Geopolitics is well and truly back with President Trump announcing yesterday afternoon that the proposed June 12 Summit in Singapore he was to have with North Korean leader Kim Jong Un is off. Initial thoughts ran to Trump’s recent comments speaking aloud about the possibilities on whether the meeting may or may not occur and that even if this one did not occur, it might occur later. Trump comments sounded more decisive/final though he did say later that a meeting could occur later, but if North Korea does the right things, setting the bar higher.
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For anyone following my Platinum Service it made 133 points yesterday and is now ahead by 1287 points for May, having made 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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“The world…has lost a great opportunity,” President Trump said, citing “anger and open hostility” in a recent North Korean statement. ‘’Please let this letter serve to represent that the Singapore summit, for the good of both parties, but to the detriment of the world, will not take place,’’ he wrote in a letter to Kim. Speaking later at the White House, Trump said his ‘’maximum pressure campaign’’ against North Korea would continue and threatened a military response if Kim resumes nuclear activity. On the surface, it is sounding pretty strong stuff. But he also left the door open for the talks to take place if Kim takes ‘’constructive’’ steps toward peace. “It’s possible that the existing summit could take place, or a summit at some later date.’’
Adding some more spice into the geopolitics mix on the trade tensions front, the President warned that he might impose car tariffs of 25% on all car imports, ostensibly on national security grounds. German Chancellor said that she is expecting a lasting exemption from US steel tariffs and there is no doubt that Trump’s comments on car tariffs will not have been lost on her either.
Market reaction overall has so far been measured and somewhat contained. Currencies have struggled to find new direction, the VIX is little changed and US stocks closed down, the Dow by 0.3%, the S&P by 0.2%, while the Nasdaq was little changed. The Japanese Yen initially jagged lower to below 109, but has since been bid back above the figure. The BBDXY Spot Dollar Index has been overall drifting a little lower, the AUD/USD trading this morning in recently familiar territory at 0.7578. On some signs of a safe haven bid from investors, the gold price rose, up $15.20/oz to $1,310, a rise of 1.17%, US bonds also getting support, 10 year bond yields down a net 1.65bps to 2.977%. (There was no key US data to move markets.) European bond yields eased too, the 10 year German bund yield down 3.5bps to below 0.5% at 0.472%. Base metals rose on the LME.
Oil had a down day for once. Russia’s Energy Minister Novak said that Russia and OPEC will discuss whether it is appropriate to scale back production cut, sufficient news for investors to take some money off the table from oil after what has been a very good run. The Brent-WTI spread widened further on US oil supply pipeline congestion concerns with the EIA reporting a 5.78m barrel rise in US inventories last week as US production continues at a brisk rate.
Sterling found some support after UK Retail Sales were much stronger than expected in April, bouncing back after the ‘’beast from the east’’ storm depressed sales in March. Yesterday the Times ran an article suggesting that UK PM May was planning to ask the EU for a second transition period to run until 2023 to avoid a hard border in Ireland. The government has since denied any truth to that report. May’s Brexit war cabinet remains split on the two options for the UK’s future trading relationship with the EU. EUR is also a little stronger against the USD. Interestingly, Mark Carney spoke that a very positive deal (progress in Brexit negotiations towards a ‘’deep and special’’ relationship with the EU were his words) could unleash an investment boom. That is an out there view, having spoken earlier in the week about how Brexit had sliced off 2% from the UK’s growth. He also spoke of the importance of Bank of England guidance through the Brexit uncertainty.
There were two Fed speakers, Kaplan and Harker, both non-voters this year and neither especially rocking the boat as far as whether the Fed will hike three of four times this year and some more next. Harker had a slight dovish tilt suggesting that he does not want to push rates above neutral and that his view remains three (maybe four) this year and another three next taking Fed funds to neutral then. Kaplan said that he does not want inflation to run persistently above or below 2% and that it is not historical symmetry with no need for catch up for inflation undershooting. He is prepared to tolerate some overshooting, but only if it is seen as temporary.
This morning on the Economic Front we have the German IFO Business Climate at 9.00 am and this is followed at 9.30 am by UK GDP. At 1.30 pm we have US Durable Goods Orders. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
Later at 4.45 pm Fed Members Kaplan, Evans and Bostic are speaking at the Dallas Fed.
June S&P 500
Yet again the S&P sold off after President Trump cancelled his meeting with North Korea only for the ‘’buy the dips’ to come in and push the market higher as the S&P again held the strong support area from 2700/2710. Yesterday after the S&P traded the whole of my buy range from 2715/2723 for an average long position at 2719, I emailed my Platinum Members to exit any long position at 2721 and to re-buy on any subsequent dip lower to 2705. Frustratingly the S&P made a low at 2705.75 before rallying to an overnight high so far at 2737.50. As I mentioned yesterday a break and close above 2740/2745 is a buy signal for next week while a close below 2700 will be a short-term sell signal, although the market will then have to break its 50 Day Moving Average at 2680 before we see a more aggressive move lower. Today I will again look to buy the S&P from 2714/2722 with a 2708 stop. I still do not want to be short the market at this time.
EUR/USD
The Euro rallied to an intra-day high at 1.1751 before selling off this morning. I am still flat and today I will now lower my buy level to 1.1630/1.1670 with a 1.1590 stop. I still do not want to be short the Euro at this time.
June Dollar Index
I am still flat the Dollar and today I will now raise my sell level to 94.25/94.65 with a 94.95 stop.
June DAX
With the price action for the DAX negative all morning I emailed my Platinum Members to lower their buy level for the market to 12870. After we traded lower to this revised buy level I covered this position at 12880 as I had too many open positions on board at this time and I am still flat. The DAX has strong support from 12750/12810 and today I will be a buyer in this area with a 12695 stop. The DAX should have difficulty in trading back above the 13050 resistance area and today I will now be a small seller from 13040/13100 with a 13150 stop.
June FTSE
As so many of my markets were getting triggered yesterday I cancelled my buy level in the FTSE in an email to my Platinum Members and I am still flat. If you did buy the market at least the FTSE rebound to a high at 7755 before trading at 7730 this morning as I go to press. The FTSE has strong support from 7640/7680 and today I will be a buyer in this area with a wider 7595 stop. Below 7670 the FTSE has strong support at 7625 and a break and close below here this evening will be a strong sell signal for next week.
Dow Rolling Contract
After the S&P traded the whole of my buy range as mentioned above I waited to buy the Dow which I did at 24725 before using a small initial rally at the time to cover this position at 24770 and I am now flat. The Dow subsequently made a low just above 24600 before rallying over 300 points as yet again anyone caught short the Dow got slammed. Given the volatility in the Dow you have to trade this market in small size with a wider stop. This market is still a buy on dips until we break and close below the 50 Day Moving Average which comes in well below the market today at 24402. Today I will again look to buy the market on any dip lower to 24580/24730 with a 24505 stop. My only interest in selling the Dow is still on a rally higher to 25080/25210 with a 25270 stop. If any of my positions get triggered in the US Stock Indices today I will look to be flat at close of business especially as the market tends to have a large movement on the re-opening on Sunday night as we saw last week when the Dow gapped 300 points higher. Thankfully we were not short for that move. Remember the US and London markets are closed on Monday.
June NASDAQ
My NASDAQ plan worked well with the market trading lower to my 6915 buy level before rallying to my revised 6935 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 6880/6920 with a 6840 stop. I still do not want to be short the NASDAQ at this time.
June BUND
My Bund plan worked well with the market trading lower to my 159.35 buy level shortly after I posted before incredibly rallying to my sell level at 160.30. After my buy level was hit I cover this long position at my 159.55 T/P level. After the Bund traded higher to my sell level I emailed my Platinum Members to exit any short position at 160.20 and I am now flat. This morning the Bund traded lower to 160.04 after the open before rallying in the last half hour to currently trade at 160.40. The Bund has now rallied over 300 points since last Friday with the yield now at just 0.46% which is madness. The bund has strong resistance from 160.65/160.95 and today I will be a seller in this area with a 161.20 tight stop. I will also be a small buyer on any dip lower to 159.55/159.95 with a 159.25 stop which is just below yesterday’s low print.
Gold Rolling Contract
The Daily Sentiment Index again proved what a valuable technical indicator it is as Gold rallied over $15 after I posted yesterday morning. I am still flat and today I will now raise my buy level to 1285/1293 with a 1279 tight stop.
Silver Rolling Contract
Silver fell just shy of my 16.75 T/P level. As I have been offside since I put this trade on I emailed my Platinum Members to exit any long position at 16.63 and I am still flat. Today I will again look to buy Silver on any dip lower to 16.20/16.50 with a 15.90 stop. Silver has now traded sideways for over three months and needs to break and close over 16.80/17.00 for the bulls to regain control.
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