The US Dollar (BBDX) was little changed on Friday while US equities and US Treasury yields ended the week a little bit lower reflecting a mild risk off tone. After all of last week’s saga, the US has no phenomenal health care plan as Republicans tell Trump that it ain’t going to happen. House Speaker Ryan pulls the Republican Health Care Bill from the House minutes before a planned vote amid mounting opposition from his own party. This was the first major attempt by the administration to reform the government and its miserable failure exposes the limits of President Trump’s negotiating skills as well as divisions within his own Party. US political focus now shifts towards tax reform, arguably a more important legislative piece for markets.
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 any one is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 170 points on Friday and is now ahead by 914 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.
US equities started the day on a positive note, but as it became evident that the Health Care bill was unlikely to pass, equities turned south with a small recovery in the last trading hour easing some of the losses. The S&P500 closed down 0.08% and the Dow -0.28% while the NASDAQ buck the trend closing the week up 0.2%. The S&P500 lost 1.4% on the week, its biggest weekly loss since November 4, the week before the US election.
After starting the day on a solid footing the USD (BBDXY) lost ground through out the day following the move lower in US equities. The Index recovered a bit of ground in the last hour of trading, but still ended the day down 0.08% and the week -0.63%. European currencies were the performers against the US Dollar as preliminary PMI readings for March beat expectations (SEK was 0.24%, CHF 0.20% and EUR 0.14%). EUR spent most of the US session above the 1.08 mark, but it succumbed in the last hour of trading to close the week at 1.0798 before rallying above 1.0850 on the re-open of markets last night..The Australian Dollar essentially treaded water for most of Friday and ended the NY session little changed from Friday morning’s opening levels. The AUD closed the week at 0.7623 and is again little changed this morning despite the weaker US Dollar. Sterling underperformed on the day (-0.38%), but it still managed to end the week 0.7% higher against the US Dollar.
10y UST yields drifted from 2.43% to 2.39% as the Health Care bill prospects diminished during the day, but the small recovery in equities at the end of the session lifted yields helping 10y UST end the week at 2.41%. The 2y10y UST curve flattened 1.2bps to 115.5bps and the 5y30y curve flattened 1bps to 106.8bps. So in general there has been no change to the curve-flattening theme established from around the FOMC meeting in mid March.
As for commodities, it was again another session of mixed outcomes. Oil prices ended the week stronger, up between 0.5% and 0.6%, gold continued its ascendency up another 0.1%, but iron ore lost 1.5% to end the week at $85.1. Copper was down 0.4% following news that the world largest copper mine, BHP Billiton’s Escondida in Chile, have ended a lengthy strike. Many analysts expect the metal to come under pressure now the dispute has been effectively postponed for another 18 months.
CFTC data from the week ending March 21 shows US Dollar speculative longs against G10 currencies rose by 29.2k to 198.5k with the Canadian Dollar showing the biggest move 21k longs turned into 24k shorts. Meanwhile in rates 2y, 5y and 10y shorts were reduced by 5k, 41k and 94k respectively.
The Euro area Manufacturing PMI rose to 56.2 in March from 55.4 in February while the Services reading climbed to 56.5 from 55.5. Both are at the highest in 71 months and suggest the broadening recovery in the euro area is still very buoyant supporting prospects of faster job creation and stronger inflationary pressures. Germany and France manufacturing and services PMIs also had a solid outcome.
The Fed’s Dudley said that Fed hikes are aimed at achieving a soft landing and the U.S. economy will cope “just fine” with a gradual policy tightening approach. In contrast, Fed Member Bullard said “It’s not necessary to raise rates that quickly if the goal is to keep inflation near target and keep unemployment between 4.5 and 5%”.
This morning on the economic front we have German IFO Business Climate and Current Assessment/Expectations at 9.00 am. Finally in the only US data of note we have the Dallas Fed Manufacturing Activity Index at 3.30 pm
Later this afternoon at 4.15 pm the Fed’s Evans will speak on US Economic Policy in Madrid.
June S&P 500
After a quiet trading week, markets certainly came to life at 7.30 pm on Friday after the Health Bill Vote was cancelled with the S&P trading lower to my 2332 buy level before rallying to a rebound high as expected at 2347 and this rally enabled me to cover my long position at 2340 and I am now flat. Overnight the Futures market opened lower and this sell-off filtered through to Asia with the Nikkei breaking key support at 19,000 to close 1.45% lower at 18985 with the S&P now trading at 2319 as I write this commentary. The S&P is again trading outside the bottom of its Daily Bollinger Band and at the bottom of its Williams Index as it approaches the key support level from 2295/2305. Unfortunately the McClellan Oscillator only closed barely in negative territory with a -28 print so there is plenty of room for the internals to weaken further before we put in a meaningful bottom. My own view is after this decline finishes that we will again make new highs before the real sell-off starts towards the end of this year. It is clear that with Friday’s pulled Health Bill that the Trump promises have taken a large hit as most of this rally occurred in the expectation of reflation taking place in the US. Today given how oversold the S&P is trading I will again look to buy the market from 2312/2318 with a 2307 stop especially given the large ”Open Gap” from Friday’s close. If I am taken long and subsequently stopped out of this trade, or I mange to T/P on any long position arising from a dip to my buy zone, I will be an aggressive buyer on any further dip lower to 2294/2301 with a 2288 stop. Given how oversold the S&P is trading I do not want to be short the market at this time.
EUR/USD
The sell-off in the US Dollar continues with the Euro hitting my 1.0870 sell level in the last few minutes. I will add to this position only on a further move higher to 1.0910 with a 1.0930 tight stop. With the Euro breaking the key 1.0800/1.0850 resistance level I will now raise my buy level in the Euro to 1.0770/1.0810 with a 1.0740 stop.
June Dollar Index
Late on Friday I emailed my Platinum Members that with USD/JPY breaking Lower to reduce their buy level in the Dollar Index. The Dollar re-opened overnight at 99.10 and I have now bought the Dollar here at 98.95 with a reduced 98.60 stop. This 98.80/99.20 area is key support for the Dollar as it tests its early February low at 99.10 following the 5% decline in the Dollar in January which as you know at this stage was a very rare Downside Key Month Reversal for the Dollar. Currency moves tend to end in spikes and we may see a spike lower in the Dollar from here before the market reverses and closes higher. However after we do get a rally it is only a matter of time before the Dollar starts to sell-off aggressively.
June DAX
Despite the aggressive rally in the Euro over the past 10 days, the DAX is managing to hold its own. I am still flat and today I will leave my buy level unchanged at 11850/11910 with the same 11795 stop. The price action continues to tell us not to be short the DAX at this time.
June FTSE
The sell-off in the US Stock market sees the FTSE opening lower this morning with the market hitting my average buy level at 7205. I am still long and I will leave my stop unchanged at 7165 on this position. If I am stopped out I will be a more aggressive buyer on any further dip lower to 7095/7135 with a 7065 stop. Given the weakness of Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan worked really well on Friday with the market trading lower to my average buy level at 20570 with a 20531 low print before rallying to a rebound high at 20661 and this rally enabled me to cover this position at my 20655 T/P level and I am now flat. This morning the Dow is trading over 150 points lower from where it closed on Friday as the Trump reflation trade takes another hit. This move lower is again led by the Banks which got hit hard on Friday. Today I will again look to buy the Dow on any dip lower to 20380/20435 with a 20330 stop. Given how oversold the Dow is trading I do not want to be short the market at this time.
June BUND
Unfortunately I covered my latest long 159.80 Bund position shortly after I posted on Friday with the Bund trading higher to my 159.95 T/P level and I am now flat. With the US Bond market continuing to rally as expected as shown by the extreme sentiment bearish readings over the previous few weeks the Bund has followed suit. Today I will again look to buy the Bund on any dip lower to 160.15/160.45 with a 159.90 tight stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold has rallied hard since I posted on Friday with the market again testing the key 1260 resistance level as I write this commentary. With the weaker US Dollar it is only a matter of time before Gold breaks higher. As a result I will now raise my buy level in Gold to 1238/1245 with a 1232 stop.
Silver Rolling Contract
Unfortunately Silver just missed my 17.45 buy level on Friday before trading higher. With Silver trading at 17.88 I have now bought the market here again with a tight 17.40 stop.
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