After an initial wobble , US equities have recovered to close higher for a fifth day in a row with gains of 1.25%/1.58%.10y UST yields are unchanged after trading to a new 4 year high while the US Dollar has continued to fall and is now down almost 2% so far this week. Lunar New year celebrations for the ‘’Year of the Dog’’ begin in Asia with China, Singapore and Hong Kong amongst other Asian countries out today. After falling almost 1% early in the New York session, the S&P500 closed 1.30% higher and the intraday charts show a similar pattern for the Dow Jones and NASDAQ indices. US equities are up around 5% to 6% in the past five days, after losing around 8% to 9% in the previous 5 days. Meanwhile, over this 10 day period and amid further evidence of higher inflation, US Treasury yields have continued to climb. Two Monday’s ago 10y UST yields closed at 2.70% and now the 10y tenor trades at 2.89%, after reaching a new four year high of 2.94% during yesterday’s trading session.
To mark my 1525th 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 This offer is open to both new and existing members and 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 10 points yesterday and is now ahead by 1369 points for February having made 879 points in January, 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notifications.
For now it seems that US equities are coming to terms with a higher yield environment, however with recent inflation readings surprising to the upside, US Treasury yields still have the potential to climb higher. As long as US data support the prospects for higher economic growth then, in theory, US equities should be able to cope with a higher yield environment. For now that seems to be the case, but if US Treasury yields climb above 3%, the ability for US equities to cope is likely to remain questionable. I suspect the push-me/pull-you contest between yields and stocks is likely to remain a market theme for a while yet.
Meanwhile, US Dollar weakness remains the main theme in currencies. CHF (0.73%) and JPY (0.71%) are the big outperformers in G10, so despite the risk positive environment evident in equities, there is a clear bid for safe haven currencies. JPY strength was aided by comments from Japanese finance minister Taro Aso, noting that Yen’s strength was not abrupt enough to trigger intervention. Sterling has also had a good day, up 0.67% with the pair now trading at 1.4130 after trading down to a low of 1.3800 two days ago. News of a softening in EU negotiation stand appears to have been the trigger for Sterling with Politico reporting that EU officials are considering watering down the mechanism that would sanction the UK if it breaks EU rules during the Brexit transition periods. Later, an EU official said that no decision had been taken.
Amid a broad soft USD environment, CAD and AUD are the strugglers over the past 24hrs with both currencies little changed against the USD. Yesterday’s Australian Labour market report came in line with expectations, revealing a 16K net job gain (+15k consensus) with the Jobless Rate also printing in line with expectations at 5.5%. The detail looked a little bleaker with -50k full-time jobs and the creation of 66k part-time positions. This might have been a factor weighing on the AUD overnight, although underperformance against other crosses might have been at play too. Higher oil prices (WTI +0.3% and Brent 1.6%) did not help the Canadian Dollar, but just like the AUD, crosses underperformance are probably a downward factor. EURCAD, for instance, made a fresh 2 year high yesterday.
In economic news, US PPI was +0.4% m/m in January, matching the consensus, however, the core measure ex food & energy beat expectations printing at +0.4% m/m, above the +0.2% consensus. Meanwhile, US Industrial Production was -0.1% m/m in Jan, below the +0.2% consensus. So although recent US economic data has come below expectations and below levels activity indicators have been suggesting, inflation readings have continued surprise on the upside.
Lastly on the other side of the Atlantic, Eurostat reported that the EU’s Trade Surplus with the US rose by 7% to $160bn in 2017 despite the stronger Euro. One analyst that I follow notes that the report supports the view that in a medium-long term context the Euro is still a cheap currency despite its recent strong appreciation, while data like this might also get the attention of President Trump and his penchant for imposing trade barriers.
This morning on the Economic Front we have UK Retail Sales at 9.30 am. This is followed at 1.30 pm by US Housing Starts and Building Permits. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
March S&P 500
Yesterday was a frustrating trading session across the board with many of my buy levels missing by small margins before trading a lot higher. Yesterday after the US Markets opened the S&P had a nasty 30 Handle sell-off to a low of 2689 just missing my 2685 buy level before incredibly rallying 50 Handles to trade at 2739 this morning. The S&P is now 210 points higher than last Friday’s low print with the McClellan Oscillator again proving what a fantastic signal it is for identifying a major low. Last night the MO closed in positive territory for the first day in many weeks with a +51 print. Yesterday after the S&P rallied I emailed my Platinum Members to raise their sell level in the S&P to 2728. After a brief sell-off to a low of 2722, I covered this short position at 2727 and I am now flat. You just cannot afford to hold a short position in the US stock markets overnight at this time. Today the S&P is within touching distance of my 2758/2775 sell area and I will be a seller here with a 2785 stop. I will also raise my buy level to 2710/2720 with a 2703 stop.
EUR/USD
The Euro continues to rally as expected without me been able to get a long position on board and I am still flat. Today I will leave my sell level unchanged from 1.2580/1.2620 with the same 1.2655 stop. I will raise my buy level slightly to 1.2390/1.2440 with a 1.2355 stop.
March Dollar Index
Unfortunately, overnight I was stopped out of my 88.75 long position at 88.30 and I am now flat. The Dollar is severely oversold and today I will again look to buy the market on any further dip to 87.60/88.00 with a 87.25 stop.
March DAX
My DAX plan worked well with the market trading lower to my 12320 buy level before rallying. However given the strength of the Euro I covered my long position at my revised 12340 T/P level and I am now flat. Today I will again look to buy the DAX on any dip lower to 12220/12295 with a 12170 stop. I still do not want to be short the DAX at this time.
March FTSE
No change as I am still a seller on any further rally to 7285/7325 with a 7355 tight stop. Meanwhile I will now raise my buy level to 7140/7175 with a 7110 stop.
Dow Rolling Contract
The Dow had a wild trading session yesterday, trading to an initial high at 25167 after I posted before selling off to a low at 24800 before rallying strongly to trade at 25300 this morning. My sell level in the Dow was at 25170 which finally hit late in the session. Thankfully the Dow had a quick 50 point sell-off from here and I used this move lower to cover my short position at my revised 25158 T/P level and I am now flat. The Dow is now trading 2000 points higher than last Friday’s low print. This is an incredible move as yet again all short positions have got slammed. Today I will now raise my buy level to 24750/24880 with a 24685 stop. The next resistance level is from 25420/25550 and today I will be a seller in this area with a 25635 stop. If I am stopped out of this position I will be a more aggressive seller on any further rally to 26030/26230 with a 26310 stop.
March NASDAQ
Unfortunately the NASDAQ just missed my 6630 buy level before rallying another 200 points with this market again the strongest of the US Indices yesterday. It is so hard to be short and as complacency sets in the next wave lower could be even more scary than last week’s aggressive sell-off. I do not want to buy the NASDAQ at these levels and today I will be a seller on any further rally to 6930/6980 with a 7025 stop.
March BUND
The BUND is trying to consolidate its recent losses with the market again just missing my 157.35 buy level with a 157.42 low print before rallying back to the 158 area. I am still flat and today I will now raise my buy level to 157.10/157.50 with a 156.80 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1333/1343 with the same 1325 stop.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 16.70 buy level before rallying and I used this move higher to exit this position at my revised 16.83 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 16.30/16.65 with a 15.90 stop.
Recent Comments