R.I.P. Chuck Berry. And R.I.P. anti-protectionism, after the weekend G20 meeting Communique omitted reference to avoiding protectionism, reflecting the new reality of the USA’s position. This turns the spotlight firmly on the formulation of U.S. Trade Policy in coming weeks. It risks upsetting currently benign global risk sentiment. No dramas in Friday’s markets, which saw US equity Indices closed little change but on the week while US Bond Yields leaked a bit lower and the US Dollar fell back to its lowest levels since November 11, two days after Trump’s election victory. The BBDXY dollar index is now 61.8% back from the level from which it started to rally on the Trump news, so a fairly significant technical level.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 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 can you please contact me on firstname.lastname@example.org
For anyone following my Platinum Service it made 109 points on Thursday and is now ahead by 724 points for March, having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Looking back at the week just gone, the lower US Dollar and lower bond yields suggests diminishing faith in Trump being able to deliver any sort of net fiscal stimulus in the coming year while equities apparently still travel in hope. Perhaps it’s that the latter still have the prospects of deregulation, be it in the financial, energy or airlines sectors, to look forward to, relevant for equities but less so for bonds or the dollar. Who knows, but for now we at least need to see the proposed tax side of Trump’s Budget agenda before we can from any sort of reasoned opinion on the possible fiscal policy landscape (unlikely before May).
US data was pretty good on Friday – Manufacturing Output up 0.5% with favourable upwards revisions, while the University of Michigan’s Consumer Sentiment Index rose. Yet inflation expectations in the latter fell back, and the Fed’s Labour Conditions Index shows no signs of tightening. So nothing to support the view the next Fed move will come as early as June.
In FX, both the narrow DXY and broader BBDXY finished marginally lower, DXY -0.06% to be 0.9% down on the week, BBDXY -0.13% and 1.3% lower on the week. USD/JPY lost the most and consistent with its high-beta status vis-a-vis US Treasuries, -0.54% to Y112.55, followed by NZD which added back 0.43% to 0.7017 and AUD/USD, _0.34% up on the day to 0.7704.
So Japanese Yen aside, it’s the commodity currencies showing the biggest swings in relation to overall US dollar volatility (alongside commodity prices themselves). Sterling took a hit – from which it later recovered – on a Bloomberg story saying EU officials are ruling out any discussions with U.K. Prime Minister Theresa May over a post-Brexit trade deal until she agrees to settle Britain’s financial commitments to the bloc (that previous reports have suggested could be as high as €60bn).
US stocks saw the S&P close 0.13% higher at 2378.25 and 0.2% higher on the week. Utilities, telecoms, materials and industrials were the main winners Friday and energy, consumer staples, health care and financial the fallers – the latter by just over 1%. The Dow was -0.1% and the NASDAQ flat. The VIX was little changed at 11.28 0.38 lower on the week.
In rates 2 year Treasuries finished 1.6bps lower at 1.318% (-3.7bps on the week); 5s lost 3.2bps to 2.019% (-8.3bps on the week); 10s -4.0bps to 2.501% (-7.4bps w/w).
In commodities, gold added $3.0 to $1230.2 (+$29 on the week). Oil was unchanged for both WTI and Brent at $48.78 and $51.76 respectively and both are marginally up on the week. Iron ore lost 30 cents to $92.34 but is $5.62 or 6.5% up on the week. Steaming coal added 20 cents to $81.30 to be +$2.55 on the week but coking coal lost 50 cents to $158.25 and is $3 lower on the week.
This morning on the economic front we already had the release of German PPI which came in at +0.2% versus +0.4% expected. At 10.00 am we have Euro-Zone Labour Costs. Finally we have the Chicago Fed National Activity Index at 12.30 pm.
Later at 5.00 pm the Fed’s Evans will speak on the Economy and Monetary Policy in New York.
June S&P 500
The S&P traded lower to my average buy level at 2376 before rallying back above 2380 in a quiet trading session. As so many of my positions got hit at the same time I covered this position at my revised 2378 T/P level. I also emailed my Platinum Members to re-buy the S&P on any dip lower to 2369 which was filled overnight and as I want to have all members on the same page I covered this position earlier this morning at 2371 and I am now flat. The S&P has strong support from 2359/2365 and today I will be a buyer in this area with a 2354 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2342/2347 with a 2337 stop. My only interest in selling the S&P is on a rally higher to 2385/2391 with a 2396 stop.
Unfortunately the Euro missed my 1.0685 buy level with a 1.0705 low print after I posted on Thursday before trading to just shy of 1.08 this morning. However the Euro is overbought and trading at the top of both its Daily Bollinger Band and Williams Index. The Euro also has major resistance from 1.0840/1.0880 and given the significance of this resistance level I will be a seller in this area with a tight 1.0910 stop. I will also raise my buy level slightly to 1.0680/1.0710 with a 1.0645 stop.
June Dollar Index
I am still flat the Dollar which continues to sell-off as expected following January’s huge Downside Key Month Reversal. On Thursday after I posted the Dollar just missed my 100.90 sell level before trading back below 100 which is bearish. If the Dollar can break and close below 99.00 it will be a significant technical break opening up a move to 97.50 and possibly 95.00 over the coming weeks. Today I will lower my sell level slightly to 100.45/100.85 with a 101.15 stop. Despite the Dollar trading oversold I still do not want to be long the market at this time.
On Thursday the DAX traded lower to my 12100 buy level before bouncing back to 12130. With the Euro trading higher and so many of my other positions near my buy levels I emailed my Platinum Members to exit this position at 12115 and I am still flat. This morning the DAX is opening lower and my only interest in buying the market is on a further dip lower to 11960/12020 with a 11915 stop. Despite the stronger Euro I still do not want to be short the DAX at this time.
No change as I am still a buyer on any dip lower to 7270/7300 with the same 7240 stop. Sterling is stronger this morning after getting hit hard over the previous few trading sessions which may see the FTSE trade lower to my buy level. Despite the stronger currency I still do not want to be short the FTSE at this time especially with the market trading near new all-time highs.
Dow Rolling Contract
As I have mentioned countless times the Friday of a Quarterly Expiration can be hard to trade with so many positions rolling over or cash settling. Despite an incredible 10 Billion Shares trading on the big board on Friday the price movement was limited. On Thursday my Dow plan worked well with the market hitting my 20900 buy level before rallying to my revised T/P level at 20935 and I am still flat. The Dow has strong resistance from 21050/21110 and today I will lower my sell level to this area with a 21170 stop. My only interest in buying the Dow is on a dip lower to 20770/20830 with a 20720 stop.
The Bund has had a wild ride since I posted on Thursday having trading in a 150 point range on large volumes. After I posted on Thursday the Bund traded all my buy range which put me long at an average rate of 159.40 before rallying strongly and I used this rally to exit this position at 159.59 and I am now flat. On Friday morning the Bund got hit hard trading below 159.00 before rallying back to 159.96 this morning. Today I will again look to buy the Bund on any dip lower to 158.95/159.30 with a 158.65 stop. Despite the negative price action over the previous 10 days I do not want to be short the Bund at this time.
Gold Rolling Contract
Gold is certainly trying to recover its mojo off last Wednesday’s 1196.80 low print. I am still flat Gold and today I will raise my buy level slightly to 1214/1222 with a 1207 stop. A break and close over 1250 will be very constructive for Gold, while a break and close below 1190 will be bearish.
Silver Rolling Contract
Unfortunately Silver just missed my second buy level at 1715 after I posted on Thursday with a 17.20 low print and I am still just long at 17.48. With the market back to near my initial buy level I will now lower my T/P level on this position to 17.65. I will still look to add into this position on any dip lower to 17.15. I will also leave my stop level unchanged at 16.95.
Following our successful live trading sessions over the US Non-Farm Payrolls in 2016, Paul Wallace and I are hosting are next event in London for the April NFP data on April 7th. All details of this event are on the following link and if any of my members would like to attend please click on the £150 link which is £100 off the main rate.