All eyes will turn to Shanghai next weekend when the G20 Summit starts on Friday. While we might hope for some assurances from Central Banks that they are not engaging in a race to the bottom on negative interest rates and that the Fed is not going to risk further upsetting febrile markets by pushing ahead with ‘gradual’ tightening anytime soon, risk is high that Central Bankers return to home shores on their domestically driven ways. The prospect of any meaningful commitment to fresh fiscal support by G20 nations to shore up global growth looks similarly slim, albeit the noises about ‘helicopter money’ being the next policy shoe to drop are becoming a little louder.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily commentary which includes 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 90 points on Friday and is now ahead by 1685 points for February having made 3365 points in January. Since I started this service last June it has made over 20000 points.
Last Friday’s US markets saw another volatile trading session with the US stock market opening sharply lower in the wake of upside surprises in the US CPI Report where the core rate rose 0.3% m/m for a 2.2% y/y rate which was up from 2.1%. However the Indices recovered through the balance of the day with the S&P 500 ending the day flat having been down 0.8% in early trade. The US Dollar closed lower despite higher Bond Yields post – CPI thanks to a firmer Euro with the EUR/USD rallying to 1.1130 from its morning low at 1.1067. Sterling got a boost late in the day having initially ignored a steller Retail Sales Report on news of a deal in Brussels that UK PM Cameron said would enable him to recommend British voters elect to stay in the EU. The ‘Brexit’ referendum has now been called for June 23rd. Sterling has given back all of Friday’s gain in this morning’s open on news that popular London Mayor Boris Johnson is advocating in favour of Britain leaving the EU.
The S&P500’s flat finish on Friday meant that on the week it was up 2.8% while the Dow and NASDAQ ended the week up 2.6% and 3.8% respectively. Earlier the Eurostoxx 50 finished 0.83% lower but on the week was up 4.2% while the VIX finished 1.1 point’s lower at 20.5, which was 5 points down on the week.
In Bonds, 2 Year Treasury jumped by 5bps on the CPI Report to a high of 0.76% while 10 Year Treasuries ended the day up 6bps at 1.75%.
Fed-speak on Friday came from Cleveland Fed President Loretta Mester, a current FOMC voter and noted hawk who said she still backs further gradual increases in interest rates. She sees the US economy as able to ‘power through’ the turbulence from financial markets with the help of the consumer. Also speaking on Friday, the ECB’s Vice-President Vitor Constancio who said the ECB would aim to prevent banks from unintended harm if it decides next month to ease Monetary Policy which is a firm nod towards the ‘tiered’ negative rates employed by the SNB and BoJ.
This morning markets are opening firmer on the back of the 3% rise in the Shanghai and 1.1% rise in the Nikkei.
On the economic front we have German and Euro-Zone Markit Manufacturing/Services PMI at 8.30 and and 9.00 am respectively. This is followed at 11.00 am by UK CBI Trends Total Orders. At 1.30 pm we have the Chicago Fed National Activity Index. Finally at 2.45 pm we have the US Markit Manufacturing PMI Index.
March S&P 500
My calls for Friday all worked with the exception of the S&P which is very frustrating when having got stopped out on Friday to see the S&P trading 35 Handles off its 1898 low print at 1933 this morning. The last three trading day’s last week were positive with each time the S&P opened on its low only to close near its highs. Those three days are significant for a couple of reasons. First, they came off fresh 52-week lows in the S&P which is a pretty strong buying reaction to the selling. Second, it is the first time we have seen three consecutive up-days in the market in 2016, which is a very important signal. Finally, those three days formed a short-term candlestick pattern called ‘three white soldiers’. Ignore the stupid name, as this pattern is actually a very reliable bullish reversal set up. According to Thomas Bulkowski, one of the few market researchers who has back-tested short-term candle patterns, the three white soldiers pattern results in bullish reversal 82% of the time.
Since the original 1805 low print in January, the S&P has been forming an inverse head and shoulders pattern, which is a classic reversal setup that triggers an upside move with a breakout above 1945. I am not saying we are going to break 1945 on this run as we may need to see some more filling on the downside first but a break and close over this 1945 level will be very bullish. As I have mentioned a few times over the past week nearly all my points generated in my Platinum Service have been on the buyside of the stock market which is incredible when you see how far the markets have sold off particularly in Europe. Given how important the 1945 level is and the fact that we have a potential huge ‘Open Gap’ this morning I will look to go short from 1940/1946 with a1951 stop. I will also look to buy the market on any dip lower to 1913/1919 with a 1908 stop.
EUR/USD
My idea of continuing to buy dips in the Euro again worked on Friday with the Euro trading lower to my 1.1085 buy level shortly after I posted. Subsequently the Euro traded higher to 1.1130 which enabled me to cover this position at my 1.1115 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1030/1.1060 with a 1.0995 stop.
March Dollar Index
Finally the Dollar hit my 97.15 sell level before having a subsequent sell off to 96.60 which enabled me to cover this position at 96.95 and I am now flat. Today I will again look to sell the Dollar on any rally higher to 97.40/97.70 with a 98.10 stop. Despite the positive price action in the Dollar I do not want to be long especially as we approach the G20 Summit on Friday.
March DAX
My DAX plan also worked well on Friday with the DAX trading lower to my 9350 buy level with a 9342 low before having a nice near 200 point rally this morning. Unfortunately with nearly all my calls hitting at the same time and in order to reduce risk I cut this position at 9375. Thankfully by the time I emailed my Platinum Members as to what I had done the DAX was trading at 9420 and I am still flat. As mentioned last week the 9250/9300 area was crucial especially with the DAX now trading 250 points higher having broken this key pivot point. This area should now act as strong support against any subsequent selling. Today I will look to buy the DAX on any dip lower to 9420/9470 with a 9380 stop. I still do not want to be short the DAX at this time.
March FTSE
The FTSE plan worked well for anyone who bought the market at my 5890 buy level or lower especially with the FTSE trading 100 points higher at 5990 this morning. Unfortunately I did not buy the market myself and I am still flat. Today I will look to buy the FTSE on any dip lower to 5920/5960 with a 5895 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan also worked well with the Dow hitting my 16340 buy level before having a nice rally which enabled me to cut this position too early at 16380 and I am now flat. The Dow has strong resistance from 16620/16680 and I will be a seller here with a tight 16730 stop. Despite the positive price action my only interest in buying the Dow is on a dip lower to 16360/16425 with a 16295 stop.
March BUND
Unfortunately the BUND again just missed my 164.70 buy level with a 164.85 low print before rallying higher and I am still flat. Today I will raise my buy level slightly to 164.55/164.85 with a 164.35 tight stop.
Gold Rolling Contract
No change as I am still a buyer from 1187/1195 with the same 1179 stop.
Silver Rolling Contract
Having exited my initial long Silver position at 15.70 the market has finally hit my 15.00 buy level earlier this morning. I am still long and I will leave my stop the same at 14.45 on this position.
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