The NASDAQ 100 wiped out one month’s worth of gains in less than five hours on Friday, when it plunged to a 5657 intraday low print. This sell-off dragged the S&P lower with both Indices ending Friday with large Downside Key Day Reversals. This wide ranging outside-down day in the S&P 500, was led by very large drops in the ‘’FAAMG’’ stocks. Intraday, Microsoft declined nearly 5%, Google (Alphabet), just over 5%, Facebook and Apple both declined nearly 6%, and Amazon 8.5%. The Wall Street Journal notes that these five stocks account for 41% of the S&P’s market cap increase this year. Meanwhile following the UK Election, Sterling closed 1.6% lower at 1.2740 while the Euro closed 0.1% higher at 1.1208.
To mark my 1350th 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 New Platinum Service it made 106 points on Friday and is now ahead by 310 points for June, having made 1071 points 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 1750 points.
The rout in US tech stocks began when Robert Boroujerdi, Global Chief Investment Officer at Goldman Sachs warned that low volatility in Facebook Inc, Amazon.com Inc, Microsoft Corp and Google parent Alphabet Inc may be blinding investors to risk such as cyclicality and regulation. My own view that Friday’s price action is a warning of what is coming late this year/early 2018 and investors need to be prepared of what can go wrong when a large number of traders hit the sell button at the same time. The sell-off in the NASDAQ was the largest since the Brexit vote last June. The one caveat for the Bulls with Friday’s sell-off was incredibly the McClellan Oscillator improved from Thursday’s close at +1 to close on Friday night at +27.
Overnight Sterling steading after Friday’s rout while later today UK PM May will address the 1992 Committee of rank-and-file Tory Lawmakers, in a meeting that will test her chances of staying in office.
In Interest Rates, the yield on the 10-year Treasuries closed higher for a fourth day, advancing two basis points to close at 2.22 percent. This is a big week for the US with the FOMC Meeting and Rate Announcement on Wednesday at 7.00 pm followed by the press conference with Fed Chair Janet Yellen.
In Commodities, West Texas Crude gained 0.6% to close at $46.10 a barrel, following Thursday’s 4% fall on the unexpected increase in US stockpiles which cast doubts on OPEC’s ability to rebalance world crude markets.
Meanwhile late on Friday we got the latest IMM data which showed that the long EUR positions increased to a 10 year high. However with the Daily Sentiment Readings at such elevated levels I would not be chasing the Euro higher from here as this market is well due a correction.
The sell-off in US stock on Friday saw the Nikkei closed 111 points lower this morning at 19900.
This morning on the Economic Front we already had the release of French Business Sentiment which came in as expected with a 105 print. Incredibly we have no major data due on either side of the Atlantic apart from the US Federal Budget at 6.00 pm.
June S&P 500
It took a while but my S&P plan worked really well on Friday with the S&P trading lower to my 2417 buy level with a 2415 low print before rallying 15 Handles in a straight line and this rally higher enabled me to cover my long position at my 2424 T/P level and I am now flat. As I mentioned in my Economic Commentary above, Friday’s sell-off was just a warning of how quickly this market can turn. With the FOMC Meeting on Wednesday I would expect the US stock market to ‘’hold in’’ ahead of Yellen’s press conference at 7.30 pm on Wednesday. For this reason I will again look to buy on any dip lower to 2414/2420 with a 2409 stop. If I am taken long the S&P and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2394/2400 with a 2389 stop. Despite the fact that as a result of the 30 Handle sell-off on Friday which was a sell extreme that I have been looking for I am not going to chase this market lower ahead of the FOMC on Wednesday. Remember over the past number of years the market tends to rally into such an event.
EUR/USD
My Euro plan also worked well on Friday with the Euro trading lower to my 1.1170 buy level before rallying to close back above 1.12. As I wanted to get Friday off to a positive start I covered my long Euro position too early at my revised 1.1180 T/P level and I am now flat. The Euro is severely overbought and due a correction but the market needs to break and close below 1.1140 to get something going on the downside. Today I will again look to buy the Euro on any dip lower to 1.1125/1.1160 with a 1.1085 tight stop. The main resistance for the Euro is from 1.1300/1.1340 which is the high following the Trump election victory last November and today I will be a small seller in this area with a 1.1365 tight stop.
September Dollar Index
No change as I am still a buyer on any dip lower to 96.30/96.60 with the same 95.95 stop. With the DSI reading so low to me it is only a matter of time before the Dollar at least attempts a short-term rally.
June DAX
I am still flat the DAX which incredibly hardly moved following Friday’s aggressive sell-off in both the S&P and NASDAQ. Today I will now raise my buy level to 12610/12670 with a 12550 stop. I still do not want to be short the DAX at this time.
June FTSE
The continued weakness in Sterling helped the FTSE to challenge its all-time high before the market finally followed the US markets lower late in Friday’s session and I am still flat. Today the FTSE has strong support from 7425/7465 and I will be a buyer in this area with a 7390 stop which is just below the post- election low print at 7395. As long as Sterling stays weak there is no point in trying to sell the FTSE.
Dow Rolling Contract
Incredibly the Dow closed at a new-all time high on a day when both the NASDAQ and S&P got hammered. Thankfully we are finally seeing a pick-up in volatility as we approach Wednesday’s key FOMC Meeting. The Dow has very strong support at its March 1, high at 21169 and today I will look to buy the market on any dip lower to 21100/21170 with a 21040 stop. My only interest in selling the Dow is on a rally higher to 21400/21460 over the coming days with a wider 21550 stop.
September BUND
I am still flat the Bund and today I will leave my sell level unchanged from 165.40/165.70 with a 166.05 stop. Despite the bullish price action in the Bund I still do not want to be long the market at this time.
Gold Rolling Contract
Gold traded lower to my 1266 buy level on Friday before rallying back above 1270. Again in keeping with my theme of banking points when available I emailed my Platinum Members to exit this position at my revised 1268 T/P level and I am now flat. Gold has strong support from 1245/1255 and we may well see a deeper correction first before Gold finally breaks back above 1300. Today I will again look to buy Gold on any dip lower to 1249/1256 with a 1243 stop.
Silver Rolling Contract
When the NASDAQ got hit on Friday I bought Silver at 17.22. I will only add to this position on any move lower to 16.90 with the same 16.60 stop.
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