Who would have guessed that on a day when Geo-polical stress was once more to rear its head via the bombing of a Syrian air-base by the United States, and US Non-Farm Payrolls rose by less than 100,000 (98K and with 38K worth of downward revision), that the US Dollar and US Bond Yields would end the day higher and equities virtually unchanged? That is the reality of Friday’s markets, with all the Asian trading session ”risk-off” moves unwound during both Friday’s European and US trading session. The US strikes were seen for what they probably are – a one-off warning at this stage to Syria’s President Assad to desist from using chemical weapons in the ongoing civil war, while the sharp fall in the US Unemployment Rate to yet another new cycle low(4.5%) carried the day as far as the US Labour market data was concerned. Hourly Earnings at 2.7% down from 2.8% y/y were in line with expectations and not a market moving part of the report.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested can you please contact me on firstname.lastname@example.org for details.
For anyone following my Platinum Service it made 49 points on Friday and is now ahead by 448 points for April, having made 1335 points 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.
Following the NFP Report, and also taking into account other US data releases since earlier in the week, the Atlanta Fed lowered its Q1 ”GDPNow” estimate to just 0.6% from an already meagre 1.2% previously. However NY Fed President Bill Dudley was on the wires noting that in recent years Q1 data has come in unusually weak, that and something that looks like 1% might actually be more like 2%. More interesting for markets, Dudley said people had misunderstood his remarks earlier in the week about taking a pause from raising rates when the Fed starting trolls shrinking its balance sheet, saying he meant only a ”little pause”, and that ”a pause is pretty short already, and I think a little pause is even shorter than that”. And remember, Dudley is regarded as a dove.
Other important news on Friday was agreement between US and China to engage in a 100-day examination of trade issues, which Commerce Secretary Wilburn Ross (the man who saved Bank Of Ireland) described as a ”sea change” in the pace of discussions. Trade Secretary Steve Mnuchin meanwhile said that the Treasury’s latest report on currencies would be revealed very soon, probably this Friday according to Reuters and unlikely to label anyone a ”currency manipulator” at this stage at least.
In FX, we saw the BBDXY Index +0.3% on the day and +0.6% higher on the week. The worse performing G10 currency was Sterling. This followed some very poor Industrial Production and Trade Figures, the former _0.7% against +0.2% expected and the visible Trade Deficit blowing out to £12.5bn in February. GBP/USD fell 0.8% to $1.2370. Next worse was AUD/USD, down 0.6% to close the week exactly at 0.7500, which is the lowest close since January 16.
In rates, 2 Year Treasuries gained 5bps to 1.29% and 10 years +4bps to 2.38% which is comfortably back in the 2.30-2.60% range having briefly traded below 2.3% on Friday on news of the US air strikes.
This morning on the economic front we have Euro-Zone Sentix Business Confidence at 9.30 am. The only US data is the Labour Market Conditions Index Change at 3.00 pm.
Later this evening at 8.00 pm the Fed Chair Yellen is speaking at a live Q&A session
June S&P 500
The S&P which hit a low early Friday morning at 2336 on the US air strike rose to a high at 2361 following the NFP release before selling off into the close. As mentioned over the past few months it is so difficult to be short this market for any length of time as traders just keep ”buying the dip” no matter what the news. With the ”GDPNow” revised to just 0.6% growth for Q1 which is incredible when you see the Unemployment Rate at 4.5%, in my opinion it is only a matter of time before the US goes into recession. I believe that this will happen towards the end of this year, early 2018 and that the US stock market will eventually tank. The Trump election victory has probably postponed this scenario for 12 months. I am still flat the S&P and today I will raise my buy level to 2337/2343 with a 2332 stop. If I am taken long and subsequently stopped out of this position or I manage to T/P on any long position from this initial buy range, I will be an aggressive buyer on any subsequent dip lower to 2314/2320 with a 2309 stop. The S&P has strong resistance at 2370 which is a 1 year trend line and today I will again look to sell the market on any rally higher to 2366/2372 with a 2377 stop.
On Friday the Euro traded the whole of my 1.0580/1.0610 buy range thus putting me long at an average 1.0595 price. The Euro is oversold as the market continues to trade sideways for the best part of 1 year. Last week the total range for the Euro was just 111 points. However the break of the 3 month trend line at 1.0620 is a worry for my long position and today I will look to exit this latest long position on any move back to the 1.0620 break down pivot point. I will leave my stop at 1.0560 and if I am stopped out of this trade I will be a more aggressive buyer on any further move lower to 1.0500/1.0535 with a 1.0470 stop.
June Dollar Index
As I am already long the Euro I emailed my Platinum Members to cancel any sell level in the Dollar as one short Dollar position over the weekend was enough risk. Today I am going to stay flat the Dollar as I want to see if the market can take out its next resistance at 101.40 before making my next recommendation.
Following last Monday’s Downside Key Day Reversal off the six year trend line at 12400, the DAX has now recovered half of these losses sustained last week. I am still flat the market and today I will move my buy level slightly higher to 12095/12150 with a 12055 tight stop. I still do not want to be short the DAX at this time.
The FTSE continues to hold above its key Head and Shoulders 7180 neckline support with the weaker Sterling certainly a positive factor for the market. I am still flat the FTSE and today I will now move my buy level higher to 7210/7240 with a wider 7175 stop. Remember a break and close below 7180 has a target price at 7040.
Dow Rolling Contract
I am still flat the Dow which continued to rally off Friday’s early morning low at 20519. Today I will now move my buy level higher to 20520/20580 with a 20470 stop. As I have a sell level in the S&P above I will not have one in the Dow at this time as I want to see how the Dow trades at its next resistance level from 20750/20800 first.
My Bund plan worked well with the market hitting my 163.00 sell level shortly after the NFP was released on Friday before trading to a 162.60 low print. As I wanted to get Friday off to a positive start I covered this short position at my revised 162.83 T/P level and I am now flat. The Bund is severely overbought and I am on watch for a sell signal which we do not have as yet The February high for the Bund was at 163.10 and I would expect the market to have difficulty initially in breaking above here. For this reason I will again look to see the Bund on any rally higher to 163.05/163.30 with a 163.55 tight stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold traded lower to my 1252 buy level before rallying small to a rebound high at 1256. In keeping with my theme of banking points when available plus the fact that I did not want to have a long Gold position over the weekend I covered this position at my revised 1254 T/P level and I am now flat. Today my only interest in buying Gold is on a further dip lower to strong support from 1238/1244 with a 1233 stop.
Silver Rolling Contract
My latest long 18.30 Silver position saw the market struggle again above 18.40 and for this reason I emailed my Platinum Members to cover this position at 18.42. Unfortunately I bought Silver again at 18.10 on a day that Silver closed with a Key Downside Reversal. This is a worry and I am not happy with being long the market especially given the previous reaction to any KDR this year. Therefore I will now look to exit this position on any mover higher to 17.98 and stand aside.