In German chancellor Angela Merkel’s words, the G20 accord issued on Saturday did not even attempt to paper over the differences between the United States and the other 19 G20 members. It explicitly notes the decision of The United States to withdraw from the Paris Climate Treaty while the remaining 19 members reaffirmed their commitment to it. On trade and investment, there are the usual platitudes about commitment to open markets, to fight protectionism including unfair trade practises, etc., but also that G20 ‘recognise the role of legitimate trade defence instruments’. This latter phrase looks to have been at US insistence. EC President Jean Claude Juncker made clear at G20 that the EU would react ‘within a few days’ with counter measures should the U.S. shortly announce tariffs on steel imports. This is one potential ‘risk off’ factor in coming days or weeks and which would not do the AUD any favours were it to occur.

To mark my 1375th 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 can you please contact me on bryan@tradernoble.com for details.

For anyone following my Platinum Service it made 35 points on Friday and is now ahead by 318 points for July, having made 1023 points in June, 1071 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.

Friday’s US Payrolls data left markets a bit flat-footed, caught between an upside surprise on headline payrolls of 222k (plus 47k worth of upwards revision to April and May) but a downside surprise on average hourly earnings (+0.2% and 2.5% y/y and with a 0.1% downward revision to May to 2.4%). The Unemployment Rate edged up 1/10% to 4.4% but this was aided by a rise in the participation rate to 62.8% from 62.7%.

Good for stocks (S&P500 +0.64%) but as Friday wore on, reflection on the earnings side of the report seemed to weigh more on Bond Yields and the US dollar, both ending down on pre-employment report levels though both finishing NY trade slightly up on Thursday’s close. The VIX lost 1.35 to 11.19, to be unchanged on the week.

Elsewhere the Canadian dollar was the FX winner following a strong employment report (+45.3k albeit dominated by part-time) and Ivey PMI (61.6 from 53.8). These served to push the probability of the Bank of Canada lifting rates by ¼% on Wednesday to 95%.

Sterling in contrast was the biggest loser, after weak Industrial Production, Construction Output and poor Trade figures served to knock back recently built expectations of early Bank of England tightening. The Japanese Yen also maintained its Asia-session weakness that came from the BoJ’s strong signal of commitment to its current Yield Curve Control policy. AUD/USD closed Friday hugging the 0.76 cent mark and has opened this morning little changed.

Weekly FX positioning data published by the IMM on Friday – for the week through last Monday – was notable in so far as speculative long NZD positioning has pushed out to a new record high (previous high was in April 2013). overall USD speculative long vs. G10 currencies have been virtually eliminated, down to just 3.3k contracts from 51.0k the previous week. This was led by a renewed build in EUR longs, to 77.5k from 58.7k (not quite enough to yet be considered extreme). Extension of AUD longs also contributed meaningfully to the overall decline in USD longs, +12.7k to 32.4k.

In Interest Rates the global sovereign yield back-up continued but only marginally so, the exception being UK Gilts which fell back 1.1bps to 1.305% at 10 years after the weak set of UK data. US Treasuries saw 2s +0.5bp to 1.401% (+1.7bps w/w) and 10s +1.9bps to 2.386% to be 8.1bps higher on the week. The 10yr Bund added another 1.1bps to 0.573% and so 10.7bps up on the week.

In commodities, oil extended Thursday’s drop with WTI and Brent crude off $1.30 and $1.40 respectively to $44.23 and $46.71. On the week, WTI is off $1.81 and Brent -$1.21. Friday’s Baker Hughes rig count showed the number of active U.S. rigs up by 7 to 763, after dropping by 2 last week. Gold lost a hefty $13.60 to $1,209.7 to be $32.60 lower on the week. Iron ore gained 80 cents to $62.80 but is still $2.15 lower on the week.

In Summary, commodities are adding a little bit of weight to the AUD alongside last week’s refusal by the RBA to join the more hawkish or less dovish central bank chorus. Definitely something to watch this week.

The Fed on Friday, prior to the market close, pre-released its semi-annual Monetary Policy report that will be presented by Fed chair Yellen to House and Senate committees this week. It doesn’t contain anything market moving, though reaffirms the intention to commence Fed balance sheet reduction this week and pushed back once more against a strictly rules-based approach to monetary policy. It also enhanced interest in financial stability concerns – citing stretched valuations in bond, equity, and commercial real estate prices. The message here is that pushing on with policy normalisation is not wholly contingent on the incoming economic data calendar.

This morning on the Economic Front we have Euro-Zone Sentix Investor Confidence at 9.30 am. This is followed at 3.00 pm by US Labour Market Conditions Index Change. Finally at 8.00 pm we have US Consumer Credit.

We have a Euro-Group Meeting in Brussels where both Dragi and Coeure are speaking later today.

September S&P 500

Yet another NFP data release where the markets traded in a narrow range before very late in Friday’s trading session saw the S&P trade higher to my average 2422.50 sell level. As I did not want to be short or have a position over the weekend I emailed my Platinum Members to exit any short position at 2423 and I am now flat. While the S&P may rally initially this week, the asset allocation of investors in the monthly poll by the American Association of Individual Investors (AAII) has risen to 52.1%, which is the highest since the March 2015 high. The only other time when investors were more dramatic in their belief in stocks was in the hay day of the Great Asset Mania in the late-1990s. This eventually led to a 50% decline in the S&P to October 2002 and a 39% decline in the Dow over the same period. I am not saying that the market is going to crash from here but we do have six Hindenburg Omen’s on the clock and this signal is valid until mid-October. Risk is certainly building in an economy where Money Supply is already contracting on the back of the recent Fed Rate hikes. Today I will move my buy level higher to 2407/2413 with a 2402 stop. My only interest in selling the S&P is on a further rally higher to 2434/2440 with a 2445 stop.

EUR/USD

The Euro also traded in a narrow range following Friday’s NFP release and I am still flat. With the Daily Sentiment Index reading at such elevated levels I will continue to look to sell the Euro on any further rally to 1.1465/1.1505 with the same 1.1535 tight stop. I will also leave my buy level unchanged from 1.1310/1.1345 with a wider 1.1275 stop.

September Dollar Index

No change as I am still a buyer on any dip lower to 95.00/95.45 with a 94.65 stop. Given the single digit DSI reading I still do not want to short the Dollar at this time.

September DAX

Despite the stronger Euro, the DAX has traded higher as thankfully we had no sell level in this market on Friday. Going forward I am bearish the equity markets but until we get a sell extreme across all the main Indices these markets are still a buy on dips as they have been for most of the past eight years. Today I will now raise my buy level to 12310/12370 with a 12270 tight stop.

September FTSE

Earlier this morning the FTSE traded higher to my 7320 sell level. I am not comfortable in being short the FTSE especially with EUR/GBP now trading near 0.8850. Today I will only add to this position on a move higher to 7360 with a tight 7380 stop. I will now look to exit this position on any move lower to 7305.

Dow Rolling Contract

As I have mentioned countless times over the past few weeks for me to turn bearish the Dow we need to see a break and close below the March 1, previous all-time high at 21169. Until we break this level I will continue to look to buy the dip in the Dow. Today I will raise my buy level to 21240/21310 with a 21180 stop which is just below the 21197 low print from last Thursday week.

September BUND

I am still flat the Bund which has traded lower every day since the 165.30 high print from two weeks ago. As I mentioned on Friday the back up in Yields is enormous. However the Bund is now severely oversold and due a bounce. Today In will raise my buy level slightly to 159.90/160.30 with a 159.60 tight stop. Given how oversold the Bund is trading I do not want to be short the Bund at this time.

Gold Rolling Contract

The precious metals have got hit hard over the past few weeks. On Friday after Silver hit my buy level I waited to buy Gold at 1209. The market having made an initial low at 1207 then rallied to a 1213.50 rebound high. Just like the S&P above I did not want to have a position on board over the weekend and I emailed my Platinum Members to exit any long position at 1212 and I am now flat. Earlier this morning Gold rallied to just shy of 1214 before getting hit again to trade at 1204 as I write this commentary. The divergence between Gold and Silver at this time is huge. If we go back to last December the low for Silver was 15.62 while Gold had an equivalent low at 1122. With Silver trading at 15.20 I much prefer to own it rather than Gold. As a result I am going to stand aside in Gold today to see if the market does accelerate further to the downside.

Silver Rolling Contract

Silver got hit hard on Friday with the market trading to my 15.45 buy level. Just like both Gold and the S&P above I did not want to have any positions on board over the weekend and thankfully I emailed my Platinum Members to exit this position at 15.55 and I am now flat. For those members who did stay long Silver did rally late on Friday to a rebound high at 15.66 and again overnight to a 15.65 high print before getting slammed in the last 30 minutes. Silver has now lost over 20% in the past two months and is extremely oversold as shown by the DSI reading in single digits. With Silver currently trading at 15.22 I have bought a small piece here and I will only add to this position on any subsequent move lower to 14.80 with a 14.55 stop.