US equity Indices have all closed with losses of more than one percent. Treasury yields are about 3bps lower on average with December Fed Funds tightening risk back to 30% from 40%. The Japanese Yen and Swiss Franc top the FX leader board while the Australian Dollar is close to the bottom at 0.7884 and so more than half a cent below the level prevailing as I posted yesterday’s Daily Commentary. The initial catalyst for the risk-off tone was concern and rumour that Trump’s main economic adviser Gary Cohn was set to quit in disgust at the President’s response to the Charlottesville racial violence. Were that to eventuate, it would be seen as driving an even bigger nail into the coffin of hope for tax reform. While the White House has issued a denial of any such intent (but not Cohn directly, I would note) the tragic news of another terror attack in Europe, this time Barcelona, has compounded prevailing negative sentiment. And then just before the New York close, we’ve had red headlines saying Trump is dropping plans to form an advisory council on how best to spend $1tn. on infrastructure.
To mark my 1400th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Membership 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 can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 48 points yesterday and is now ahead by 661 points for August, having made 1096 points in July, 1023 in June, 1076 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
This immediately evokes the Groucho Marx quip about not wanting to be a member of a club that would have him as a member.
The other significant news yesterday was contained in the summary minutes of the ECB’s July 20th Council meeting, which expresses concern about the risk of the Euro exchange rate overshooting in the future and the tightening of financial conditions implied by the rise in both the Euro and Bond Market Yields. The Minutes noted with concern the rise in real interest rates implied by the latter and says that the still-required favourable financing conditions “could not be taken for granted”. EUR/USD, already down from above 1.1775 to about 1.17 in front of the minutes, promptly fell to just above 1.1660 but has since recovered to back above the figure.
My read of the ECB is that as things stand, a signal of intent with respect to the fate of the QE bond buying programme could still come out of the September 7th Governing Council (GC) meeting, or at latest October, in so far as it is a further significant riser in the Euro and or Bund yields, rather than the levels reached in the last few months, that most concerns the ECB at this juncture.
US data has been mixed, with a small downside surprise on Industrial Production, within which manufacturing output fell by 0.1% against the 0.2% rise exacted. But the Philly Fed Survey remained strong (18.9 from 19) US Jobless Claims fell to their second lowest level since 1973 and the Index of Leading Indicators rose for the eleventh month in row and in line with expectations.
Fed speak included resident dove Neel Kashkari repeating his view there’s no rush to raise rates. He also says that the Fed will likely watch debt limit talks when considering when to start balance sheet shrinkage. Bob Kaplan meanwhile has repeated that he wants to see more progress on inflation before the next Fed rate hike.
This morning on the Economic Front we have ECB Current Account and Construction Output at 9.00 am and 10.00 am respectively. This is followed by Canadian CPI at 1.30 pm. Finally we have University of Michigan Consumer Sentiment at 3.00 pm
September S&P 500
With volatility finally returning after been in hibernation for most of the past eight months we are starting to see the normal movements in stock markets return. I cannot emphasise enough how important it is to have my Platinum Service as the updated emails are key to avoiding major loses. Yesterday I sent four updates and if this volatility continues then the number of updated emails will be high also. I did not like the price action in the US Indices yesterday morning and after both the S&P and Dow hit my buy levels at 2457 and 21930 I immediately emailed my Platinum Members that I had exited these positions at 2458 and 21935 respectively. These were fast markets with the S&P dropping to an initial low at 2450 before rebounding to 2458 a few minutes later while the Dow hit 21888 before rebounding back above 21950 thus giving everyone who was long a decent exit price. The fact that the S&P could not sustain a break over the 2460/2470 congestion zone was a warning but the break and close below 2450 is bearish. The S&P has support at its 100 Day Moving Average at 2414. The S&P has not traded below this key landmark since last November. Today I will be a buyer on any further dip lower to 2412/2418 with a 2406 stop. Remember a break and close below 2400 tomorrow will be a confirmed sell signal. I will now look to sell the S&P on any rally higher to 2438/24440 with a 2450 stop.
EUR/USD
Unfortunately the Euro just missed my 1.1660 buy level with a 1.1662 low print before rallying 90 points and I am still flat. Today I will leave my buy level unchanged from 1.1620/1.1660 with the same 1.1585 stop. I will also lower my sell level slightly to 1.1810/1.1850 with a 1.1880 stop.
September Dollar Index
My latest long 93.40 Dollar position worked well with the market trading to a 94.00 high print. This move higher enabled me to cover my long position at my 93.65 T/P level. Subsequently I emailed my Platinum Members to re-buy the Dollar at 93.50. I am still long and will only add to this position on any move lower to 93.10 with the same 92.90 stop.
September DAX
When the S&P traded to an initial low at 2441 I again emailed my Platinum Members to cancel any buy order in the DAX and I am still flat. Technically the DAX is having major problems in breaking its key 12300 resistance level while at the same time holding above important support at 11900. Today my only interest in buying the DAX is on a further dip lower to 11960/12020 with a 11895 wider stop.
September FTSE
Late in yesterday’s trading session the FTSE got hit hard and in the process traded the whole of my 7315/7345 buy range. This put me long at an average rate of 7330. Subsequently I emailed my Platinum Members to exit any long position at 7335 and this has now been filled at the re-open of the Futures Market at 7338 and I am now flat. The next support level is from 7240/7275 and today I will be a buyer on any dip to this area with a 7215 tight stop which is just below the recent two month low at 7232.
Dow Rolling Contract
Getting out of any long Dow position per my first update this morning certainly saved a lot of money as the market subsequently fell a further 200 points and I am still flat. Yesterday’s price action was outright bearish as a number of important levels got broken. The next main support is from 21570/21630 and today I will be a buyer here with a 21510 stop. Given the importance of yesterday’s break lower I will now use any rally to 21850/21910 to go short with a 21960 tight stop.
September BUND
Thankfully the Bund just missed my 164.35 initial sell level ahead of the 9 pm close and I am still flat. The Bund has strong resistance from 164.65/165.05 and today I will move my sell level to this area with a 165.25 stop. Despite the bullish price action I still do not want to be a buyer at this time.
Gold Rolling Contract
The high for Gold so far this year is the Double Top at 1295/1296 and a break and close above here this evening in New York will be bullish. I do believe we will break this level but we may need to sell-off slightly first to correct the overbought nature of the market before eventually breaking higher. I am still flat Gold and today I will now move my buy level higher to 1269/1275 with a 1263 stop which is just below this week’s low print.
Silver Rolling Contract
Just before I posted Silver has traded lower to my 16.90 buy level with a 16.86 low print. I will only add to this position on any move lower to 16.60 with the same 16.35 stop. I will now lower my T/P level on this position to 17.10.
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