The previous Friday’s strong US Payrolls Report has become a somewhat hazy memory after a much softer than expected Retail Sales Report on Friday that challenged prevailing confidence that the US consumer has entered Q3 in rude health. In truth, the flat month-on-month readings for both the headline and so-called Control Group readings (the latter feeding the retail component of GDP and which makes up about 50% of consumption) suffered both from a very strong Q2 (revised higher on Friday, ex-autos in June now +0.9%) and a slump in petrol prices depressing sales values.
To mark my 1150th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 65 points on Friday and is now ahead by 500 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
That said August Preliminary Consumer Sentiment also underwhelmed while PPI readings were much weaker than expected. The US Dollar swooned on the Retail Sales report before an afternoon recovery, bonds yields fell by more than 5bps across the curve before lifting slightly into the close, while equities finished down small.
In FX, the narrow DXY dollar index ended 0.14% lower at 95.68 having slumped from 95.75 to 95.25 straight after Retail sales and PPI. The broader BBDXY ended just 0.05% down on the day while against Asian EM, the US Dollar rose slightly, ADXY -0.2%. In individual currencies, JPY was strongest, USD/JPY -0.65% to Y101.30, and AUD the weakest, -0.61% to 0.7652. CAD gained 0.3% and NOK another 0.5% with both benefiting from further gains in oil prices.
In stocks the S&P finished just 0.1% down at 2182.9 after Thursday’s new record high. The VIX finished in NY -0.13 to 11.39. In Bonds, Treasury yields rebounded slightly in late trade but finished between 3.6 and 4.7bps lower (2s -3.6bps to 0.7221% and 10s -4.6bps to 1.5135%).
Commodities saw Gold lose $3 to $1336 (unchanged on the week) while oil continued to rally on speculation of a forthcoming OPEC agreement on production cuts, WTI +$1.0 to $44.49 (+$2.69 on the week) and Brent +$0.93 to $46.97 (+2.72 on the week). The LMEX index ended down 1.35% while Iron ore firmed by $1.01 to $60.37 (-$0.37 on a week ago).
Fed speak on Friday came from St Louis Fed President James Bullard in a local radio interview and who repeated his ‘one then done’ view of Fed policy, saying ‘We think the regime will persist so that the policy rate can stay about flat over the policy horizon with just one rate increase”.
So to summarise the data, U.S. July Retail Sales saw headline 0.0% (0.4%E, 0.8%P revised up from 0.6%). Ex-autos sales were -0.3% (0.1%E, 0.9%P revised up from 0.7%). ‘Control Group’ sales were 0.0% (0.3%E, 0.5%P).
The University of Michigan preliminary August consumer sentiment came in at 90.4 (91.5E, 90.0P). 5-10 year inflation expectations were unchanged at 2.6%, 1-year 2.5% down from 2.7%. The Fed pays more attention to the 5-10 year read. U.S. July PPI Final Demand was weak at -0.4% M/M (0.1%E, 0.5%P). Core PPI was -0.3% (0.2%E, 0.4%P) for 0.7% Y/Y down from 1.3% in June. Price discounting in the auto sector and, according to one of advisory firm we respect, an inexplicable compression in margins (probably not to be repeated) accounted for the weakness.
Meanwhile China’s July money supply data published late Friday showed Aggregate Social Financing at just CNY487.9bn down sharply from 1,629.3bn in June and 1,000bn expected. New Yuan loan 463.6bn down from 1,380bn and 850bn expected. M2 money supply 10.2% Y/Y (11.0%E, 11.8%P).
This morning on the economic front we have no economic data of note from either the Euro-Zone or the UK, while at 1.30 pm we have US Empire Manufacturing. This is followed at 3.00 pm by the NAHB Housing Market Index. Finally just before the US Markets close at 9.00 pm we have the Net Long Term TIC Flows.
September S&P 500
Unfortunately the S&P just missed my 2175 buy level before rallying into the close and I am still flat. It is amazing that despite the awful economic data on Friday the stock barely budged against emphasising my point about how difficult it is to short this market until see finally see a sell-extreme first. Incredibly despite the three main US Indices, namely the Dow, S&P 500 and NASDAQ which all closed at new weekly all-time highs that the McClellan Oscillator closed with a negative reading of -36, which shows how weak this market is internally and is only been driven higher by a few stocks. At the same time volatility has collapsed as shown by the VIX which closed at a new two year low. However despite all the negative comments that I have mentioned above, the price action is still positive and today I will again look to buy the S&P on any dip lower to 2169/2175 with a 2163 stop. My only interest in selling the S&P is still on a rally higher to 2192/2198 with a 2203 stop.
EURUSD
My Euro plan worked well as the Euro traded into my sell range with a 1.1225 high print before trading as low as 1.1160 given anyone a nice gain on their short position. Unfortunately given how weak the US economic data was on Friday I emailed my Platinum Members to raise their sell level for the Euro which was not filled and I am still flat. Today I will now raise my buy level to 1.1080/1.1125 with a 1.1045 stop. Given how weak the US economy is, I do not want to be short the Euro at this time as in my opinion as mentioned last week there is no chance that the Fed can raise rates ahead of the Presidential Election in November.
September Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 96.15/96.45 with a 96.80 stop. I still do not want to be long the Dollar at this time.
September DAX
I am still flat the DAX which surprisingly traded in a very narrow range when you consider the amount of economic data released on Friday. Today I will leave my buy level unchanged at 10575/10630 with the same 10515 stop. My only interest in selling the DAX is still into the December high at 10886 which will see me try a short position from 10850/10910 with a tight 10950 stop.
September FTSE
The weakness in Sterling continues to underpin the FTSE. Although the market is extremely over-bought the price action is positive and just like the S&P above his trend will continue until we get a sell-extreme. Today I will raise my buy level slightly to 6830/6860 with a 6795 stop. As mentioned on Friday, that despite the FTSE trading at the top of its Daily Bollinger Band I do not want to be short the market at this time especially as the 2000 high at 7000 is not that far away and I would be very surprised if we do not test this level before traders try to short the market.
Dow Rolling Contract
My Dow plan worked well with the Dow hitting my 18545 buy level with an 18532 low print before having a nice rally over 18580 into the close. This rally enabled me to cover my long position at my revised 18575 T/P level as emailed earlier to my Platinum Members and I am now flat. There is no doubt that the Dow continues to be the weakest of the three main US Indices. However with the US Dollar starting to finally weaken it is difficult to be short the Dow. Today I will again look to buy the market on any dip lower to 18470/18530 with an 18425 tight stop.
September BUND
Thankfully the Bund rallied on Friday back above 168 and this rally enabled me to cover my long 167.35 position at 167.55 and I am now flat. Today I will again look to buy the Bund on any dip lower to 167.10/167.40 with a 166.75 stop. As long as the Bund can stay over the key 166.50 support level I do not want to be short the market at this time.
Gold Rolling Contract
No change as I am still a buyer of Gold on any dip lower to 1313/1321 with the same 1305 stop. Remember the 1310 level is key support for Gold as a break and close below here could see the market accelerate to the downside.
Silver Rolling Contract
My Silver plan worked well on Friday as short after the US Retail Sales was released Silver traded higher to my 20.20 T/P level on my 20.05 latest long position. Subsequently I emailed my Platinum Members to buy Silver again at 19.75. I am still long and with a 19.10 stop which is just below the key 19.20 major support level.
For any of my UK members who may be interested I am doing a special all-day trading seminar over the Non-Farm Payrolls in London on September 2nd 2016. I will be assisted by Paul Wallace who is a trader that I have done a lot of joint presentations in both Dublin and London over the past 12 months. Paul is a very engaging and interesting speaker and together we will try and take you through how to trade markets live over an important economic indicator. If anyone is interested in this not to be missed event in my opinion you can check the details out on the following link:
https://summer2016londonlivetradingday.eventbrite.com
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