Last Friday’s sharp move in global risk sentiment sparked by the Bank of Japan’s largely unexpected decision to join the ECB, Danish and Swiss National Bank’s and Sweden’s Riksbank, in taking interest rates into negative territory extended throughout the European and US trading sessions. Bond Yields fell in every major Bond market alongside 2% bounces in all major Bources.
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 1/5 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 65 points on Friday to close January with a gain of 3365 points. Since I started this Platinum Service last June it has generated a return of over 17500 points.
So it was the spectre of more monetary accommodation globally (or in the case of the Fed, ‘lower for longer’),rather than safe-haven considerations, driving price actions across asset classes. Another modest rise in Oil prices played with the grain as Russia announced it was making overtures about production cuts alongside OPEC. Gold rose $6 to 1123 which is probably more reflective of the further fall in the opportunity cost of owning a yield-less asset than a symptom of risk aversion.
In Currencies, the Dollar Index (+1%) outperformed broader Dollar Indices thanks to the former’s higher (13.6%) weighting for the Japanese Yen and also the 1% drop in EUR/USD and which carries a 57.6% weight. The Dollar Index closed 1% higher at 99.61 which is a new closing high for the year.
USD/JPY ended in New York +1.92% at Y121.14 having been as high as 121.66 mid-afternoon London time. The EUR/USD closed -1% at 1.0830 with confidence in more monetary accommodation from the ECB at its upcoming meeting on March 10 bolstered by the BoJ’s actions.
In Equities, after the Nikkei closed 2.8% higher and +3.3% on the week both the S&P and the Dow rose by 2.5%, reducing January’s loss to 5.1% for the S&P and 5.5% for the Dow. The huge rise in stock markets saw the VIX falling over 10% or 2.2 points to 20.2.
In US Treasuries, 2s fell by 4.35bps to 0.7737% and 10s by 5.8bps to 1.92%. Meanwhile 10 Year German Bunds earlier finished a full 10bps lower at 0.32% and UK Gilts an even higher 11bps to 1.557% with Short Sterling Contracts now pricing for some 10bp of cuts from the Bank of England by the summer.
Commodities saw Brent Crude +$0.85 to $34.74 and WTI +$0.52 TO $33.74.
On the data front, US Q4 GDP came in at just 0.7%, just beneath the 0.8% consensus – the latter one that had been continually lower in the days leading up to the release and so limiting market disappointment. Somewhat encouragingly, Consumption Expenditure rose by 2.2%.
Overnight the Nikkei rose 2% to close at 17865 which is giving a small boost to European markets at the open.
This morning on the economic front we already had the release of China Caixin Manufacturing which printed 48.4 versus 48.1 expected. At 8.55 am and 9.00 am we have German and Euro-Zone Manufacturing PIM respectively. This is followed at 9.30 am by UK Manufacturing PMI and Mortgage Approvals. At 1.30 pm we have US Personal Income/Spending and the PCE Deflator. Next up is US manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have US Construction Spending and the ISM Manufacturing.
March S&P 500
Friday proved yet again why it is so difficult to be short equity markets for more than a few hours as you just do not know which Central Bank will intervene to prop up the markets next. Last week we had more promises from Dragi and the ECB that they will ease further at next months’ meeting on March 10 while on Friday The BoJ introduced negative interest rates. In my opinion these measures will not work as it so difficult for the World economies to exit this deflationary environment especially when we have low growth and weak salaries. When you see German Bund Yields for 10 year money at just 30bp after all the QE implemented over the past few years then you know you have a serious deflationary environment. Speaking of being short the S&P on Friday after the US Markets opened the S&P rallied to my 1911 sell level before having a quick move lower to 1902.5 which enabled me to email my Platinum Members to exit this position for a nice gain at 1904 and I am now flat. Friday’s move higher has left another ‘Open Gap’ from Thursday’s close at 1879 to Friday’s day session low at 1892. As I mentioned in Friday’s commentary the S&P has strong resistance at 1940/1950 and today I will look to go short on any further spike higher to 1943/1950 with a 1956 stop. The fact that the S&P broke and closed over the 1904/1910 area has to be respected and today I will look to buy the market on any dip lower to 1905/1912 with a 1899 stop.
EUR/USD
The Euro traded lower to my 1.0820 buy level on Friday with the market having a nice rally to near 1.0860 this morning. However as I wanted to be flat over the weekend I covered this position at 1.0830 and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.0790/1.0825 with a 1.0760 stop.
March Dollar Index
Similar to the Euro above the Dollar traded higher to my 99.80 sell level and as I wanted to be flat this market I covered my short position at my 99.70 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 99.80/100.10 with a 100.30 stop.
March DAX
Unfortunately I moved my sell level higher in the DAX to 9855 which just missed this morning and I am still flat. For those of you who sold the DAX at my initial 9830 sell level I would cover this position here at 9760 and go flat. The DAX continues to trade heavy despite the weaker Euro with the market not helped by the weaker German Retail Sales reported on Friday. The DAX is along way from its 2015 high at 12400. Today I will again look to sell the market on any rally higher to 9830/9880 with a 9925 stop. The price action is continuing to tell me not to be long the market at this time.
March FTSE
Unfortunately the FTSE just missed my 5890 buy level after I posted on Friday and I am still flat. There is no doubt the FTSE has put in at least a decent bottom in the market at the 5600/5750 major support level. Today I will raise my buy level to 5930/5970 with a 5895 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow is now 1000 points higher than its low made 10 days ago as yet again the McClellan Oscillator proves itself to be a fantastic technical signal especially when we see a negative reading of sub -250. Over the past few days the MO has got stronger as shown by its positive 188 reading on Friday. Just like the FTSE above the Dow also missed my buy level on Friday and I am still flat. Today I will look to go short on any further spike higher to 16550/16650 with a 16720 stop. Given the huge move higher over the past week my only interest in buying the Dow is on a dip lower to 16210/16300 with a 16140 stop.
March BUND
The BUND was trading at my 163.25 sell level by the time I posted on Friday. However shortly after lunch I was stopped out of this position at 163.50. This morning with the BUND opening higher I have again gone short again at 163.70 with a 164.10 stop. The BUND is trading at the top of its Williams Index and is outside its Bollinger Band and in my opinion is due a decent correction.
Gold Rolling Contract
I am still flat Gold as the market keeps moving away from my buy level each day. I do not want to keep chasing this market higher and today I will leave my buy level at 1103/1110 with a 1097 stop.
Silver Rolling Contract
No change as I am still long at 14.30 with the same 13.95 stop.
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