More focus on the US economy and the US Dollar yesterday in the wake of a spate of interviews given by now-confirmed US Treasury Secretary Steve Mnuchin. He gave his first interview with the Wall Street Journal om Wednesday and followed that up yesterday with two more interviews with CNBC and Bloomberg TV. The USD has had a mixed 24 hours or so in response. It’s all sounded quite measured and careful. No labelling of China as a currency manipulator, development of tax plans and firm intentions to lift US growth but not to be evident till late next year. No immediate tick either to a border tax and little to nothing on infrastructure. The USD overall has been softer in response. In his Wall Street interview he emphasised the importance of lifting growth to 3% and the priority the Administration is devoting to its tax plans. He said the White House is now working with Congressional Republicans, aiming to get legislation passed by the August recess, an “ambitious timeline” he recognised, adding “it could slip to later in the year”.
To mark my 1275th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 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 139 points yesterday and is now ahead by 1391 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.
Notably Mnuchin dodged the important question of whether the tax cuts would be revenue neutral, instead highlighting the priority to lifting growth to 3%. The GOP tax plan includes a border tax (taxing imports and subsidising exports through a cash flow/VAT-style tax), a tax offset that Mnuchin was not giving the immediate green light to in his interviews. In his CNBC interview he said they are looking at the border tax, but noted that there are issues with it. (Some have said that such a tax could come with a higher dollar and thus neutralising the intended trade effects of such a tax. Mnuchin recognised the US Treasury as raising such concerns.)
In the past 24 hours, the USD has declined by around 0.4% overall, the market is continuing to wait for the important details of the tax/fiscal plans, the absence of any infrastructure details, and that Mnuchin said that the step up in growth to 3% may not occur until late 2018.
Separately, the President has been meeting with large US manufacturers, calling them out to restore US manufacturing jobs and US trade dominance, Trump blasting trade deals and large US deficits with Mexico and China. Business leaders, also meeting with White House senior officials, have been calling for deregulation, citing restrictions among others from the EPA, health care, aspects of Dodd-Frank legislation and some supply-side technical staff shortages. The AUD has been an underperformer in this latest miniepisode of USD softness. Instead it’s been tracking around 0.77. The strongest performer has been the Pound and despite Austrian Chancellor Kern saying that Brexit is going to be costly for the UK, citing an estimate of €60bn as the UK’s pension entitlement, budget and other obligations.
Elsewhere in Europe, Germany’s second cut of its Q4 GDP confirmed the first estimate of 0.4%, notching up growth of 1.9% for 2016, the strongest in the G7, shading out the UK at 1.8% and the US behind at 1.6%. And that was all from domestic growth, exports lagging imports. Not wanting the market to move too quickly, ECB Chief Economist Peter Praet said that the recovery is still dependant on supportive monetary policy and that the economies are fundamentally fragile. While Sterling has been stronger, the Euro has been listless.
This morning on the economic front is quiet with the only data release of importance being the UK RBA Loans For House Purchase at 9.30 am. Over in the US is also a light economic calendar with New Home Sales and the University of Michigan Consumer Sentiment both due at 3.00 pm.
March S&P 500
My S&P and Dow plan worked very well yesterday with both hitting my sell range within a few minutes of each other. I know most traders will have just picked one of these markets to go short. Personally after the S&P hit my 2366 sell level I covered this position at 2365 in anticipation of both my Dow and FTSE sell levels getting triggered which thankfully happened. For those members who stayed short the S&P instead the result was decent with the S&P falling 13 Handles to a 2353 low print before spending the rest of the trading session trading higher. I am still flat the S&P and I will continue with my strategy of buying the Dip and selling rallies while at the same time conscious of reacting to a proper sell-off which is long overdue. The McClellan Oscillator closed flat yesterday as it nears hitting a negative price level. I have mentioned countless times about how narrow this rally has been over the past six weeks but until we see a sell extreme that lasts for more than a few days or more importantly a Downside Key Day Reversal, the S&P will continue to be a buy on dips as more short positions get squeezed. Yesterday’s move lower in the S&P closed some of the ”Open Gap” from last Friday’s Chicago close with the Gap now at 2347.50/2353. Today I will again leave my buy level unchanged at 2345/2351 with the same 2340 stop. I will also look to sell the market on any further rally to 2366/2372 with a 2377 stop.
EUR/USD
Unfortunately the Euro just missed my 1.0525 buy level with a 1.0538 low print after I posted yesterday before trading back to 1.06 and I am still flat. As I have mentioned over the past few days it was not for the political worries associated with both the French and Dutch Elections the Euro would be trading a lot higher especially given the back ground of strong European growth and inflation. Tuesday’s low at 1.0493 is now key support and today I will move my buy level higher to 1.0525/1.0555 with a 1.0485 stop. I still do not want to be short the Euro at this time.
March Dollar Index
After spending nearly three weeks correcting some of January’s 5% fall, the US Dollar has started to sell-off again. This is as it should be given the Downside Key Month Reversal in January for the Dollar Index. Remember Key Month Reversals are extremely rare. I am still flat the Dollar and today I will now lower my sell level to 101.25/101.55 with a 101.90 tight stop. If the Dollar can break its early February low at 99.05 we will see an acceleration to the downside.
March DAX
The strength of the Euro is putting pressure on the DAX this morning with the market hitting my 11915 buy level before rallying 20 points. As I do not know how many members bought the DAX as they await my Daily Commentary and as a result I have covered this position at 11925 so that everyone is now on the same page and I am now flat. The DAX will have decent support at the 11810/11860 area and today I will be a buyer in this range with a 11760 stop. I still do not want to be short the DAX at this time.
March FTSE
My FTSE plan worked well with the market hitting my 7295 sell level before selling off and this move lower enabled me to cover this position at my 7260 T/P level and I am now flat. It is clear that the FTSE has strong resistance at last months 7292 all-time high and that rallies into this area are to be sold for now. The strength in Sterling is also not helping the FTSE at this time and today I will look to sell the market on any rally higher to 7275/7305 with a 7330 stop.
Dow Rolling Contract
My Dow plan worked really well with the market hitting my 20825 sell level before falling 80 points and this sell-off enabled me to cover my short position at my 20750 T/P level and I am now flat. This market is on borrowed time but as I mentioned over the past few days it is possible that we test the 20940/21000 area before finally we may see a sell-off that lasts for more than a few hours. Yesterday was the 10th consecutive higher close for the Dow which is incredible. My big concern is still the CNN Fear & Greed Index which closed at 83 on Wednesday. Only three times in the last three years has the Index reached this level of ”Greed”, late last year, mid-year last year and mid-year in 2014. Each time it has done so save for the last time, equity prices fell soon thereafter and reach such over-extended levels to the downside that ”Fear” became the overwhelming motion, from whence share prices rose. In other words, these are unsustainable levels of ”Greed” and ownership of shares at this point is a punt of the purest sort. Today I will again look to sell the Dow on any rally higher to 20840/20950 with a wider 21050 stop. I am using a wider parameter given my huge concern about this market but the problem is where to pitch my sell level. I will scale into this sell range conscious of the fact that I cannot remember the last time that the Dow closed higher for 11 days in a row.
March BUND
Initially my short 165.20 Bund position worked well as the market traded lower to my revised 164.90 T/P level after I posted yesterday morning. Unfortunately and in hindsight a stupid thing to do I emailed my Platinum Members to go short the Bund again at 165.25 with a 165.70 stop which unfortunately was filled near the close and I am now flat. I have always had a rule that never trade the same commodity twice in the one trading session and I broke that rule to all our costs yesterday and is another hard lesson learned. The only good thing is the fact the Bund is trading higher this morning with the market now trading at the top of its Bollinger Band and Williams Index in another blow off move to the upside. Fundamentally this move makes no sense given the pick up in both German growth and inflation but the nervousness of the elections is seen flight to safety by way of the Bund. Just like before this move in to the Bund will end in large losses for the pension and hedge funds. Today I will again look to sell the Bund on any rally higher to 165.85/166.30 with a 166.70 stop. I will scale into this sell range in smaller size than normal.
Gold Rolling Contract
Gold has just exploded over the past 48 hours with the market trading at 1255 this morning. As I mentioned earlier in the week a break and close over 1245 this evening is a new buy signal and today I will now raise my buy level to 1239/1247 with a 1233 tight stop. Thew next target for Gold is 1270/1275.
Silver Rolling Contract
Finally we are seeing some movement in Silver with the market hitting my 18.20 T/P level on my 17.96 long position from last week. Subsequently Silver traded lower to 18.06 and I emailed my Platinum Members to re-buy the market at 18.12. I am still long and I will now raise my stop on this position to 17.80. I will leave my T/P level unchanged at 18.50.
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