Just when it seemed safe to go back out, risk markets are on the defensive again, with European equities down 1%, but this time rising bond yields have re-emerged as the catalyst as they were at the end of last week on that higher than expected US Average Earnings print in the Non-Farm Payrolls report from last Friday. The Dow which was down 600 points at 8.30 pm accelerated this decline by another 400 points in the last thirty minutes of trading for 1032 points loss or 4.15% in what was the worst trading sessions since 2011. The only data of note yesterday was US Weekly Jobless Claims that remained low at 221K for w/e 3 Feb.
To mark my 1500th 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 offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 265 points yesterday and is now ahead by 672 points for February having made 879 points in January, 946 points in December, 823 points in November and 657 points in October. 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 AUD/USD is trading back around 0.78 this morning, having tested below the figure overnight and again this morning. RBA Governor Lowe was speaking last night and delivering the message that while the next movement in rates is likely to be up, he intimated that he’s certainly in no immediate rush. He noted that the floating currency buys time for the RBA to not move lock-step with other central banks (the RBA cash rate reached a less-low emergency level) and they look for ‘’gradual’’ progress in reducing unemployment and getting inflation return to the midpoint of the target range. He went on to say that ‘’the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy’’. In the end, their policy assessment will rest on the data and that is what will drive the RBA Board. In terms of the RBA outlook for growth, unemployment, and inflation, more will be revealed in this morning’s quarterly Statement. Lowe said last night that ‘’these forecasts will be largely unchanged from the previous set of forecasts’’, so a likely muted/minimal reaction is likely today.
Yesterday’s Chinese Trade figures had little impact, revealing a much larger y/y surge in Chinese imports (30% in CNY terms, 36%.9% in USD terms and including strong iron ore imports), symptomatic of continuing internal Chinese economic growth. Note that there is no January Chinese activity reports, the first not coming till the combined Jan/Feb figures next month.
Currencies that out-performed the USD yesterday included the ‘’safe haven’’ Japanese Yen and the Swiss Franc. Another swimming against the tide was Sterling, courtesy of the Bank of England and Governor Mark Carney. The BoE left rates on hold as expected, voting 9-0. So no surprises there, but the market reaction came in the messaging and forecasts. Sterling spiked higher by two big figures (it was weakening slightly into the announcement) after BoE Governor Carney noted that ‘’monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period’’, concerned about inflation risk. The BoE upgraded their growth forecasts for the coming few years a bit, mainly due to the more positive global environment. And it continued to highlight the lack of spare capacity in the economy, with the unemployment rate at a multi-decade low of 4.3%. The market now prices a 75% chance the BoE will raise rates at its May meeting (from 50% beforehand). Sterling has since fallen back, but it remains slightly up on the day against the USD.
Bill Dudley (NY Fed President so a voter) was out on the wires. He described the stock market sell-off seen to-date as ‘’small potatoes’’. Dudley added that four hikes this year were possible if the economic outlook strengthened. Philadelphia Fed President Harker said the correction had not changed his economic outlook and noted that broader financial conditions were still highly accommodative. Uber-dove Fed President Kashkari noted that bond markets are signaling that inflation is well within control while in an amusing tweet said ‘’stick with the dollar, yen and leave bitcoin to toy collectors’’. He does not see it as a currency but as a novelty.
This morning on the Economic Front we have UK Industrial/Manufacturing Production, Construction Output and the Trade Balance at 9.30 am followed by the NIESR GDP Estimate at 12.00 pm. At 1.30 pm we have Canadian Unemployment. Finally at 3.00 pm we have US Wholesale Inventories.
March S&P 500
My S&P plan worked very well yesterday with the market trading lower to my 2660 initial buy level before rallying to a high of 2686. I did not like the price action in the US Stock markets yesterday and I emailed my Platinum Members to exit any long position at 2665 and to be a more aggressive buyer on any dip lower to my second buy level at 2616. This was subsequently filled in a dramatic trading session before we rebounded to a high of 2647 which enabled me to cover this position at my 2629 T/P level and I am now flat. Subsequently the S&P fell nearly 70 points into the close as the market finished with a decline of 3.8% and is now down 10.1% of its highs from two weeks ago. You have to be nimble trading this market and take your gains when you see them before they evaporate. It is difficult to hang on to a short position as we see now with the S&P trading 35 points higher from last night’s close. This market is extremely oversold with the McClellan Oscillator closing with a -293 print while the Fear & Greed Index finished with a reading of just 8 which is Extreme Fear and one of the weakest readings in history. It is only a few weeks ago that this reading was at 94 which is Extreme Greed. The fact that the S&P closed below 2618 is bearish but it is difficult to be short the market given the extreme sentiment levels as mentioned above. Today I will be a small seller on any rally higher to 2635/2655 with a 2670 stop. Given the volatility I have to use wider ranges. I am only trading in small size as a result especially with the VIX again closing over 30 at 33.46. I will also be a buyer on any dip lower to 2535/2550 with a 2525 stop which is just below last Monday’s low print. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2485/2505 which is my initial downside target with a 2470 stop.
EUR/USD
Unfortunately just as I posted yesterday morning I was stopped out of my long Euro 1.2300 position at 1.2245. Subsequently the Euro made a low at 1.2212 before rallying back to where I was long which is frustrating. I still believe that the Euro is a buy on dips especially with the US Government shut down for the second time this year as we wait to see if the Senate will have a vote before the US Markets open. Today I will again look to buy the market on any dip lower to 1.2170/1.2215 with a 1.2135 stop.
March Dollar Index
My Dollar plan worked well with the Dollar trading lower to my 89.95 buy level before rallying to my 90.15 revised T/P level and I am now flat. Today I will again look to buy the Dollar on any dip lower to 89.40/89.80 with a 89.10 stop.
March DAX
Despite the weaker Euro the DAX was heavy all-day. My DAX plan worked well but again as mentioned above you have to be nimble and after the market traded lower to my 12420 buy level we had a nice 70 point rally which enabled me to cover this position at my revised 12450 T/P level as emailed earlier to my Platinum Members and I am now flat. I did not do another DAX trade despite the market falling 300 points. The DAX has strong support from 12050/12120 and today I will be a buyer on any dip to this area with a 11995 stop. I still do not want to be short the DAX at this time.
March FTSE
The FTSE which traded lower to my 7125 initial buy level before rallying small. With all markets in fast mode I emailed my Platinum Members to exit any long position at 7135 and I am still flat. The FTSE does not have any real support until the 6960/7000 area and today I will be a buyer here with a 6920 stop.
Dow Rolling Contract
In my 32 years of trading I have never witnessed a trading session like we had yesterday in the Dow with the market moving 50/100 points every few minutes. If you are trading the Dow you have to be nimble otherwise you will get hit hard. Yesterday after the Dow traded lower to my 24590 buy level with a 24505 low print we rallied back to a rebound high at 24665 and I used this rally to exit any long position at 24640. If you waited for the Dow to trade the whole of my 24470/24620 buy range the Dow subsequently sold off quickly to a low of 24425 before rallying over 200 points which should have given all members a decent profit but again you have to be nimble and if you have a position you have to be watching the screen. The 400 points sell-off in the last thirty minutes was scary but with sentiment at extreme levels we see the Dow recovering most of these 400 points so far this morning. It promises to be another wild trading session as I cannot see too many traders wanting to hold a position over the weekend. The Dow has major support from 23400/23600 and I will be a buyer in this area with a 23320 stop. A break and close below 23350 is a sell signal opening up the possibility of a quick move lower to 22000.
March NASDAQ
Nine of my 10 markets got hit yesterday which has never happened before and it was difficult to keep up with every move in every market. I know most of you only trade a few of my markets but I have to cater for everyone. After the NASDAQ traded lower to my 6490 buy level we rebounded 30 points and I used the rally to exit my long position at 6500 and I am now flat. The next strong support for the NASDAQ is from 6225/6275 and today I will be a buyer in this area with a 6190 stop.
March BUND
My BUND plan worked well as the Bund traded the whole of my 157.35/157.75 buy range with a 157.26 low print. This sell-off had me long at an average rate of 157.55 as the Bund trade above 80 basis points for the first time since 2015. Subsequently the Bund rallied nearly 100 points on the back of the equity sell-off and I unfortunately covered my long position too early at my revised 157.75 T/P level and I am now flat. Given how oversold the BUND market is trading I will again be a buyer on any dip lower to 157.00/157.40 with a 156.65 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1288/1298 with a 1282 stop.
Silver Rolling Contract
No change as I am still long at 16.47 with the same 15.95 stop and a now lower 16.55 T/P level. If either of these scenarios play out I will be back with a new update for my Platinum Members.
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