US Stock markets closed mixed to lower yesterday as investors decided to take a breather, after five straight trading sessions of the S&P 500 setting new all-time highs. The S&P closed -0.09% while the Dow again closed higher with a 0.04% gain. with bond yields also lower. In the currency space the US Dollar has been softer, Euro, Sterling and the CHF stronger. The Aussie has been steady-to lower, though hugging 0.77, supported by the soggy US Dollar. It’s not been any surprising weakness in the US data that’s lead to US Dollar-selling. US Housing Starts/Building Permits for January (coming in the wake of post-election rises in Treasury yields and mortgage rates to which they follow), the Philly Fed, and Weekly Jobless Claims releases all beat street consensus, but these did not bring back support to the Dollar during the session.
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For anyone following my Platinum Service it made 95 points yesterday and is now ahead by 1035 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.
Main board US stock indexes have been drifting lower, including after a press conference from President Trump who was vowing to spend up on the military and stating that his team was running like a “fine-tuned machine” rejecting perceptions to the contrary. “I see stories of chaos. It’s the exact opposite”, he said.
There has been some Central Bank news from both sides of the Atlantic in the form of the ECB Minutes from their January 18-19 meeting and Bloomberg TV interviews from Atlanta Fed President Dennis Lockhart (a non-voter this year) and Fed Vice Chair Stanley Fischer. While Lockhart said he could be persuaded that a March hike might be appropriate, Fischer was much more open ended and general in his comments. He said that “I don’t want to give you numbers on two or three, but this is consistent with what we had thought should be happening around now — that is that we’d be moving closer to the 2 percent inflation rate, and that the labor market would continue to strengthen.” If those two things happen, we’ll be on the path that we more or less expected.”
He was emphasising “gradual”, saying that if rates reach anything like the levels of previous years then it will be a matter of “years”. Keeping hopes of a near term hike alive, he did say that wages have “started happening”. Next month’s Non Farm Payrolls will be important in the lead up to the March 15 meeting with 10bps currently in the curve for March, a 40% chance, so still less than 50%.
The ECB minutes of its Jan meeting highlighted that they would continue with the stimulus to the end of the year (through and beyond the elections) and that they were not jumping at shadows (my words) over the recent uptick in CPI, given the kick from energy and not internal subdued price pressures. As for the AUD, it had been bought into yesterday’s employment numbers, up to around 0.7730, but a mixed report (weaker full-time) took the gloss off the report and buying interest faded. It’s been flat still overnight, though not retracing too much. Bulk commodity prices have been lower overnight, iron ore down $0.99, met coal down $2. Base metals softer mostly, while gold has ticked up $8.50 with stocks soggy.
This morning on the economic front we have UK Retail Sales at 9.30 am. After a disappointing December, the market is only priced for an OK rebound in January, though not even enough to counter the 2.0% decline in December, a 0.7% rise tipped for January. This is followed by Euro-Zone Construction Output at 10.00 am. Finally in the only US data of note at 3.00 pm we have the Leading Index.
March S&P 500
My S&P plan worked very well yesterday with the market trading lower to my 2345.50 revised T/P on my latest 2348 short position. Subsequently I emailed my Platinum Members to go short again at 2349 before the market dipped to a low of 2336 and this sell-off enabled me to cover this position at my 2343 T/P level and I am now flat. I wrote in great detail yesterday on the sentiment extremes and nothing has changed on that front. My own view is that the market will probably hold in until we get Trump’s Tax proposals which he will finally outline to Congress on February 28. Today I will again be a seller on any rally higher to 2347/2353 with a 2358 stop. If I am taken short I will again be a more aggressive seller on any further rally to 2362/2368 with a 2373 stop. I will still look to buy the S&P on any dip lower to 2326/2332 with a 2321 tight stop. As I mentioned at my lecture last night a lot of this move higher was on the back of a major Hedge Fund who was short the equivalent of $17bn in S&P options and once the S&P broke 2300 he had to cover this position which was announced last evening had now been done. I am sure that given the extent of this aggressive move higher over the past week that there are more Hedge Funds in trouble.
The Euro continued to rally after I posted yesterday morning and I am still flat. It is amazing that all the economic research coming across my desk is still Euro bearish. Today I will again raise my buy level in the Euro to 1.0570/1.0610 with a 1.0540 stop. I still do not want to sell the Euro at this time.
March Dollar Index
I am still flat the Dollar which continued to sell-off after I posted yesterday morning. The key level to watch for the Dollar is last month’s low at 99.05 and if we do break and close below here we will then see the Dollar accelerate lower. Remember we still have a Downside Key Month Reversal for January and this in itself is a very rare event. Today I will leave my buy level unchanged at 99.80/100.20 with a 99.45 stop. I will now lower my sell level to 101.20/101.60 with a 102.05 stop.
The DAX continues to trade in a narrow range as so far it cannot close over the key 11800/11850 resistance level. Yesterday after the DAX traded lower to my 11735 buy level the market rallied 50 points. I was not comfortable in being long the DAX as I do not like the price action and I covered this position for a small gain at 11745 and I am still flat. The DAX has strong support at 11650 and today I will be a small buyer on any dip lower to 11620/11665 with a 11580 stop. Despite my concerns with the price action in the DAX I am still not comfortable in putting on a short position.
I am still flat the FTSE and today I will now lower my sell level slightly to 7265/7305 with a 7330 stop. As mentioned yesterday a break and close over the January all-time high at 7292 will be bullish but given how overbought the FTSE is trading I prefer to sell into strength from here.
Dow Rolling Contract
I am still flat the Dow as none of my parameters got hit yesterday as the Dow took a breather after its near 800 point rally so far this month. It is interesting that the McClellan Oscillator closed with just a positive reading of +31 which is incredible when you see that all the main US Indices are near all-time highs. Today I will now lower my sell level in the Dow slightly to 20660/20720 with a 20760 stop. Meanwhile I will leave my buy level unchanged at 20420/20475 with the same 20370 stop.
Unfortunately the Bund just missed my 163.00 buy level by a few points before rallying strongly on the release of the ECB Minutes. Today I will raise my buy level slightly to 162.95/163.25 with a 162.55 stop. Remember the Bund has very strong support from 162.60/162.90 and should lead to a decent rally on any initial test of this range.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1216/1223 with the same 1210 stop.
Silver Rolling Contract
No change as I am still long from yesterday morning at 17.95 with a now revised 17.75 stop on this position. If I am stopped out of this trade I will be a more aggressive buyer on any further dip lower to 17.30/17.65 with a 16.95 stop. The 17.27 level is key for Silver and should initially hold any sell-off into this area with a decent rally.