U.S. Equity Markets rose to a new record high, while sovereign bonds extended gains and the US Dollar slumped after central banks around the world continued a shift toward easier monetary policy. Oil surged amid rising tensions with Iran. The S&P 500 opened at an all-time high, spurred by speculation the Federal Reserve will cut Interest Rates soon enough to avert an economic slump. The benchmark retreated after President Donald Trump hinted at possible retaliation for Iran shooting down a U.S. drone, only to rebound and close above the previous high set on April 30. Energy shares led the gain as crude surged more than 5%. The CBOE Volatility Index rose above 15. The geopolitical tensions briefly overshadowed fresh impetus for risk assets from the Fed, Bank of Japan and Bank of England, all of which signalled a readiness to support growth. The 10-year U.S. Treasury note yield dropped below 2% for the first time since November 2016, while the greenback sank the most since January. Gold surged toward $1,400 an ounce.
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Equities
Traders are now pricing in a virtual certainty the U.S. Central Bank will cut rates by July, Fed Fund Futures show. Seven of 17 Fed officials now think it will be appropriate to lower the benchmark overnight rate by a half-percentage point by the end of the year, according to updated projections published Wednesday. Fed Chairman Jerome Powell cited “uncertainties” in the outlook that have increased the case for a rate reduction as officials seek to prolong the near-record American economic expansion. The S&P 500 Index rose 1% to a closing record of 2,954.18, the Nasdaq Composite Index gained 0.8% and the Dow Jones Industrial Average increased 0.94%. Meanwhile The Stoxx Europe 600 increased 0.4% to the highest in about seven weeks and the MSCI Emerging Market Index surged 1.6% to the highest in more than six weeks.
Currencies
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index declined 0.6%, to the lowest since January.
The Euro rose 0.5% to $1.1290, the strongest in more than a week.
The Japanese Yen strengthened 0.5% at 107.52 per dollar, the strongest in more than five months.
The British pound increased 0.5% to $1.2696, the strongest in more than a week.
The MSCI Emerging Markets Currency Index rose 1%.
Bonds
The Bond Markets traded in a narrow range yesterday with the yield on 10-year Treasuries falling 2 basis points to 2%. In Europe, Germany’s 10-year yield eased 3 basis points to -0.32%, and Britain’s 10-year yield declined 6 basis points to 0.81%, after touching the lowest level in almost three years.
Commodities
Growing tensions in the Gulf saw West Texas Intermediate rise 5.4% to $56.65 a barrel. This saw capital hit the Gold Market with Gold rising over 2.5% to sit at $1395 an ounce this morning. Finally, the relentless rise in Bitcoin continues with the market trading at $9800 this morning.
This morning on the Economic Front we have German, Euro-Zone and UK Markit Services PMI at 8.30 am, 9.00 am and 9.30 am respectively. Also at 9.30 am we have UK Public Sector Borrowing Requirement, followed by the Bank of England Quarterly Bulletin at 12.00 pm. Next we have US Manufacturing PMI at 2.45 pm. Finally, we have Existing Home Sales at 3.00 pm
Meanwhile the Fed’s Clarida and Brainard are speaking at 11.30 am and 5.00 pm respectively.
September S&P 500
Today is Quarterly Quadruple Expiration for the June Contract across all US Indices and can be one of the most difficult sessions to trade. Yesterday was a wild trading session with the S&P trading higher my 2962 sell level before falling over 25 Handles on rumours that President Trump would bomb Iran. This move lower saw the market hit my 2956 revised T/P level and I am now flat. Yet again the buy the dip won the day with the market rallying to close at a new all-time high. With debt levels now much higher than the Global Financial Crisis in 2008 plus and incredible $12 trillion of bonds trading with a negative interest rate, stock markets do not care as Fund Managers just chase yield. QE has not worked as we still have no inflation and the Global Economies are in or close to recession depending on which country you look at. In my opinion this is one of the most dangerous scenarios we have seen in many decades. Add in the worsening geopolitical situation and it does not look positive. Yet equity markets do not care. Despite all of my concerns you just cannot be short the equity markets. Today I will raise my buy level to 2926/2936 with a 2918 stop. The 2900/2920 is good support and a break and close below here for a few days could signal a significant top in the market. Ahead of the weekend I do not want to be short the S&P at this time.
EUR/USD
I am still flat the Euro. We have strong resistance from 1.1350/1.1390 and today I will be a seller on any rally to this area with a 1.1435 stop. I am not going to chase the Euro higher and today I will leave my 1.1195/1.1235 buy level unchanged with the same 1.1155 stop.
September Dollar Index
No Change as I am still a seller on any rally higher to 96.65/97.05 with a lower 97.40 stop.
September DAX
This morning the DAX traded lower to my 12290 buy level shortly after the Futures Market opened on Eurex, before rallying to my revised 12325 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 12210/12275 with a 12165 stop. Despite the DAX having trouble in breaking and closing over 12400 I still do not want to be short the market at this time.
September FTSE
I am still flat the market which again just missed my 7320 initial buy level. Today I will leave my 7280/7320 buy range unchanged with the same 7245 tight stop.
Dow Rolling Contract
I am still flat the Dow and today I will again raise my buy level slightly to 26370/26540 with a higher 26290 stop. Despite the Dow trading overbought I still do not want to be short the market at this time as the market eyes its 26951 all-time high.
September NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 7710 buy level before rallying to my revised 7731 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7640/7690 with a 7595 tight stop.
September BUND
I am still flat the Bund and today I will now raise my sell level slightly to 171.85/172.25 with a 172.65 stop.
Gold Rolling Contract
Gold has now rallied over $100 in a few weeks rising $50 in the last three days as geopolitical tensions rise. I am still flat and with Gold trading well above its Daily Bollinger Band I am reluctant to chase this market higher. Today I will only raise my buy level slightly to 1367/1375 with a 1359 stop.
Silver Rolling Contract
Thankfully Silver traded below my 15.32 buy level with a 15.30 low print after I posted yesterday morning before the market rallied to my revised 15.50 T/P level. Silver continues to underperform Gold and today I will be a small buyer on any further dip lower to 14.95/15.25 with a 14.60 stop. If I am taken long I will have a T/P level again at 15.50.
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