Canada was to blame for what little price action there was on Friday, in FX at least, in which the Canadian dollar was the only currency to end the day down against a generally falling US dollar, following much weaker than expected Canadian CPI. Headline inflation fell to 1.3% from 1.6% and 1.5% expected, in doing so putting the kybosh on thoughts of an imminent policy tightening by the Bank of Canada (and just as market were starting to wonder if the RBA might be the next central bank cab off the rank in signalling that emergency policy settings might no longer be required). Last week was billed as a likely to be a nothing week given the sparse economic and events calendar, unless something came along out of left field, and so it proved. On a Friday NY close-to-close basis, the US dollar is 0.1- 0.2% higher, US stocks are virtually unchanged and Treasury yields are very narrowly mixed.
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 made 68 points on Friday and is now ahead by 695 points for June, having made 1071 points in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
US data was of little consequence, New Home Sales coming in stronger than expected after accounting for a big upwards revision to the prior month but for what is a highly volatile series, while the little watched Markit US PMIs came in a bit below expectations and down on May.
Earlier, Eurozone French, German and EZ PMIs showed manufacturing readings up and a bit better than expected but service sector readings a fair bit weaker, to leave Composite PMIs down on May and a bit softer than expected but still at very strong absolute (i.e. expansionary) levels.
We heard from both extremes of the current FOMC hawk/dove spectrum courtesy of Loretta Mester and James Bullard, but of little market consequence. Mester wants to push on with rates rises (though not necessarily straight away, while Bullard is insistent the Fed should now pause.
On the fate of the Health Care reform bill being discussed by the Senate, indications Friday were that 5 republican Senators won’t support it in current form (more than two dissents and it can’t pass).
In US stocks, the S&P finished Friday 0.16% higher and is 0.2% up on the week. The Dow lost just 0.01% to be unchanged on the week and the NASDAQ gained 0.46% and is 1.8% up on the week, so recouping a good chunk of the prior week’s losses. The VIX finished the day 0.46 lower at 10.03 and 0.36 down on the week.
In FX, the dollar was weaker across the board bar USD/CAD, the narrow DXY index -0.34% to be 0.1% up on the week and the broader BBDXY index -0.24% Friday and +0.2% on the week. With the exception of the 0.26% rise in USD/CAD post CPI (to 1.3267) and a virtually unchanged USD/JPY at Y111.28, there wasn’t much to choose between other G10 currencies, most of them 0.3- 0.4% up (EUR/USD to 1.1194, AUD/USD to 0.7568, NZD/USD to 0.7285, GBP/USD to 1.2718). This morning both the Euro and AUD has restarted the week little changed.
In rates 2 year Treasuries were unchanged at 1.342% (+2.5bps on the week); 10s were -0.6bp to 2.149% 0.9bp down on the week.
Commodities were stronger across the board. Gold added $8.6 to 1,256 but is only $2 up on the week. Oil came back 30 cents but WTI crude is still $1.73 lower on the week at $43.10 and Brent $1.83 down at $45.54. Friday’s Baker Hughes U.S. oil rig count rose by another 11 rigs to 758, now the 23rd straight weekly rise. The LMEX index gained 0.56% while iron ore added 20 cents to $56.75 and is up $1 on the week.
This morning on the Economic Front we have the German IFO Business Climate at 9.00 am and this is followed at 9.30 am by UK BBA Loans For House Purchase. At 1.30 pm we have US Durable Goods Orders and the Chicago Fed National Activity Index.
Much more interesting than the data calendar this week is the number of central bankers on the speaking roster. In particular, at the ECB forum in Sintra, Portugal starting today and ending Wednesday (the new (global) version of Jackson Hole?) ECB President Mario Draghi and former Fed chair Ben Bernanke kick off the proceedings with dinner speeches (Bernanke’s provocatively titled “When growth is not enough”). Over the coming three days, as well as a bunch of academic luminaries (Stamford, MIT and Harvard feature prominently) there is a panel on Wednesday featuring no less than Mark Carney, Mario Draghi, Haruhiko Kuroda and Stephen Poloz.
September S&P 500
My S&P plan worked well with the market trading lower to my 2429 buy level before rallying to a rebound high at 2438. As both the S&P and Dow hit my buy level at the same time I bought the Dow instead. However which ever Index you bought the result was a nice gain. Unfortunately the S&P did not break and close below 2418 which would have generated a Downside Key Week Reversal on what has turned out to be one of the quietest trading months for the S&P in many years as shown by the VIX which closed at 10.03 on Friday. I am looking forward to reading Bernanke’s Speech at the ECB Forum in Portugal later today. Today I will again look to buy the S&P on any dip lower to 2425/2431 with a 2420 stop. My only interest in selling the S&P is still on a rally higher to 2451/2457 with a 2462 stop.
EUR/USD
Yet again the Euro traded in a very narrow range as the summer holidays look like they have come early for traders this year. I am still flat the Euro and today I will now raise my buy level slightly to 1.1100/1.1140 with a 1.1065 stop. Meanwhile ahead of the ECB Forum I will now raise my sell level in the Euro to 1.1260/1.1300 with a 1.1340 stop which is just above last November’s 1.1300 post Trump Election victory high print.
September Dollar Index
Unfortunately the Dollar just missed my 96.75 buy level with a 96.83 low print before rallying into the close and I am still flat. Today I will now lower my buy level slightly to 96.30/96.60 with a 96.05 stop. With Dragi speaking later hopefully we get some movement in the US Dollar subsequently.
September DAX
My DAX plan worked well on Friday with the market trading lower to my 12685 buy level. As I had close buy levels in both the S&P and Dow (which subsequently got filled) I covered my long DAX position too early at 12705 and I am now flat. This morning the DAX is trading at 12790 as the market follows the US Futures Market higher. As I have consistently said I will not short the DAX despite last week’s sizeable Downside Key Day Reversal as the buy the dip crowd continue to support all equity markets at this time and until we get a sell extreme that lasts for more than a few trading sessions, this will continue to be the case. Today I will again look to buy the market on any dip lower to 12670/12720 with a 12630 stop.
September FTSE
Unfortunately the FTSE just missed my 7315 buy level before spending the rest of Friday’s session trading sideways to higher and I am still flat. This morning despite the stronger Sterling, the FTSE is trading at 7400 as the market tries to negate last Tuesday’s Downside Reversal. Today I will now raise my buy level to 7330/7365 with a 7295 stop. I still do not want to be short the FTSE at this time especially with the significant discount that the FTSE has to the Cash Market.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 21330 buy level before rallying to my 21375 T/P level and I am now flat. The Dow which opened weak last night has turned around and is now trading nearly 100 points higher at 21455. It is difficult to get too bearish on the Dow at this time especially with the market trading so close to its 21535 all-time high print from last Tuesday. Today I will be a small seller on any further rally higher to 21570/21630 with a 21680 stop. Meanwhile I will again look to buy the Dow on any dip lower to 21320/21380 with a 21270 tight stop.
September BUND
Just like the Euro above, the BUND has literally stopped trading over the past few weeks since we rolled from the June Contract to the September Contract. I am still flat and today I will leave my sell level unchanged from 165.45/165.75 with the same 166.05 stop.
Gold Rolling Contract
Gold has a better week last week as the 500 week Moving Average at 1237 held. However Gold needs to break and close over 1275 for the bulls to regain control. I am not going to chase this market higher and today I will leave my buy level from 1237/1244 unchanged with the same 1231 stop.
Silver Rolling Contract
Having watched my large average long 16.68 Silver position trading offside for most of the past 10 days I emailed my Platinum Members on Friday afternoon to exit this position for a small gain at 16.72 and I am now flat. As I mentioned on Friday, Silver needs to break and close over 17.05 for the market to resume its upside move. Today I will again look to buy Silver on any dip lower to 16.25/16.60 with a 15.95 stop.
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