In terms of market moves yesterday was a quiet trading session with only minor changes in currencies (USD flat), equities (S&P500 -0.1%) and Bond Yields (USTs -1.8bps). The biggest moves occurred in the Canadian dollar, (+0.7%) Norwegian Krone (+0.5%) and Kiwi (+0.5%) – mostly on the back of Central Bank commentary and a move higher in oil prices. Norway’s central bank removed its explicit easing bias at its meeting yesterday, stating “the balance of risks suggest that the key policy rate will remain at today’s level in the period ahead”. It also revised its path for the key policy rate higher in 2017 and 2018 and importantly the path is gradually rising from 2019. Echoing comments from the Bank of Canada and from the RBA Governor, the statement said there were “signs of impending reversal in the decline in petroleum investment” with the prospect of a modest rise in the near term.
To mark my 1350th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 15 points yesterday and is now ahead by 627 points for June, having made 1071 points 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 1750 points.
It is clear that there has been a shift in Central Bank policy amongst the advanced commodity countries, who are seeing the drag from the mining/oil downturn bottoming and possibly becoming a tailwind in the near future. The missing ingredient of course remains inflation and the Norges Bank forecasts inflation will hold below its target of 2.5% through at least 2020 (note core inflation is currently 1.6%).
The RBNZ too has seemingly joined the party with a mostly unchanged post meeting statement against a whisper expectation that the statement would be more dovish given the rise in the Kiwi and a disappointing Q1 GDP figure. This was not the case with no reference of the Kiwi being overvalued and currency markets took this as a green light with the Kiwi finishing up 0.5%. It looks unlikely the RBNZ will lift rates until 2018 and there was little reaction in the rates market.
In the US, politics continues to play in the background, but with little impact on markets overall. Senate Republicans unveiled their Healthcare Bill to repeal Obamacare in draft form and a formal Bill is likely to be brought to the floor next week or the week after. For the Bill to pass, Republicans need 50 votes, meaning they can only afford to have two Republicans oppose it. While headlines suggest five Republican Senators are likely to oppose it, they have expressed a willingness to negotiate. US equity markets are hopeful with Health Care stocks closing 1.1% higher. However, a fall in other sectors saw US equities finish unchanged on the day.
The WTI oil price rose 0.6% yesterday to close at $42.77, and that move has continued overnight with the market now trading at $43.10, while moves in Brent were stronger (+1.0% to $45.25. There is not much to report on in terms of new developments, though the support for oil likely came on news of Cyclone Cindy hitting the Gulf of Mexico and Saudi Arabia continuing to target a price of $65 a barrel.
The rise in oil did support the CAD, which rose 0.7%. Also supporting the CAD was much stronger than expected Retail Sales. Headline Retail Sales rose 0.8% m/m, more than double the market consensus, along with the core measure which rose 1.5% m/m. That overall bodes well for Q2 GDP in Canada and plays into the vein of growth picking up in the Canadian economy and the likelihood of the Bank of Canada removing policy accommodation.
Late last night, UK PM Theresa May has further indicated the likelihood of a soft Brexit by making concessions to EU citizens already living in the UK. PM say said those who were already in the UK would be given an opportunity to build up five years’ worth of residence which would than confer on them “settled status” and give them the same rights as British citizens to work, pensions and other public services. This news has helped Sterling to recover with Cable currently trading at 1.2735. I certainly would not be short Sterling as I continue to believe the currency is undervalued.
This morning on the Economic Front we have German and Euro-Zone Manufacturing PMI along with Services/Composite PMI at 8.30 am and 9.00 am respectively. This is followed at 1.30 pm by Canadian CPI and the US Manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have US New Home Sales.
Meanwhile the Fed’s Bullard, Mester and Powell are speaking at different venues at 4.15 pm, 5.40 pm and 7.15 pm respectively.
September S&P 500
There is no doubt this market does not want to sell-off at this time as no matter what happens the ‘’buy the dip’’ crowd always return. I am still flat and the level that I am watching closely is the 2418 key pivot and support points as a close below here will be a Downside Key Week Reversal. Unless something dramatic happens it is unlikely that we will break this level by this evening. Today I will now raise my buy level to 2423/2429 with a wider 2417 stop. Internally the market is still weak as shown by the McClellan Oscillator which closed with a negative 62 print. The S&P has strong resistance at last Monday’s 2451.50 new all-time high and today my only interest in selling the market is on a rally higher to 2448/2454 with a 2459 stop.
EUR/USD
The Euro has stopped trading for the last seven weeks with little or no movement during this period. I am still flat and today I will raise my buy level slightly to 1.1080/1.1120 with a 1.1050 stop. As mentioned over the past few days the large speculators continue to hold record long positions in the Euro and today I will continue to look to sell the market on any rally higher to 1.1235.1.1270 with a 1.1305 stop which is just above the 1.1300 high print following Trump’s Election victory last November.
September Dollar Index
As I wanted to bank some points for yesterday’s trading session I covered my long 97.15 position aat my revised 97.30 T/P level and I am now flat. This morning the Dollar is trading slightly weaker and I will use any further sell-off to 96.45/96.75 to buy the Dollar with a 96.15 stop.
September DAX
Unfortunately after I posted the DAX just missed my 12680 buy level before rallying 100 points and I am still flat. Today I will now raise my buy level to 12640/12700 with a 12590 stop. Despite last Tuesday’s sizeable Downside Key Day Reversal I still do not want to be short the market at this time.
September FTSE
For the third consecutive trading session the FTSE just missed my buy level with the yesterday the closest by just 4 points and I am still flat. With Sterling recovering this morning we may well see the FTSE struggle. For this reason I will now lower my buy level to 7275/7315 with a 7245 stop. The 7300 area is good support and I would expect the market to rally initially off any test of this support level.
Dow Rolling Contract
Since the Dow made its 21538 high earlier in the week the market has struggled without selling off aggressively. Sooner or later the series of Hindenburg Omen’s have to take their toll on the market. Today I will leave my buy level unchanged at 21270/21330 with the same 21220 stop. With the S&P trying to break higher I will raise my sell level slightly to 21510/21570 with a 21620 tight stop.
September BUND
I am still flat the Bund and today I will leave my sell level unchanged from 165.45/165.75 wit a 166.05 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1237/1244 with the same 1231 stop.
Silver Rolling Contract
Silver has traded in such a narrow range over the past 10 days. I am still long at 16.68 with the same 16.25 stop and 16.85 T/P level. If I am stopped out of any long position I will be a more aggressive buyer on any subsequent dip lower to 15.80/16.10 with a 15.45 stop. Remember a break and close over 17.05 is bullish.
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