The short end of the US Fed Funds Futures curve rallied further by up to 10bps and more with now only a 50% chance of a rate hike priced in by the end of 2017, while US 2 Year Treasuries eased another 4bps.
Oil did come in for more concerted selling yesterday with West Texas closing down anther $1 although the market is trying to rally this morning as I write this commentary. The Swedish Riksbank eased policy more than expected cutting its main rate by 15bps to -0.50% versus an expectation of a 10bp cut. The Kroner did briefly weaken on this news but then stabilised given the big rally going on in top tier Bond markets.
Equities came in for more selling, the Eurostoxx 600 Index closing down a hefty 3.68%, with banks taking most of the heat, closing down in France by an eye glazing 6.25% with SocGen and Credit Suisse both reporting. It has been a similar if less savage story on Wall Street with the Dow closing down 1.5% driven mainly by the KBW Banks Index which fell nearly 5%. Overnight the Nikkei which was closed yesterday fell 4.68% to 14800. To give you an idea of the carnage in the Nikkei this market was trading over 20000 in mid-December.
In FX markets, it has been another evolution with the US Dollar running into some interest rate headwinds as their markets rally and loose some of its yield gloss, the Euro trading as high as 1.1377 before retracing but still closed over 1.13 while the USD/JPY is trading in the 112’s. The one asset class that has performed strongly over the past 24 hours has been precious metals with Gold Silver and Platinum closing up 4.3%, 3.1% and 2.6% respectively.
This morning on the economic front we already had the release of German CPI which came in as expected at -0.8%. At 10.00 am we have Euro-Zone Industrial Production and GDP. This is followed at 1.30 pm by US Retail Sales and Import Prices. Finally we have Business Inventories and University of Michigan Consumer Sentiment at 3.00 pm.
March S&P 500
My S&P plan worked very well yesterday as I continue with my strategy of buying dips with a tight stop especially with the market been so oversold and the fact you do not know when the next spike will occur. Despite the technical damage done to the markets since December 29th I find it so hard to go short as the spikes are so vicious and in my opinion are easier to catch. It is incredible that most of the points generated by tradernoble this year have all come on the buy side despite markets down between 15/25% since the start of the year. Yesterday the S&P plan worked great with the market indeed testing the January low print at 1804.25 with a 1803 low which enabled me to go long at 1805 before a subsequent rally ensued which enabled me to cover this position at my 1815 T/P level and I am now flat. This morning the S&P is trading strongly despite the near 5% fall in the Nikkei. Given how oversold the market is especially the Bank Shares where CitiGroup and Goldman Sachs which are both down over 35% this year I really believe we are on the cusp of a decent rally higher. For the S&P to get on a stronger footing it needs to break 1848 and a close above here opens up the possibility of a move higher to 1890. Today I will again look to buy the S&P on any dip lower to 1818/1826 with a 1811 stop. Again if I am stopped out of this position I will be a very aggressive buyer from 1755/1775 with a 1740 stop. I still do not want to be short the market at this time.
EUR/USD
I was very unlucky with my Euro call yesterday as the Euro just missed my 1.1390 sell level with a 1.1377 high which is frustrating when you see the Euro trading 100 points lower this morning. Today I will lower my sell level to 1.1330/1.1370 with a 1.1410 stop. I still do not want to be long the Euro at this time especially with both the Bollinger Band and Williams Index so stretched on the Daily Chart.
March Dollar Index.
I am still flat the Dollar and today I will raise my buy level to 95.20/95.50 with a 94.90 stop.
March DAX
In my opinion the DAX is finally trying to find some sort of bottom given the fact as I mentioned yesterday that the market is trading 2600 points lower than before the ECB Rate announcement on December 3rd last and nearly 3800 points lower than its July 2015 high. These are huge moves and with the Euro due a correction we may see the DAX start to get a bid from this scenario. I am still flat the DAX and today I will raise my buy level to 8690/8750 with a 8640 stop.
March FTSE
Frustratingly the FTSE just missed my 5440 buy level by 6 points after I posted yesterday which is even more frustrating when you see the market trading at 5580 this morning. Given the volatility in points terms the FTSE is probably the less risky market to be long and therefore I have bought the market here at 5550 with a 5495 stop. If I am stopped out of this position I will be an aggressive buyer in front of 5460 with a 5420 stop.
Dow Rolling Contract
My Dow plan worked well yesterday with the Dow initially hitting my 15560 buy level with a 15555 low print before having a subsequent rally over 15700 which enabled me to cover this position at my revised 15610 T/P level and I am still flat. The Dow has been under pressure over the past few days especially due to the hammering the Bank stocks are getting. I am still flat the Dow and today I will again look to buy the market on any dip lower to 15550/15620 with a 15495 stop which is just below yesterday’s 15500 low print.
March BUND
My idea of selling the BUND was the correct call but unfortunately I made no points out of this move as after I posted the BUND stopped me out of my short 165.70 position at 166.10. Subsequently I went short again at 166.15 before taking profit way too early at 165.75 and I am now flat which is again frustrating when you see the BUND trading below 165 this morning. As I have mentioned countless times this BOND bubble when it bursts is going to cause carnage resulting in a lot of Hedge Funds and possibly Pension Funds getting wiped out. Today I will again look to sell the BUND on any rally higher to 165.30/165.70 with a 166.05 stop.
Gold Rolling Contract
It is incredible to see that Gold is now trading over $200 off its January low at 1050. Thankfully we have not tried to short this market despite Gold having traded in an overbought condition for the past two weeks. I have no edge in Gold at this time and I am going to stay flat as my gut feeling is if these equity markets can rally then we could see a large sell-off in Gold and therefore I will wait and try and buy the market after this expected sell-off.
Silver Rolling Contract
Silver is now trading over 15% higher this year since I gave my interview on IG Television as my pick of the year trade. However if you are still long I would look to cover some of your position here as just like Gold above Silver is very overbought and trading outside the top of its Bollinger Band and due a correction. Today I will look to buy Silver on any dip lower to 14.85/15.15 with a 14.50 stop.
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