Yesterday was a busy day in the UK, with new Prime Minister Theresa May appointing her full new Ministry and of course the Bank of England Meeting. Would the BoE cut an ultra-low Bank Rate, announce QE2 or do nothing and review in August when the next Quarterly Inflation Report/full formal forecast is due. Not an easy decision given the uncertainties since the EU Referendum and the dearth of hard information on the economy since ‘’Brexit’’. What there has been – such as a special consumer confidence reading and this week’s June RICS House Price Balance – have been softer but not alarmingly so.
To mark my 1100th issue of Tradernoble I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 150 points yesterday and is now ahead by 960 points for July having made 2550 points in June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this new Platinum Service in June 2015 it has averaged a monthly gain of over 2200 points.
In the end Governor Mark Carney and the MPC decided to not cut rates nor announce more QE but consider policy more fully in August when they will have the benefit of more information. Sterling rallied on the news of no easing, then after a somewhat choppy session, still sits at the top of the major FX Leader Board, trading at 1.3340, having traded below 1.30 at the start of the week.
The AUD has now re-established a foot hold above 0.76, staging a relief rally after yesterday’s solid Employment Report that failed to reveal any cracks in the Australian Labour market with annual employment growth to June of 1.9%.
Higher equity prices on both sides of the Atlantic with the EuroStoxx 600 Index closing up 0.8% and the S&P 500 closing 0.53% higher after a volatile 24 hours, added support to ‘’risk on’’ play. US Financials were the stronger performers, benefitting from a well-received quarterly earnings report from JP Morgan. This VIX Volatility Index eased to 12.82, which is the lowest close this year.
Bond Yields rose, US 2s by 1.2 bps and 10s by 6.1 bps to 1.535% and well above its 1.35% low print earlier in the week.
The US Dollar has been mixed, losing ground against Sterling, Euro and commodity currencies but making up ground against the likes of the Yen and Swiss Franc.
The Fed’s Lockhart and George have both been speaking, but not with especially new perspectives, Lockhart supporting the need for a ‘’cautious and patient’’ approach. Even George, who sees rates as too low, was calling for a gradual approach.
Markets are on the defensive as I go to print this morning after the latest alleged terrorist attack in Nice France. However as everyone knows at this stage after we get one of these barbaric incidents the market tend to rally as yet again the Central Banks come to the rescue.
This morning on the economic front we already had the release of Chinese GDP which came in stronger than expected at 6.7%, while both Industrial Production and Retaols have exceeded expectations. We have UK Construction Output at 9.30 am. This is followed at 10.00 am by Euro Zone Trade Balance and CPI. At 1.30 pm we have US Retail Sales, CPI and Empire Manufacturing. Next we have Industrial Production at 2.15 pm. Finally at 3.00 pm we have University of Michigan Sentiment and Business Inventories.
The Fed’s Kashkari and Bullard will speak at the OMFIF Meeting in St Louis at 6.15 pm
September S&P
Wow what can we say about the S&P which has now risen by over 188 Handles off its post Brexit low print at 1981 in less than three weeks. This is the biggest rally for the S&P in over five years. Initially my S&P plan did not work as after the market hit my 2160 sell level I was stopped out of this trade at 2166. Subsequently I emailed my Platinum Members to sell the S&P again at 2165 before the market finally sold off which enabled me to cover this position at my 2158 T/P level and I am now flat. In my opinion this is the most overvalued stock market in many years especially when you compare the PE ratio to the ridiculously low Bond Yields. However the market will keep rising until we finally are able to break some key technical levels to the downside. The 2134 previous high from 2015 will now act as strong support as well as the ‘Open Gap’ left from yesterday’s Chicago low at 2153 to Wednesday’s close at 2145. Today I will be a buyer on any dip lower to 2145/2150 with a 2139 stop. If I am taken long and subsequently stopped out of this position I will be a very aggressive buyer in front of 2134 with a 2129 stop. Given how over-bought and over-extended the S&P is trading I will again try to sell the market on any mover higher to 2170/2175 with a 2181 stop.
EUR/USD
No change as I am still a buyer on any dip lower to 1.1020/1.1060 with a 1.0985 stop. Given how strong the 1.1200/1.1240 resistance is I will now look to sell the Euro in small size from 1.1180/1.1220 with a 1.1255 tight stop.
September Dollar Index
I will now lower my sell level in the Dollar to 96.55/96.85 with a 97.20 stop. I still do not want to be long the Dollar at this time.
September DAX
My DAX plan worked very well as the market spiked higher to my 10070 sell level ahead of the BoE rate announcement before trading 120 points lower which enabled me to cover this position at my 9960 T/P level and I am now flat. Today I will again look to sell the DAX on any rally higher to 10140/10200 with a 10245 stop. My only interest in buying the DAX is on a dip lower to 9890/9940 with a 9835 stop.
September FTSE
Unfortunately the FTSE just missed my 6710 sell level with a 6695 high print before the market traded 90 points lower and I am still flat. There is no doubt that the market has very strong resistance at its one year high at 6720 and today I will now lower my sell level slightly to 6690/6730 with a tight 6760 stop. Given how over extended the FTSE is I do not want to be long the market at this time.
Dow Rolling Contract
As I was already short both the S&P and Dow initially I did not sell the Dow as I had enough risk on board. After I was stopped out of my S&P position and had managed to T/P on my DAX short position I emailed my Platinum Members to go short the Dow again at 18530. Subsequently the Dow traded to an 18470 low print which enabled me to cover this position for a small gain at 18500 and I am now flat. I do not have the MO reading as I go to print but I can only imagine that it is north of 200 after yesterday’s huge rally across the board. Given how over extended the Dow is trading I will continue with my strategy of selling rallies with tight stops. Today I will again look to sell the Dow on any rally higher to 18610/18670 with an 18730 stop. Naturally I still do not want to be long the Dow at this time.
September BUND
The Bund continues for now to hold its key 166.50 support level and I am still flat. Today I will lower my sell level slightly to 167.40/167.70 with a 168.05 stop.
Gold Rolling Contract
Frustratingly Gold missed my 1319 buy level with a 1319.60 low print before the market had a nice near $20 rally and I am still flat. Given the extent of the bullish sentiment reading towards Gold I am going to leave my buy level unchanged at 1310/1319 with a 1299 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 19.10/19.60 with an 18.65 stop.
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