It has been an interesting past 24 hours as far as markets were concerned with higher US equities despite the 6% fall in Chinese equity markets yesterday morning, but some softness in the US Dollar and lower Treasury Yields. US data prints were generally positive with still low Weekly Jobless Claims indicating a strong labour market and a comforting Durable Goods Orders Report for January indicative of positive business sentiment. The Atlanta Fed’s GDP Now estimate for Q1 GDP as of last night now stands at 2.5% from 2.6% when the last estimate was made on February 17, pointing to a growth rebound. There will be another update on that score after this afternoon’s Personal Income and Spending Report reveals the state of consumption in January.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary which includes 1/4 updated emails throughout the trading day. This offer is open to both existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 20 points yesterday and is now ahead by 2085 points for February having made 3365 points in January. Since I started this service last June it has made over 20,000 points.
US Durable Goods Orders rose a stronger than expected 4.9% in January, and even excluding the volatile Defence and Aircraft Category, Core Orders rebounded by 3.9%, countering December’s 3.7% decline that came with an upward revision. US Weekly Jobless Claims printed at 272K in the week ended February 20th, almost bang on its forecast and the average claims level in the December Quarter, a strong pointer to no fundamental deterioration overall in US Unemployment. Not that all sectors and regions are firing as shown by the Kansas City Fed Manufacturing Index which came in at -12 for February, which was the lowest reading since the Global Financial Crisis.
Oil is higher with WTI closing up another 2.5% on seemingly little fundamental news. US equity markets continued their rebound off the mid-afternoon lows on Wednesday with both the Dow and S&P closing over 1% higher. Surprisingly on the back of the strong equity markets Treasury Yields have eased with 2 years and 10 years closing lower by 3bps and 4bps respectively leading to a softer Dollar across the board. The AUD has rebounded closing over 0.72 after yesterday’s Australian Capex outlook data took the wind out of the sails with non-mining capital expenditure budgets still looking tepid for 2016-2017.
There has been plenty of wire coverage of Fed Presidents John Williams and James Bullard both openly speaking about the various pluses and minuses facing the US economic outlook. Bullard, who until recently, has been quite strident and hawkish spoke about he expects GDP growth to be better in 2016, that China adds a new complexity to the US economic forecast, and that the Fed is not on a ‘freight train’ path of rate hikes. He wants to get away from predicting the number of rate rises. Among other points Williams was speaking about the unintended consequences of negative interest rates, a topic that is sure to get a lot of discussion in Shanghai over the next two days.
The two day Shanghai G20 Finance Ministers/Central Bank Governors meeting started overnight and will no doubt provide a fuel for the newswires. Discussion of negative policy interest rates, the unknown dangers of pushing aggressively on that front, talk of using fiscal policy to support growth will get plenty of discussion, but you would be bold to expect any meaningful change in domestic policy agendas. No doubt there will be a renewed commitment to the Brisbane Action Plan to add 2% to growth.
This morning on the economic front we have the Euro-Zone Business Climate Indicator at 10.00 am. This is followed at 1.00 pm by German CPI. At 1.30 pm we have US GDP and Trade Balance. Finally at 3.00 pm we have US Personal Income/Spending and the University of Michigan Consumer Sentiment.
March S&P 500
There is no doubt these markets are determined to test one’s patience with the S&P now trading over 75 Handles higher than Wednesday’s mid-afternoon low at 1887 yet again proving that when we have a major economic event on the horizon such as the Finance Ministers/Central Bank G20 Summit currently underway in Shanghai you cannot be short the equity markets. Unfortunately having called for this move higher the S&P missed my 1919 buy level with a 1921 low print. Subsequently the S&P traded for three hours between 1926/1929 yesterday afternoon before rallying strongly into the close and finish over the key 1945 resistance level. This rally has continued overnight with the S&P now trading at 1963. However the market is now getting overbought as shown by the McClellan Oscillator which closed with a positive reading of +232. If the market closes at these levels or higher this evening then the MO should be indicating that it is time to start to short the market. As I mentioned at length over the past few weeks all ‘Open Gap’s get filled in the S&P at some stage and we have two massive ‘Open Gap’s above the market from the start of 2016 at 1994/2010 and 2012/2035. The only good news yesterday was we had no sell levels in any of my Index position that I cover on a Daily basis as anyone shorting this market has been slaughtered as we are back to the 2015 scenario where you can only be short the markets for a few hours as shown by Wednesday’s sharp turnaround leading to a massive upside Key Day Reversal in both the Dow and S&P. Today I will raise my buy level to 1942/1948 with a 1937 stop. I will also look to sell the market on any move higher to 1978/1986 with a 1992 stop. If over the next few weeks the S&P rallies to the 2025/2040 major resistance area I will then look to put on a macro short position with a 2055 stop.
EUR/USD
Frustratingly the Euro just missed my 1.0980 buy level with a 1.0986 low print and I am still flat which is annoying when I called for the Dollar to weaken ahead of the G20 Summit. Today I will move my buy level slightly higher to 1.0955/1.0985 with a 1.0925 stop. I still do not want to be short the Euro at this time.
March Dollar Index
No change as I am still a seller on any rally higher to 97.90/98.20 with a tight 98.45 stop.
March DAX
The DAX has rebounded strongly since I was stopped out of my last DAX position on Wednesday at 9165. The DAX is now trading at 9535 again emphasising my point of how difficult it is to short markets as you are betting against capitalism and the risk of Central Bank intervention at any stage to protect the huge QE programmes implemented by the CB’s since the Financial Crisis. Today I will raise my buy level to 9370/9430 with a 9325 stop. I still do not want to be short the DAX at this time.
March FTSE
The FTSE just missed my 5890 buy level after I posted which is really frustrating as again I called for this market to rally strongly on the back of the weaker Sterling. The FTSE has been on fire over the past few weeks apart form its Wednesday wobble with the market now trading at 6070. The FTSE has strong resistance at 6150 from its breakdown in early January and today I will be a small seller on any further rally to 6140/6170 with a 6205 stop. Given the huge move higher since Wednesday I do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow is now trading an incredible 620 points higher since its low on Wednesday as every short scrambles to cover their position. However this morning the Dow is trading back at the top of both its Bollinger Band and Williams Index coupled with the fact that the MO is near a sell signal also. Today I will look to sell the Dow on any further rally to 16850/16920 with a 16960 stop. Given how overbought the Dow is trading I do not want to be long the market at this time.
March BUND
The BUND finally hit my 166.20 sell level last evening and as I wanted to book some points for yesterday’s trading I covered this position shortly after the open a 7.00 am at 166.00 and I am now flat. Incredibly the BUND is now trading with a yield of just 13pbs for 10 year money and today I will again look to sell the BUND on any rally higher to 166.40/166.70 with a 167.05 stop. I still do not want to be long the BUND at this time.
Gold Rolling Contract
Given the fact that I am already long Silver I will now reduce my buy level in Gold to 1205/1215 with a tight 1198 stop.
Silver Rolling Contract
No change as I am still long from yesterday morning at 15.20 with the same 14.75 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 14.50 with a 14.15 stop.
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