Yesterday’s official confirmation that President Trump had instructed<https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-us-trade-representative > the USTR to consider a higher 25% tariff (from 10%) on the proposed $200bn of Chinese goods triggered an angry response from China, a sell-off in Asian equities and a weaker CNY. European equities also closed in the red, but a bounce in IT shares led by gains Apple boosted US equities. CNY weakness weighed on AUD and NZD and Sterling underperformed in spite of a hike by the Bank of England.
To mark my 1650th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it made 140 points yesterday and is now ahead by 233 points for August, having made 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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After I posted early yesterday morning, Washington confirmed earlier news reports that the administration wanted to increase the proposed tariff on $200 billion of Chinese goods to 25% from 10%, stepping up pressure on Beijing to change its trade practices. Politico reported the higher tariff proposal is due to the depreciation of the Chinese currency offsetting the proposed 10% rate (CNY -8% over the past month). There was no clarification on the $16bn of tariffs that could be announced anytime from now.
Late yesterday, China’s Ministry of Commerce said that ‘’China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries’’.
Equities
Reaction to the step up in negative trade rhetoric was firstly evident in the equity market with Chinese Indices leading the decline. The Shanghai Composite closed 2% lower, after being down more than 3% at one stage. Europe was unable to arrest the negative lead from Asia and after a sharp decline at the open, US equities closed higher on the day, boosted by gains in IT shares. Apple shares led the rebound and in the process it became the first US company with a valuation of $1Trillion.
Currencies
CNY was relatively stable at the start of yesterday’s Asian session, but at the European open after China’s response to higher US trade tariffs threats, it seems that some interpreted the ‘’fully prepared’’ comment from China as a signal that authorities are willing to allow the currency to depreciate further and not get in the way of market forces. CNY and CNH came under steady pressure over the remainder of the overnight session, closing the day at 6.842 and 6.88.
Softer equities and weaker CNY dragged the AUD and NZD lower with both antipodean currencies losing about 0.55% against the USD. AUD now trades at 0.7360, with the early July low of 0.7311 now a little bit too close for comfort. Meanwhile the move up 68c proved short lived for the kiwi with the pair now trading at 0.6739.
Sterling is a notable underperformer despite the fact that BoE officials unanimously voted to lift the Official cash rate by 25bps to 0.75%. The move was widely expected, but there was some expectation for a couple of dissenters. Sterling initially spiked +0.4% to 1.3125 on the no dissents headline, but quickly reversed the initial move trading to an intra-day low of 1.3016, one bps lower where it currently sits. One explanation of the Sterling moves would be that the market interpreted the BoE decision as a dovish hike, another however could be that the market believes the Bank is heading towards a policy mistake amid heightened Brexit uncertainty.
A stronger USD backdrop sees EUR sub 1.16 and from technical perspective the gap lower to 1.1587 now means the pair has pierced through its narrowing triangle evident since late May. USD/JPY is essentially unchanged at 111.66 with the key support at around 111.40 still resilient, in spite of the increase in US led trade tensions.
Bonds
In the bond market, Japan conducted an unscheduled bond buying operation after the 10-year yield reached as high as 0.145%. This signals that whilst the Bank of Japan ultimately has an upward limit of 0.20%, it is not prepared to see the market jump to that level so quickly, creating more of a two-way market in the short-term. Italy has returned to the spotlight, with its 10-year rate up 12bps to 2.90% on nervousness ahead of Budget talks. US 10-year Treasuries have not pushed on through the 3% and have retreated a little to sit down slightly to 2.98%.
Commodities
It has been another mixed session for commodities with oil prices up between 1.5% and 2% while on the other end copper and metal prices are down around 0.70%.
Economics
UK: Markit construction PMI, Jul: 55.8 vs. 52.8 exp.
UK: Bank of Eng. bank rate (%), Aug: 0.75 vs. 0.75 expected which is the highest rate in 10 years.
This morning on the Economic Front we have German, Euro-Zone and UK Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. Next we have Euro-Zone Retail Sales at 10.00 am. This is followed at 1.30 pm by US Non-Farm Payrolls where the market expects another solid outcome with +192k jobs created while the Unemployment Rate is expected to fall to 3.9% from 4.0%. Focus will also be on the hourly earnings figure which is expected to print unchanged at a 2.7% y/y. At the same time we get the latest US Trade Data. Finally we have US Markit PMI and ISM Non-Manufacturing PMI at 2.45 pm and 3.00 pm respectively.
September S&P 500
What a day as the S&P which traded the whole of my buy level for an average long position at 2800 before stopping short of my 2789 stop level with a 2791 low print before subsequently recording a Key Upside Reversal to close at 2829 as yet again anyone selling the S&P got slammed. Unfortunately with so many of my positions hitting at the same time I covered my long S&P position at 2802 and I am now flat. I still have the view that the S&P will break the January 26 highs of 2878 before we finally see a more lasting sell-off in the stock market. Today I will again look to buy the S&P on any sell-off to 2812/2820 with a 2805 stop. If I am taken long and subsequently stopped out of this position will be a more aggressive buyer from 2780/2790 with a 2772 stop. My only interest in selling the S&P is against the January 26 highs where my sell level will be from 2872/2882 with a 2891 wider stop.
EUR/USD
Yesterday the Euro sold off with the market trading the whole of my buy range for a now long position at 1.1605. I am still long and I will now lower my T/P level on this position to 1.1615. Meanwhile I will leave my stop unchanged at 1.1555. If any of the above levels are triggered I will be back with a new update for my Platinum Members.
September Dollar Index
Unfortunately the Dollar again missed my buy level before rallying aggressively and I am still flat. Today I will now raise my buy level to 94.00/94.40 with a tight 93.60 stop. I still do not want to be short the Dollar at this time.
September DAX
My concerns that the DAX was trading heavy certainly proved to be the case yesterday as despite the weaker Euro the DAX at one point was trading 300 points lower that the highs recorded on Wednesday. As I had a large long S&P position along with a Dow and FTSE position I waited to buy the DAX which I did at the bottom of my range at 12530. I know most of you do not traded the DAX given the volatility and with the market thankfully falling short of my 12480 stop with a 12484 low print before subsequently rallying. I used this rally to exit my long position at 12555 and I am now flat. So far the DAX is holding the key 12500 support level and today I will again look to buy the DAX on any dip lower to 12430/12500 with a 12380 stop. Despite the negative price action I still do not want to be short the market at this time.
September FTSE
The FTSE also traded the whole of my buy range yesterday for an average long position at 7505. As I had six open positions at the one time I emailed my Platinum Members to exit any long FTSE position for a breakeven and I am still flat. Subsequently the FTSE rallied to close in New York at 7569. There is now doubt that the key for the FTSE is to hold the now major support from 7450/7490 and today I will again look to buy the market on any dip to this area with a 7410 stop. The FTSE has strong resistance from 7710/7760 and I will be a seller on any rally to this area with a 7805 stop.
Dow Rolling Contract
My Dow plan worked well as after the Dow traded lower to my 25140 buy level I used the subsequent rally to cover this position at my revised 25205 T/P level and I am now flat. The good part about yesterday was no matter which market Index you bought you should have made some points as thankfully none of my stops where hit. I know most of you do not want to have more than three open positions at the one time which is perfectly understandable given the risks. Today I will again look to buy the Dow on any dip lower to 25020/25170 with a 24950 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 24730/24880 with a 24650 stop. As long as the Dow can hold the key 24800/25000 support level I still do not want to be short the market at this time.
September NASDAQ
Unfortunately the NASDAQ just fell short of my 7185 buy level before rallying to my sell range as the market also recorded a Key Upside Reversal. This move higher saw me go short market at an average rate of 7360. I am still short with the same 7410 tight stop and a now higher 7335 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September BUND
Ahead of the US Payrolls I am going to leave my Bund buy level unchanged from 160.30/160.70 with the same 159.95 stop.
Gold Rolling Contract
Late in the US trading session Gold finally traded lower to my 1207 buy level. As I am still long Silver I emailed my Platinum Members to exit any long Gold position at 1210 and this has been now been filled and I am now flat. Today I will again look to buy Gold on any dip lower to 1185/1195 with a 1173 stop.
Silver Rolling Contract
No change as I am still long Silver at 15.49 with the same 15.70 T/P level and 14.90 stop. I will continue to look to add to this long position on any move lower to 15.10. If my second buy level is filled I will then lower my T/P level to 15.40. If any of the above levels are hit I will also be back with anew update for my Platinum Members.
Next Monday Ireland is closed for the August Bank Holiday. Due to an unforeseen travel commitment I will not be able to do a Daily Commentary next week. If any of my buy/sell levels not triggered in today’s commentary are executed next week I will be back with an update for my Platinum Members. My next full Daily Commentary will be on Monday week August 13. Thank you for your ongoing support.
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