Yesterday was a trading session where oil news took centre stage in the lead up to the end of the week with liquidity likely thinner today into the US long weekend with the US Memorial Day holiday on Monday. Meanwhile London is also closed on Monday for their second Bank Holiday of the month. OPEC had their formal meeting, and what they agreed to do was extend the 1mbpd cut for another nine months. Clearly the market was expecting/hoping for more, both WTI and Brent crude down around $2.75/bbl (both over 5%) with futures curves across tenors also down similarly. Saudi Oil Minister Khalid Al-Falih said “we’ve said we’ll do whatever is necessary” after the meeting. But clearly what was announced has not been enough, for now anyway. Spot WTI is back down to levels in the middle of the month, before the stories started to grow louder about extending the cuts. What’s been announced bears little resemblance to the 4.8mbp cuts announced in the Asia crisis and during the GFC.
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 in this deal can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 90 points yesterday and is now ahead by 910 points for May, having made 1276 points in April, 1335 in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
Not unexpectedly, the Canadian dollar has been softer in the session, retracing back up from below 1.34 reached during the APAC session yesterday to over 1.3480 as I go to press this morning. A larger casualty for the yesterday’s session has been the AUD, down from over 0.75 yesterday – levels it has not been able to crack and hold decisively this week – to around 0.7450/60.
Moody’s downgrade of China earlier this week, no new clear direction on iron ore (down $0.28/t overnight) and a somewhat softer than expected Construction Work Done print have been neutral to mild headwinds. And in the wake of FOMC Minutes that failed to inspire any new buying of the USD, the market at the end of the day continues to price in the high likelihood of the FOMC hiking rates again at the June 14 meeting and the even money odds of another before year end.
Yesterday, US Jobless Claims continued at very low levels (234k after 233k), a pointer to continued employment growth, counterbalanced by a wider than expected good Trade Deficit for April and a larger than expected decline in Wholesale Inventories. Little to no market impact was the result, but it’s a sign that the GDP bounceback in Q2 might need to be trimmed a little.
On the Fed speakers’ front, Fed Governor Lael Brainard was speaking again, this time at a global economy event and sounding quite positive on the world economic outlook, noting a stabilisation in Japan and that the outlook in Europe was solidifying. The view from outside Europe though appeared not to be wholly endorsed by ECB Vice President Vitor Constancio (ex Governor, Banco de Portugal) who, while noting the “very positive evolution” in the Portuguese economy also said that overall risks remain tilted to the downside, an attempt, the market could presume, to curtail expectations of the ECB winding back QE soon. Through all this, the Euro has eased back during a day of indecisive currency moves. US equities have closed with the Dow up 0.34%, the S&P +0.44% and interestingly, despite the 1.79% decline in energy stocks. US bond yields are little changed.
RBA Governor Guy Debelle was speaking in London overnight and did not stray from the purpose of his visit which was to speak at the Launch of the FX Global Code of Conduct. He was speaking how the Code is a principles-centred approach rather than rules-based.
This morning on the Economic Front we have no data due from either the UK or the Euro-Zone. At 1.30 pm we have US Durable Goods and GDP. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
June S&P 500
Finally after numerous attempts the S&P broke and closed over the key 2400/2405 resistance level. This area should now act as strong support. However for the market to announce its next leg higher the Dow must break and close over its March 1, high at 21,169 to eliminate the current negative divergence between the two main Indices. There is no doubt that as mentioned yesterday the Central Banks continue to buy the Equity markets and from the outside the price action looks impressive especially given the 5% fall in both Brent and WTI. We know from the Ned Davies Research that the Fair Value for the S&P is way down at 1655 but no matter how mad this rally is, you just cannot fight it. It will end when we see a sell extreme that lasts for more than a few days and not just 36 hours as we witnessed last week. Today I will be a buyer of the S&P on any dip lower to 2400/2406 with a 2395 stop. Yesterday after the S&P hit my initial 2414 sell level the market fell slightly to a low at 2410.50. I was not comfortable in being short and I emailed my Platinum Members to exit this position at 2413. The S&P has strong resistance from 2420/2426 and today I will be a small seller in this area with a 2431 stop.
EUR/USD
I am still flat the Euro which traded to a high of 1.1250 after I posted yesterday morning before eventually trading back to a low just below 1.12. I am still flat the market and today I will continue to look to sell the Euro on any rally higher to 1.1275/1.1310 with a 1.1340 tight stop. My only interest in buying the Euro is still on a dip lower to 1.1080/1.1115 with a 1.1045 stop.
June Dollar Index
Having gone into yesterday’s trading session long at an average rate of 97.05, the Dollar subsequently made a low at 96.79 before rallying to a new high at 97.21 late in the day. I used this rally to exit my long position at my revised 97.20 T/P level and I am now flat. Today I will again look to buy the Dollar on any dip lower to 96.60/96.95 with a 96.30 stop. Given the extreme negativity towards the Dollar as shown by the latest Daily Sentiment Index reading at just 5% bulls I do not want to be short the Dollar at this time.
June DAX
My DAX plan worked well with the DAX trading most of yesterday’s 12530/12580 buy range. This sell-off put me long at an average rate of 12560 before the market rallied over 100 points is a near straight line and this move higher enabled me to cover this position at my 12625 T/P level and I am now flat. Today I will again look to buy the DAX on any dip lower to 12485/12540 with a 12440 stop. I will still be a seller into the strong resistance level from 12790/12840 with a 12880 stop.
June FTSE
The volatility in the FTSE has just stopped with the market grinding higher. I do not like the price action in Cable which may break lower if it can close below 1.29 this evening in New York. If Cable does break lower, then I expect the rally in the FTSE to resume. Today I will now move my buy level slightly higher to 7425/7460 with a 7395 stop.
Dow Rolling Contract
After I posted yesterday the Dow spent most of the trading session moving to the upside. However as I mentioned in the S&P commentary above the Dow has to break its major 21,169 resistance level. I am still flat the Dow and today I will now raise my buy level slightly to 20930/20990 with a 20880 stop. Despite my concerns for this market I still do not want to be short the Dow at this time.
June BUND
The Bund volatility has also come to a halt with the market trading in a 30 point range yesterday. I am still flat the market and today I will now raise my buy level to 160.50/160.80 with a 160.20 stop.
Gold Rolling Contract
Despite the fact that Gold managed to close over 1254 again last night I am reluctant to chase this market higher especially as I am still long Silver. For this reason I will leave my buy level unchanged at 1240/1247 with the same 1233 stop.
Silver Rolling Contract
Silver just traded in a 15 cent range yesterday on very light volume. I am still long at 17.15 and I will only add to this position on any move lower to 16.85 with the same 16.55 stop.
With both the US and UK Markets closed on Monday there will be no Daily Commentary. However if any of my calls not executed today subsequently get hit on Monday I will be back with an update for my Platinum Members. The following Monday is a Bank Holiday in Ireland and I will instead have my Daily Commentary written as usual on this day as Ireland is the only market closed.
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