European and US Equity Indices ended the week on a positive note, boosted by a rebound in bank stocks and a jump in oil prices. Deutsche Bank led the bank rally in Europe closing up 11.8% on the day after confirming a bond buyback programme reported earlier in the week. Thanks to yet another comment of cooperation between oil producers, energy companies on both sides of the Atlantic also had a strong end to the week helped along by a solid jump in oil prices. WTI ended the week at $29.44, up 12.3% on the day while Brent closed at $32.65, up almost 11%. Economic data was also supportive with US January Retails Sales beating expectations. However Consumer Sentiment was weaker than expected. Against this back drop of improved sentiment, core global bond yields drifted higher while the US Dollar was stronger against most currencies. This trend has continued so far this morning following the 7% rise in the Nikkei which closed over 16000 following its 14800 close last Friday while Gold is 2% lower this morning at $1212.
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 1/4 updated emails throughout the trading 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 150 points on Friday and is now ahead by 1475 points for February having made 3365 points in January. Since I started this service last June it has generated a return of over 18000 points.
Overall. It is hard to suggest Friday’s move bore the signs of a much needed circuit breaker to the current market rout. While bank stocks rallied on the day, the Euro Stoxx 600 Financials Sub Index ended more than 12% lower for the week, and the S&P500 Financial Index lost more than 14% for the same period. The oil fuelled rally in energy stocks was not based on concrete new positive news, rumours or comments from of cooperation between oil producers have previously amounted to nothing, so we still need to see more tangible evidence that a bottom in oil prices has been reached.
As I write this commentary the Shanghai is only down 2.8% following the Chinese markets being closed for last week due to the Lunar Holidays. Over the weekend in an interview by PBoC Governor Zhou who played down concerns over China’s decline in FX Reserves. Nothing the need to differentiate between capital outflows and capital flight. Zhou also stressed that Beijing strategy did not include further devaluation to boost exports.
Looking at Friday’s equity market performance in more detail. The Euro Stoxx 50 closed up 2.83% while the FTSE closed over 3% higher. In the US both the Dow and S&P closed up 2.0%.
In Currencies, the US Dollar was stronger against most currencies with the exception of the CAD which rose on the back of the huge move higher in Oil prices while core Bond Yields rose on both sides of the Atlantic and that trend is continuing this morning.
As for date releases US Retail Sales rose 0.2% versus 0.1% expected. The Michigan Consumer Sentiment Index fell to 90.7 from 92.0 and 92.3 expected. Notably 5-10 year inflation expectations fell to 2.4% from 2.7%. We know Fed Officials pay a lot of attention to this reading and at 2.4% the series is now at a historic low thus supporting the view the Fed will remain on hold in March, if not for longer.
Due to the US Markets being closed for the President Day Holiday the only data of not due is the Euro-Zone Trade Balance at 10.00 am.
ECB President Dragi will speak to the EU Parliament Committee at 2.00 pm and we can expect plenty of market moving comments following the pre-released speech.
March S&P 500
Now you know why I hate to go short the S&P with the market now trading over 70 Handles higher since the 1803 low print last Thursday morning. My own belief is capitalism will always work and the Central Banks who hold all the cards will do whatever they have to do to protect the stock market either by direct intervention or words. The US Cash Markets are closed today and the Futures Market is only open until 4.30 pm but this still has not prevented a huge 22 Handle rally since last Friday’s close. As I mentioned in Friday’s commentary a break and close over 1848 will be short term bullish and opens up the possibility of a move higher to at least 1890 with the S&P hitting 1880 so far. Initially the S&P hit my 1848 resistance level before falling 15 Handles to 1833 only to re-group and rally hard in the last hour of trading. With 20 minutes to go in trading on Friday evening I emailed my Platinum Members that I bought the S&P at 1857 following the 1848 break. However given the fact that I was nervous ahead of the Nikkei and Shanghai openings overnight I email my Platinum Members again at 11.15 pm last night that I was T/P on this position at 1867 and I a now flat. My Platinum Service is worth checking out for a month to see if it helps your trading. Today I will be a small seller on any further rally to 1895/1902 with a 1908 stop. The S&P has a large potential ‘Gap’ from last Friday’s close at 1858 and today I will look to buy the market in the unlikely event that the S&P sells off from here to 1854/1861 with a 1846 stop.
EUR/USD
Although we did not make a huge number of points on Friday, at least we got the direction right in all markets. Unfortunately the Euro just missed my 1.1330 sell level with a 1.1300 high as yet again the Daily Bollinger Band and Williams Index told you not to long the market at the end of last week especially with the Euro trading below 1.12 this morning. Today I will look to buy the Euro on any further fall to 1.1120/1.1160 with a 1.1085 stop.
March Dollar Index
Unfortunately the Dollar just missed my 95.50 buy level with a 95.55 low print after I posted on Friday which is frustrating when you see the Dollar trading at 96.40 this morning and I am still flat. Today I will raise my buy level to 9550/95.90 with a 95.20 stop. I still do not want to be short the Dollar at this time.
March DAX
Following the rally in bank shares the DAX is trading over 400 points higher since I posted last Friday and I am still flat as thankfully we had no sell levels on the day. This morning the DAX is back trading at the key 9200/9300 resistance level and today I will be a small seller on any further rally to 9270/9330 with a tight 9360 stop. My only interest in buying the DAX is on a dip lower to 9030/9090 with a 8980 stop.
March FTSE
My long 5550 FTSE position worked well on Friday as the market which twice tested my buy level after I posted on Friday before exploding higher which enabled me to cover this position too early at my 5600 T/P level and I am now flat which is frustrating when you see the market trading at 5760 this morning as every short position gets cleaned out across the board. Thankfully we had no sell levels in any market last Friday given the violence of the moves higher. Today I will again look to buy the FTSE on any dip lower to 5660/5700 with a 5625 stop. Despite the huge rally in the FTSE I do not want to be short the market at this time.
Dow Rolling Contract
The Dow is now trading over 400 points higher since I posted on Friday and I am still flat. I am going to stay flat especially with the Cash market closed today for the US President Day Holiday and take another look tomorrow as it is hard to get an edge in the Dow when we have no cash market open.
March BUND
As expected the BUND has got hammered on the back of the rising stock markets with the BUND trading over 220 points lower than its 166.16 high print last Thursday morning. I am still flat the BUND and today I will use any further sell-off to 163.30/163.60 to go long with a 162.95 stop.
Gold Rolling Contract.
In hindsight I should have gone short Gold on Friday as I expected Gold to fall especially as the Daily Bollinger Band and Williams Index was telling me to sell Gold. Gold is now off over $50 from its high made last Thursday and today I will use any further slippage to 1175/1185 to go long with a 1165 stop.
Silver Rolling Contract
I am glad that I lightened up on some of my core Silver long position on Friday with the market trading 4% lower this morning. I am still flat and today I will still look to buy the market on any dip lower to 14.85/15.15 with the same 14.50 stop.
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