Some slowing in the US economy in the last year, higher credit spreads and tighter financial conditions has seen the market back out pricing for Fed Rate rises this year. This theme continued yesterday with Fed Funds Futures now not pricing in the next Rate hike until August 2017 – so much for the initial forecast of four Rate hikes in 2016. The US Dollar has lost further ground against all major Currencies bar Sterling yesterday with the Bloomberg Spot DXY closing down a further 0.58%. While Financial Conditions have been easing in the US, conditions elsewhere through currency transmission channels are likewise tightening, something of a circular process.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/4 updated emails throughout the 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 135 points yesterday and is now ahead by 685 points for February having made 3365 points in January. Since I started this service last June it has made a return of 18000 points.
In the end I expect the economic performance to be the ultimate arbiter. With the US Dollar softer, Base metal prices rose as shown by Copper and Gold which both ended the day over 1% higher, though not Oil which after another volatile trading session closed down 2.5% having been up 3% at one stage.
Data releases yesterday were not especially market moving with US Jobless Claims up 8K to 285K ahead of Payrolls this afternoon. Meanwhile December Factory Orders fell 2.9% in line with expectations. Equity markets were again choppy as the Dow recovered from earlier losses to post a 0.5% gain helped again by the weaker Dollar.
Just before I posted yesterday morning ECB President Dragi and BOJ Governor Kuroda were talking and not even strong words from both of them were enough to talk down their currencies against the US Dollar. Dragi’s speech was published in my Daily Commentary yesterday and after the Euro rose after he spoke, he is now facing some tough decisions at the upcoming March 10 Meeting. Meanwhile Kuroda must be in shock as following the move by the BOJ to introduce negative interest rates the USD/JPY spiked higher to over 122 before getting hit hard over the past few days to under 117 where it currently trades.
In other news Dallas Fed President Robert Kaplan called for patience in assessing the recent turmoil, while IMF Head Christine Lagarde has been speaking noting support for the weaker oil producers namely Azerbaijan and Nigeria but also that the IMF is very bullish on India, a major beneficiary of lower oil prices.
For Sterling, the Bank of England voted 9-0 to keep interest rates steady, with previous dissenter McCafferty voting this time with his MPC colleagues. The BOE’s latest inflation report forecasts CPI at 0.8% this year and not 2% until 2018, thus sending Sterling lower across the board.
Overnight the continuing strength in the Japanese Yen saw the Nikkei get hit again closing down nearly 1.5% at 16800. A break and close below the recent low at 16000 will be very bearish and worth keeping an eye on.
This morning on the economic front we already had the release of German Factory Orders which again disappointed printing -0.7% versus 0.5% expected. At 1.30 pm we have US Trade Balance and the Non Farm Payrolls with the market looking for a rise of just 190K versus last month’s 292K print and an unchanged Unemployment Rate at 5%. The subtext of the Report, any revisions, whether the detail is is worse or better than the headline, and most importantly what it says about Average Earnings growth will be trawled over. Finally at 8.00 pm we have US Consumer Credit.
March S&P 500
Another crazy day for the S&P which fell 25 Handles after I posted before rallying over 30 Handles off this low only to get hit hard again on the back of oil prices turning lower. The key to this market is not to over trade and if you have made some money just go flat and wait for the next day because if you keep trading all day in these tricky markets you will inevitably get caught with a bad position. Yesterday after I posted to my surprise the S&P traded lower to my average buy level at 1903.50 before quickly stopping me out of this trade near the lows of the day at 1894. The one signal that has saved me countless times over the past six months since this aggressive sell-off started in the stock market is my 5 Handle Rule which is explained in detail on the education tab on my tradernoble.com website. After I was stopped out of this position the 5 Handle Rule kicked in at 1895 and I covered this position too early at 1904 ahead of its eventual rally to 1922. The main reason that I covered this position was due to me having too many open positions at the one time. I am now flat the S&P and as most members know at this stage I will stay flat until we get the release of the NFP data later on. As I mentioned above the Average Earnings is the key component to watch. If the market rallies after the NFP release I will look to go short from 1933/1940 with a 1946 stop. I will also be a buyer on any dip lower to 1886/1893 with a 1881 stop. Again if I am taken long and subsequently stopped out of this position I will use my 5 Handle Rule to go long again with a stop below whatever new low is printed.
EUR/USD
After the huge move higher in the Euro over the past two days the Euro is now trading above its Bollinger Band and at the top of its Williams Index although the BB is a narrow band after the sideways move in the Euro for the pre-seeding few weeks. I am going to stay flat until the NFP is released if the Euro rallies I will look to go short in small size against the key 1.13 resistance level with a 1.1340 stop. I will leave my buy level unchanged at 1.1080/1.1125 with a 1.1050 stop.
March Dollar Index
No change as I am still a seller on any rally higher to 97.45/97.75 with a 98.10 stop.
March DAX
As expected the DAX has held the key 9250/9300 major support zone so far with the market under pressure from the continuing rally in the Euro despite the weakening German economy as shown again this morning by the very weak Factory Orders data. As I was already long the S&P and the FTSE I waited to buy the DAX at 9290 before it had a nice rally to 9420. Unfortunately I covered my long position way too early at 9330 as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the DAX on any further dip lower to 9190/9250 with a 9155 stop. Remember a break and close below 9250 will bearish.
March FTSE
My FTSE plan also worked well with the FTSE following the other markets lower. After the FTSE hit my 5790 buy level the market had a nice rally to 5885 which enabled me to cover this position at my 5830 T/P level and I am now flat. Today I will again look to buy the FTSE on any dip lower to 5785/5815 with a 5750 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan just about worked well yesterday as I waited to buy the Dow to the bottom of my buy range given that I was already long the other Indices. After going long at 16250 the market came close to stopping me out with a 16205 low print before having a nice 250 point rally which enabled me to cover this position at my revised 16325 T/P level and I am now flat. Just like the S&P above I will stay flat until the NFP is released at 1.30 pm. If the Dow sells off on this data I will look to buy the market from 16210/16270 with a 16150 stop. Again given how weak the US Dollar is trading I do not want to be short the Dow at this time especially with the MO continuing to show strength with a positive 142 close last night.
March BUND
No change as I still a seller on any rally higher to 164.10/164.35 with a 164.55 stop. I will also look to buy the BUND on any dip lower to 163.10/163.40 with a 162.80 stop.
Gold Rolling Contract
No change as I am still a buyer of Gold on any dip lower to 1122/1130 as given how overbought Gold is trading at this time I do not want to chase the market higher.
Silver Rolling Contract
I am still flat Silver and today I will look to buy the market on any dip lower to 14.20/14.50 with a 13.90 stop.
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