Following five consecutive days of gains, US equities – the Dow and S&P at least -squeezed out miniscule gains on Friday to make it six from six, in front of a three day holiday weekend (Presidents Day). This followed an ‘’up’’ day for European stocks and the Nikkei, the latter despite the further sharp falls in USD/JPY to new post-2016 lows. On the week, gains of 4.25-5.25% for the main US indices puts them all back in the black Year To Date. The VIX was little changed (+0.33) at 19.46 and down almost 10 points on the week. While of course still elevated versus recent years, it is now almost exactly on its long term average (and close to where it began life in 1990). Also to note in this respect is that while volatility in other asset classes (bonds and FX) did not rise in the wake of the spike in equity volatility by nearly as much as in past episodes, neither have they dropped back as much too. A somewhat higher volatility environment across asset classes looks to be here to stay.
To mark my 1525th 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 in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 98 points on Friday and is now ahead by 1467 points for February having made 879 points in January, 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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The turnaround in US stocks from intra-day gains of almost 1% to flat followed, coincidentally or otherwise, reports first that the FBI has indicted 13 Russians with meddling in the 2016 US election (charges which relate back to as early as 2014 and did not make any interference that team Trump was involved). Second and perhaps more ominous, was the a report that the US Commerce Department is now recommending, among other options, the imposition of 24% tariffs on steel imports and 7.1% on aluminium.
China has already been out over the weekend saying the bases for the proposed US tariffs are groundless and that it reserves the right to retaliate if they are imposed. “If the final decision impacts China’s interests, China will certainly take necessary measures to protect its own rights,” says Wang Hejun, chief of the trade remedy and investigation bureau at China’s Ministry of Commerce.
The main piece of economic news Friday was the preliminary University of Michigan Consumer Sentiment Index, which punched the lights out at 99.5 from 95.7 in January and is back close to its October 2017 record high of 100.7. The jump is all the more remarkable given the survey was conducted in the teeth of the equity market gale two weeks ago, though perhaps not in so far as personal tax cuts took effect in January. On another day, the data could have further elevated concerns about higher demand-pull inflation down the track and hurt both bond and equity market sentiment. That said, inflation expectations in the survey, closely watched by the Fed, were unchanged at both the 5-10 year and 1-year horizons at 2.5% and 2.7% respectively.
In FX, the US dollar staged a minor comeback for no obvious reason other than position squaring into the US holiday weekend, with EUR leading the move and JPY lagging but still managing to fully recoup the APAC session swoon to end marginally weaker on the day. Of some note on the Yen is that Friday;s weekly IMM positioning data shows that speculative short positioning actually increased last week in the face of a rapidly rising yen. I suspect the last numbers might not be painting a true picture.
EUR slippage came despite comments from the ECB’s Benoit Coeure, who signalled that officials are close to starting talks on altering their policy language as they prepare for the eventual end of bond purchases. ‘’Our communication on monetary policy will change’’ Coeure told reporters on Friday in Skopje, Macedonia. Certainly the expectation is that this will be discussed in early 2018. Evidently, a lot is already now discounted regarding the ECB’s ‘’exit strategy’’ A Reuters poll late last week shows virtual unanimity amongst economists that QE will end no later than end-2018, with the ‘’median’’ estimate for when rates first start to rise being six months after QE buying ends.
Sterling was spared an immediate fall on weaker than expected Retail Sales data (0.1%) by headlines trumpeting EU’s Barnier: We are on the way to an orderly UK withdrawal. Yet reading the full text of Barnier’s speech (and viewing his neat ‘’Stairway to Brexit’ schematic) there is nothing here to justify a Sterling-positive take. Sterling ended mid-pack, down about half a percent on the day, as too did AUD, dropping briefly back below 0.79 from an earlier high of 0.7988.
On the week the Dollar is still about 1.5% lower in Index terms, losses led by JPY strength followed by NOK on higher oil prices (but which failed to support CAD) and the seemingly irrepressible NZD (no sign of risk aversion there). AUD/USD ended the week just over 1% higher. The weekly change in commodity prices, though of course in part the mirror image of USD weakness, has been a supportive influence.
US Treasuries recoiled from Thursday’s push above 2.90% at 10 years, with curve re-flattening still in evidence on the day but much more so on the week (2/10s spread in by 9.3bps).
This morning on the Economic Front we have Euro-Zone Current Account and 9.00 am and this is followed at 10.00 am by Construction Output. With the US Markets closed for the President Day Holiday there are no US Data due today.
March S&P 500
Friday was another frustrating session for my S&P buy level with the market just missing my 2720 buy level with a 2722 low print before rallying 30 Handles and I am still flat. The US Cash Markets are closed today but the Futures Market is open until 4.30 pm and then closes until it re-opens at 11.00 pm London time. I will now raise my buy level slightly to 2722/2730 with a 2715 stop. Meanwhile I will leave my sell level unchanged from 2758/2773 with a 2783 stop.
EUR/USD
The Euro traded lower to my 1.2440 buy level before trading sideways/higher for a couple of hours and I emailed my Platinum Members to exit any long position at my revised 1.2453 T/P level and I am now flat. The Euro finally sold off into the New York close and today I will again look to buy the market on any dip lower to 1.2270/1.2310 with a 1.2230 stop. I still believe that the Euro will rally to my 1.27/1.29 resistance level over the coming weeks where I will be interested in putting on a more sustainable short position. If and when we do rally to this resistance area I will be back with a narrower sell range.
March Dollar Index
I am still flat the Dollar which just missed my buy level before rallying after I posted on Friday. Today I will now raise my buy level to 88.30/88.70 with an 87.95 stop. I still do not want to be short the Dollar at this time.
March DAX
The DAX performed well on Friday testing the key 12500 resistance level. Thankfully we have had no sell levels in the DAX over the past few weeks as it is very difficult to maintain any short position in this market. The renewed sell-off in the Euro has certainly helped the DAX to rally. Today I will now raise my buy level to 12300/12375 with a 12240 stop.
March FTSE
Overnight the FTSE finally rallied to my 7285 sell level before selling off to my revised 7270 T/P level and I am now flat. The FTSE has strong resistance from 7300/7340 where I will be a seller with a 7370 stop. Given the extent of the rebound off the 6920 low print I do not want to be long the FTSE at this time.
Dow Rolling Contract
It took a while but my Dow plan worked very well on Friday with the market trading higher to my 25420 sell level with a 25434 high print before selling off nearly 200 points. This sell-off enabled me to cover my short position at my 25350 T/P level and I am now flat. The Dow has strong resistance from 25500/25700 where I will be a seller with a 25850 wider stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller on any further rally to 25950/26200 with a 26280 stop. I no longer want to be long the Dow at this time as after this rebound runs its course I am looking for a large move lower.
March NASDAQ
No change as I am still a small seller on any rally higher to 6930/6980 with the same 7025 stop. The NASDAQ has strong support from 6530/6575 and I will now look to buy the market on any dip to this area with a 6490 stop.
March BUND
Unfortunately after I posted on Friday the Bund just rallied without giving me a chance to buy. Thankfully we had no sell levels. Today I will now raise my buy level to 157.70/158.10 with a 157.40 stop.
Gold Rolling Contract
I am still flat Gold and today I will now lower my buy level to 1325/1333 with a 1318 stop. The Daily Sentiment Reading for Gold is back at 84% bulls which is one of the main reasons I do not trust this rally.
Silver Rolling Contract
Late on Friday Silver traded lower to my 16.65 buy level. I will only add to this position on any move lower to 16.30 with a 15.95 stop. Meanwhile I will now lower my T/P level on this position to 16.75. If this happens I will be back with a new update for my Platinum Members.
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