The final results of the first round of voting in the French presidential election aren’t yet confirmed. Yet the certainty of a Le Pen/Macron one-two, with Le Pen not scoring much more than pre-election poll predictions of the low to mid 20 percent’s, means markets are happy to buy what they see as the fact – that 39 year old Emmanuel Macron will be confirmed as the next President of the French Republic in two weeks’ time. The defeated candidates have been quick to throw their support behind Macron in the second round, happy to distinguish between someone they saw as a political revival and an ‘enemy of the republic’. Unlike in the UK and United States, the results look like they represent a victory for French opinion polls.
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 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 made 158 points on Friday and is now ahead by 1130 points for April, having made 1335 points 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.
I would also note that for the first time in modern French history, the 2nd round run off on May 7th won’t include a candidate from any of the mainstream French political parties. This in turn makes the elections for the national assembly (on May 11th and 18) of particular importance in terms of the new President’s prospects for enacting legislation. Remember Macron campaigned on a socially liberal platform but with business-friendly structural reforms at the heart of the economic philosophy of this formerly Socialist economy minister.
Market reaction at the open last night has seen the Euro gain the best part of 2% against the U.S. dollar (high of 1.0937 against Friday’s close of 1.0728) USD/JPY gains of 1.3% to around ¥110.5 and the still risk-sensitive AUD up about 0.6% to a high of 0.7588. This morning on the open of European Markets the Euro is lower at 1.0840 while main reaction is like to be sharp compression in the spread between French and equivalent German bonds, as well as a rise in German Bund yields themselves. This has already occurred. That said, it is far too early to see today’s results as providing the green light for the ECB to start signalling any intentions with regards to its exit from current ultra-easy policy settings. European equities – in peripheral Eurozone markets in particular – are also likely to do well today. The Nikkei closed up 1.40% as it celebrated the bounce in USD/JPY.
Markets went out on a quiet note of Friday whether in FX, interest rate to equity market and where the main offshore news event was an announcement from President Trump that he will unveil tax proposals this Wednesday. This reportedly left his own Treasury officials ‘speechless’. It would seem though that we will get no more than a broad outline of tax plans this week. Of note is that administration officials are saying that at this stage at least, these will not include plans for a so called border-adjustment tax. This is important because without the revenue assumed to accrue from this (potentially more than $1 trillion) Trump won’t be abler to present plans for tax cuts that are revenue or deficit neutral. However, it appear this means there may well be deficit busting tax cut plans but which will contain so called sunset clauses, meaning they expire in 10 years.
This will then greatly improve chances of Congressional approval since they could pass in the Senate by a simple majority (i.e. be ‘filibuster’ proof without requiring 60 of the 100 Senate votes). As such we should not simply dismiss what emerges this week as cheap talk. The Trump element of the ‘reflation’ trade may be battered and bruised, but is not yet completely dead.
This morning on the economic front we have German IFO Business Climate/Expectation at 9.00 am. Next we have UK CBI Trends Total Orders/Selling Prices at 11.00 am. This is followed at 1.30 pm by the Chicago Fed National Activity Index. Finally at 3.30 pm we have the Dallas Fed Manufacturing Activity Index.
June S&P 500
My S&P plan worked well on Friday with the market trading lower to my average buy level at 2345.50 with a 2340.25 low print before rallying on the back of the Trump Tax Cut proposal which is due to be announced on Wednesday. As I wanted to be flat ahead of the weekend as is my norm for any major event I covered this position at 2347 and I am now flat. For those members who did hold and long S&P position over the weekend they were well rewarded with the S&P opening 25 Handles higher at 2372 last night. The Gap higher for the S&P sees the market through the 2367/2369 short term trend line as I write this commentary. However as you know all ‘’Open Gap’s’’ in the S&P eventually get filled. So far this morning the S&P is holding below the three week and April high at 2375 but a break above the 5 week high at 2378 targets 2390/2392 before the March 1 all-time high at 2400. As I have consistently said over the past few years trying to short this market for any length of time is pointless until we take out some proper support levels. Wednesday’s large intra-market divergence between the Dow and S&P was the first clue that this market was going to rally and thankfully we had no sell levels across my Indices on Friday as yet again any short position got slammed. Today I will look to buy the S&P on any dip lower to 2355/2362 with a wider 2349 stop. The price action continues to tell me not to try and short the S&P at this time.
EUR/USD
It took a long time but finally at 9.55 pm on Friday evening the Euro hit my 1.0730 T/P level on my latest long 1.0710 Euro position and I am still flat. For those Platinum members who did not see my ‘’update 4’’ which was sent out after my T/P level was hit and held their Euro position over the weekend then you did very well with the market opening 200 points higher at 1.0920. Having reached a high at 1.0935 the Euro has sold off this morning with the market so far holding the 1.0800/1.0820 support level. Today I will again look to buy the Euro on any further dip lower to 1.0785/1.0830 with a 1.0750 stop which is just below last week’s high at 1.0777. Despite the Euro trading overbought I still do not want to be short the market at this time. Trump is telling you he wants a weaker Dollar and this eventually will happen and is normal with markets the Dollar will weaken much further than what most traders believe to be possible.
June Dollar Index
The Dollar just missed my sell level on Friday before gapping lower on the Re-open this morning. I am still flat and today given how oversold the Dollar is trading I will be a small buyer on any further move lower to 98.35/98.75 with a 97.95 stop.
June DAX
This morning the DAX has opened with a large gap to the upside at its tests its three week highs at 12326. Above here the DAX has strong resistance at the April all-time highs at 12400. I am still flat the market and given the significance of these all-time highs I will be a small seller on any further rally to 12420/12470 with a 12515 tight stop. My only interest in buying the DAX is on a dip lower to 12200/12260 with a 12160 stop.
June FTSE
This morning the FTSE is re-testing last Tuesday’s 7180 Head & Shoulders Neckline resistance level. I am still flat the market and given the significance of this resistance level I will be a small seller from 7185/7220 with a 7240 tight stop. I do not want to be long the market at this time.
Dow Rolling Contract
My Dow plan worked well on Friday with the market trading lower to my 20515 buy level before having a quick rally to 20600 on the Trump Tax Cut announcement. As I had so many ‘’open’’ positions at the same time late on Friday I emailed my Platinum Members to exit this position at 20570. The only good part of this exit was the fact that by the time everyone got to read my email the Dow was trading at 20600. For any member who held and long Dow position over the weekend then they would have had a huge gain. This morning the fact that the Dow has broken the 20660 resistance level that I mentioned on Friday could be key. However we need to close over this level in New York this evening which would then imply a rally to the March 1 all-time high at 20169 over the coming weeks. Today I will be a small buyer on any dip lower to 20570/20630 with a 20520 stop. Given the price action I still do not want to be short the Dow at this time.
June BUND
Thankfully after the Bund hit my 162.55 buy level late on Friday I emailed my Platinum Members to exit this position at 162.60 and I am now flat. This morning the Bund is trading 130 points lower on what is a large gap to the downside. I am going to stay flat the Bund today as I want to see how the market adjusts to this new price range before re-committing to a trade recommendation tomorrow.
Gold Rolling Contract
My Gold plan worked well with the market trading the whole of my 1264/1270 buy range on the open last night. This sell-off put me long at an average rate of 1267 before the market rallied to my 1276 T/P level overnight and I am now flat. Today I will again look to buy Gold on any dip lower to 1257/1264 with a 1251 stop.
Silver Rolling Contract
Silver also traded lower to my 17.65 buy level on the re-open last night with a 17.55 low print. I am still long and I will now raise my stop on this position to 17.25.
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