The recovery in US equities continued on Friday and unlike Thursday, European equities also managed to record some gains. US Treasury Yields were little changed, but the US Dollar was softer across the board more than reversing Thursday’s gains. The US Dollar was on a steady decline for the whole of Friday with political news still weighing on the currency while equity focus seems to have focussed back towards the outlook on the economy and strong corporate earnings. North Korea tested another missile on Sunday but market reaction has been muted so far.
To mark my 1350th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 110 points on Friday but is still ahead by 740 points for May, having made 1276 points in April, 1335 in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
The US Dollar also came under renewed pressure following a report in the Washington Post stating that a current White House Senior Advisor is a person of interest on the FBI Russian probe during the election campaign. Meanwhile former FBI Director Comey has agreed to testify in public before the Senate Intelligence Committee after the Memorial Day Holiday at the end of the month.
On better news over the weekend, Saudi Arabia and the US announced several agreements from defence to oil and gas industries with the Pentagon reporting a package of $110bn in arms purchases. The White House noted that the deal ‘’would support tens of thousands of new jobs in the US’’.
The EUR closed above 1.12 in New York for the first time since November 9, last year and has risen close to 6% since mid-April. The rapid rise in the currency is now getting to a point where the ECB is likely to become uncomfortable. The Central Bank Monetary Policy measures have been focussed on reviving inflation within the Euro area, but a strong currency could potentially undermine these efforts. Meanwhile Bundesbank President Weidmann said domestic price pressures are still subdued, buy the economic recovery will gradually allow it to increase. He also said that this must be taken into our account in our forward-looking Monetary Policy.
The weakness in the US Dollar also helped Cable to regain a 1.30 handle with a 0.8% rise. In a weekend interview, UK Brexit Secretary Davis suggested that the UK would quit talks on leaving the EU unless the Bloc drops its demands for a divorce payment of £100bn. ‘’The first crisis or argument is going to be ever sequencing’’, he said.
This morning on the Economic Front we have no date due from either the UK or the Euro-Zone. At 1.30 pm we have the Chicago Fed National Activity Index and this is followed by the Canadian Bloomberg Nanos Confidence Index.
June S&P 500
Unfortunately my S&P plan did not work well on Friday with the market trading higher to my average sell level at 2377 before stopping me out of this position at 2384 and I am now flat. In hindsight I should have not had a sell level in the S&P especially as I mentioned the still ‘’Open Gap’’ from Tuesday’s Chicago close at 2397 to Wednesday afternoon’s 2384 rebound high. On Friday the S&P traded to a 2389 high with a good portion of this ‘’Open Gap’’ now filled. Internally the market was strong on Friday with the McClellan Oscillator improving from Thursday’s -98 print to close on Friday with a -16 reading. As the last eight years have shown us it is extremely difficult to be short the S&P for more than a few hours before buyers return and this scenario will continue until we break some key support levels. The S&P has strong support at Thursday’s 2344.50 low print ahead of the 100 Day Moving Average at 2335. However the real support does not come in until 2300/2310. A break and close below 2300 over the coming weeks will be the first sign that we have at least a temporary top in the market. Although the S&P had a late sell-off I have to respect the fact that the market closed over 2379 and today I will be a small buyer on any dip lower to 2370/2376 with a 2364 stop. My only interest in selling the S&P is on a further rally to last Monday’s highs at 2404/2410 with a 2416 stop.
EUR/USD
Late on Friday the Euro traded higher to my 1.1190 average sell level. I am still short and I will leave my stop unchanged at 1.1235. Although the Euro did close over 1.12, it needs to stay over this key resistance point for at least two weeks before I can comfortably look to buy the market again. The other reason that I am reluctant to chase the Euro is that sentiment is at near record levels as shown in the Dollar Index below. The Euro is also trading above the top of its Bollinger Band and Williams Index and twice last year at 1.16 in May and 1.13 following the Trump Election victory, each time the Euro got hit hard. If I am stopped out of my short position I will be a more aggressive seller on any further rally higher to 1.1270/1.1310 with a 1.1340 tight stop. Given how over extended the Euro is trading I do not want to be long the market at this time.
June Dollar Index
Thankfully most of you do not trade the Dollar Index given its crazy 8/9 point spread that is charged by the spread betting firms. Having made some nice points on my aggressive long position on Thursday I lost those points having got stopped out of my long 97.55 average position at 97.15. The Daily Sentiment Index reading for the Dollar closed on Friday with just a print of 6%, which is the lowest percentage of Dollar Bulls in nearly six years (June 7, 2011). On top of this when a market like the Dow breaks a key support level at 98.50 which we did earlier last week, we normally see a re-test of this breakdown point before the Dollar resumes its decline. For this reason I have again bought the Dollar at 97.00 with a tight 96.60 stop.
June DAX
The DAX continues to hold above the key 12460/12500 support level from which it bounced following a test on Thursday morning. However the market did not see much follow through on Friday despite the firmness of the American Indices. This is understandable given the strength of the Euro. Today I am going to leave my buy level unchanged from 12470/12530 with the same 12415 tight stop. Despite the reluctance for the DAX to rally I still do not want to be short the market at this time.
June FTSE
With the FTSE severely overbought it is hard to get an edge in the market at this time. There is no point in trying to go short while I am reluctant to chase this market higher. I am still flat and today my only interest in buying the market is on a dip lower to 7390/7420 with a 7355 stop.
Dow Rolling Contract
Thankfully we had no sell level in the Dow on Friday which continued to rally strongly off Thursday’s 20490 low print. For me to turn more than short-term bullish of the Dow I need to see a break and close above the March 1 high at 21169. Today I will now raise my buy level to 20610/20670 with a 20550 stop. I still do not want to be short the Dow at this time especially as I have a sell level above in the S&P.
June BUND
Unfortunately the Bund just missed my 161.15 buy level with a 161.16 low print before rallying and I am still flat. Today I am going to lower my buy level slightly to 160.50/160.85 with a 160.20 stop. It is a major worry that the Bund is still trading with a yield below 40 basis points after the Euro-Zone economy has been growing for the past 12 months. This is one of the main reasons why I am worried about growth when you see Bond Yields with such low coupons.
Gold Rolling Contract
Gold again traded in a narrow range on Friday but still below the 4.5 year mega trend line from 1280/1284. I am still flat Gold and today I will raise my buy level slightly to 1234/1240 with a 1229 stop. Gold has strong support at 1216 and as long Gold can stay above this support then Gold should still be a buy on dips.
Silver Rolling Contract
There is no doubt following the mega sell-off in Silver when the market closed lower for 13 of 14 trading sessions that a lot of confidence has been knocked out of the market resulting in making it more difficult to make points. Silver has very strong support from the December low at 15.80/16.00 and a break and close below here will be very bearish, perhaps leading to a further significant sell-off. Meanwhile Silver has very strong resistance above the market at 17.68/17.81. I am still flat Silver and today I will raise my buy level to 16.45/16.80 with a 16.10 tight stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 15.80 with a 15.35 stop.
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