The US market has taken a breather yesterday, notwithstanding news very late in the New York trading session that a Special Counsel (Robert Mueller, ex-FBI Director) was being appointed to investigate Russia’s involvement in the election. It has not been another day of selling of US equities. Rather, the Dow has steadied, up 56 points after Wednesday’s 370 point rout. It’s been more a stop-gap session. US Treasury yields have changed little, 10s at 2.23%, up ½ a basis point. There has been earlier testimony from former FBI director James Comey circulating, Comey saying that he had not been pressured for political purposes to close an investigation. The implication then would be that President Trump is off the hook. Without pre-judging how the Special Counsel investigations might run or uncover, they have in the past run for up to years. Whitewater took several years to complete.
To mark my 1350th issue of Tradernoble Daily Commentary I am offering a special 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 please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 138 points yesterday and is now ahead by 850 points for May, having made 1276 points in April, 1335 in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
The USD has made a partial recovery, the DXY up 0.26%, the larger gains against the Yen and Sterling, and surging against the Brazilian Real. The USD was also not harmed by the release of another low Weekly Jobless Claims Report, while the Philly Fed Index for May was supper charged, up to a reading of 38.8 from 22.0 (F:18.5).
US Treasury Secretary Mnuchin was delivering his first Congressional testimony, this to the Senate Banking Committee, Mnuchin speaking of the Administration’s goal to lift growth to 3%-plus and that the US Treasury has a team of 100 working on the Administration’s tax reform proposals.
The Pound was later afflicted by a mini flash crash that unseated the Pound from above 1.30, spiking briefly below 1.29, before steadying, but not recovering. Sterling had earlier outperformed in the wake of a much stronger than expected April Retail Sales report that doubled expectations. Headline ex-auto sales rebounded by 2.0%; including fuel, the rise was 2.3%.
It was politics that has hit the Real and Brazilian markets hard. President Michel Temer has had allegations of corruption made against him (alleged recordings of him discussing hush money for pay-offs), having been appointed with the promise of a cleaner administration. The Bovespa stock market index is down 8.8%, while the BRL has lost over 7% against the USD, trading this morning at 3.35/40, from earlier levels at around 3.10. Temer is standing his ground amid a Supreme Court approved investigation.
The Euro, while losing some ground for the session against the partially-recovering USD, seems to be getting some support from an emerging view that the June 8 ECB meeting will sign off on a less dour outlook. Draghi last night said that the Euro-area recovery is becoming increasingly broad-based countries and regions. He also noted how Euro area domestic demand had been the mainstay of the recovery. French ECB member Benoit Coeure gave a Reuters interview, saying that the ECB shouldn’t wait too long before taking away support. He said that there is too much gradualism in policy normalisation. Bundesbank President Jens Weidmann also weighed in, noting that political risks had diminished since the French Presidential election and that policy should be normalised if the recovery continues.
The official account of the April 26-27 ECB meeting also reported that the Central Bank left a re-assessment for the June meeting, members at the April meeting having disagreed on risks. That disagreement seems to be continuing, though the tone of Draghi’s remarks seems to be relatively much less worrisome. The minutes noted that new staff projections and data would put officials in a better position to take stock and re-assess the sustainability of the recovery and the outlook for inflation. The first (recovery sustainability) would seem to get a tick; the second (inflation outlook), well that’s an assessment and outlook that many central banks are pondering right now, some more advanced in the cycle than the ECB as it considers whether to wind down QE in June.
After having rallied yesterday after yesterday’s stronger than expected Employment Report, the AUD has eased back to the lower 74s in the wake of the somewhat firmer USD. Iron ore prices eased $0.60/t, while coal prices firmed a little. Having out-performed in the previous session, the NZD has under-performed in this session, down 0.38%.
This morning on the Economic front we have Euro-Zone Current Account at 9.00 am and this is followed at 11.00 am by UK CBI Total Orders/Selling Prices. Finally we have Canadian Retails Sales at 1.30 pm and Euro-Zone Consumer Confidence at 3.00 pm.
The Fed’s James Bullard is speaking in the US and his views are well known: no need to lift the US Fed funds rate further, but the Fed should be now on the path to winding down its balance sheet, beginning with its holding of mortgage-backed securities.
This morning, there are three ECB speakers, (Dombroyskis, Praet and Constancio)and the market will continue to sift through these speeches for the differing views. It’s certainly now looking like the June 8 meeting will produce a shift to a more balanced assessment.
June S&P 500
As I have been saying for the past 4 weeks that all ‘’Open Gaps’’ get filled in the S&P with the market getting hit hard shortly after I posted yesterday morning. This move down completely filled the 2345/2366 ‘’Open Gap’’ from the Friday ahead of the first round of the French Election last month with the market rallying 30 Handles off the 2344.50 low print to 2375 before a late sell-off saw the S&P close at 2363. Normally on the first test you get a large rally with the subsequent tests of this ‘’Open Gap’’ leading to smaller rallies before eventually we break this now key support level. Yesterday all four of my Indices buy levels were hit together in a very short space of time. No matter what Index you bought you would have made nice points as none of my stops were hit before the market rallied hard shortly after the US Markets opened. Yesterday after the S&P hit the whole of my 2346/52 buy range this meant that I was long at an average rate of 2349 before unfortunately cutting this position too early at my revised 2353 T/P level and I am now flat. The reason I cut was I thought that we would see additional selling to meet margin calls when the US market opened but alas this did not happen. My service is all about making as many points as possible for the least amount of risk and when all four of your Indices get hit at the same time you have to reduce your exposure. The S&P has two key supports at yesterday’s 2344.50 low print and then at 2335 which is the 100 Day Moving Average. I am also watching the 2348 level as a weekly close below here tonight will be a short-term sell signal for next week. Today I will be a small buyer on any dip lower to 2350/2356 with a 2344 stop. If I am taken long and subsequently stopped out of this position or I manage to T/P on any long position I will either way be an aggressive buyer on any further dip lower to 2333/2338 with a 2328 stop. I will also lower my sell level slightly to 2373/2379 with a 2384 stop.
EUR/USD
As expected the Euro sold off given the severe overbought condition of the market and I am still flat. As I mentioned yesterday the 1.1200 level is key as a break and close over here for a few weeks has a target level of 1.21 ahead of 1.30 over the coming months. Given how overbought the Euro is trading plus the significance of the 1.12 level I cannot see us breaking above here at this time. Today I will now lower my sell level slightly to 1.1170/1.1210 with a 1.1245 tight stop. The Euro has strong support from 1.0970/1.1010 and today I will be a buyer in this area with a 1.0940 stop.
June Dollar Index
It took a while but finally the Dollar traded higher to my 97.80 T/P level on my very large 97.60 average long position. Subsequently I emailed my Platinum Members to re-buy the Dollar in normal size from 97.50/97.80 and overnight after the market dipped I am now long at 97.70. I will only add to this position on a move lower to 97.40 with a tight 97.15 stop which is just below yesterday’s low print. The Dollar is extremely oversold as shown by the Daily Sentiment Index which is trading near single digits which is the lowest reading since August 18, 2016, which was followed by a substantial rally in the Dollar. For the Dollar to get back on a firmer footing it needs to break and close over 98.50.
June DAX
My DAX plan worked well yesterday with the market trading lower to my 12500 buy level before rallying over 100 points. Again I do not know which Index or how many Indices that members bought yesterday but either way it should have worked out for you. Again as I had so many open positions I covered this long DAX position at my revised 12525 T/P level and I am now flat. There is no doubt that the DAX has strong support from 12460/12510 and today I will again be a buyer in this area with a 12415 tight stop. The real support for the DAX is from 12260/12300 and if the market trades down to this area I will be an aggressive buyer with a 12210 stop.
June FTSE
The movements in Sterling are really affection the price action in the FTSE at this time. This scenario will probably continue until we get the Election out of the way on June 8. Yesterday after I posted the FTSE got hit hard to my 7386 average buy level on the back of the much stronger than expected UK Retail Sales data. With Cable spiking above 1.30 I did not want to be long the FTSE and I emailed my Platinum Members to exit this position at 7395 and I am still flat. The FTSE has better support at last week’s 7348 high print and I prefer to get long the market near this level as it will be a better risk/reward trade. For this reason my only interest in buying the FTSE today is on a dip lower to 7335/7370 with a 7315 stop. Otherwise I will stay flat.
Dow Rolling Contract
Hindsight is a great word and it certainly applies to me and the Dow yesterday. My buy level was spot on that we would hold the key 20500 support level with the market trading to a 20490 low print before rallying 250 points. Unfortunately after I bought the market at 20500 I covered this trade at my revised 20540 T/P level as I had 6 open positions on board at the time which was way too much risk and I am now flat. Despite yesterday’s strong rally I still do not believe that we are finished with the downside and today I will again look to buy the Dow on any dip lower to 20490/20550 with a 20435 stop. Despite my concerns I still do not want to be short the Dow especially going into a weekend.
June BUND
I am still flat the Bund and today I will raise my buy level slightly to 160.75/161.15 with a 160.40 stop. The price actions continues to tell me not to be short the Bund at this time.
Gold Rolling Contract
Gold just missed my 1245 buy level with a 1245.90 low print and I am still flat. Gold is struggling and really needs to break and close over its 4.5 year mega trend line from 1280/1284 for the bull market to reassert itself. Given the significance of this trend line I will be a small seller in front of 1280 with a 1292 stop. My only interesting in buying Gold today is on a dip lower to 1230/1236 with a tight 1225 stop.
Silver Rolling Contract
Silver rallied to a 16.89 high shortly after I posted yesterday morning with the market just missing my 16.90 T/P level on my latest long 16.72 position. I do not like the price action in Silver especially with the Daily Sentiment Index in neutral territory with a 40% bullish percentage and for this reason I emailed my Platinum Members to exit and long position at 16.76 and I am now flat. I am going to stay flat unless we trade lower to 16.00/16.30 where I will be a buyer with a 15.70 stop which is just below the key 15.80/16.00 support level from last December.
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