Plenty of official hand-wringing regarding downside risks to global growth and which was reflected in the Communique issued on Saturday after the 2-day G20 Meeting of Finance Ministers and Central Bankers in Shanghai. This included – presumably at the urging of the UK Government contingent and largely for the benefit of the domestic constituency – ‘Brexit’ as an additional risk to the global recovery.
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 ended the day flat on Friday and is still ahead by 2085 points for February having made 3365 points in January. Since I started this service last June it has made over 20,000 points.
Yet consistent with US Treasury Secretary Jack Lew’s pre-G20 comments that we should not expect a crisis response to a non-crisis situation, there were no hard policy commitments from anyone. This included on Fiscal Policy, where the declared need to ensure that debt to GDP ratios remained on a ‘sustained path’, adequately reflects the public opposition of German Finance Minister Wolfgang Schaeuble heading into G20 to calls for looser Fiscal Policy to support growth. The public commitment to refrain from competitive currency devaluations was a ‘gimme’ that means nothing in practice. I doubt the 25 members of the ECB Governing Council are about to invite representatives of their fellow G20 Members to express their views on the upcoming ECB Meeting on Thursday week, ditto the BoJ when it next meets on March 15.
Expectations for any substantive commitments out of G20 were sufficiently low such that we should not expect and significant market response early this week to what are a whole lot of weasel words. That said, there is some risk they aggravate the risk – negative reaction to Friday’s jump in the Fed’s preferred core PCE deflator inflation readings to 1.7% and which present a challenge to the market’s hitherto confident pricing out of the 2016 Fed tightening risks.
The US Dollar jumped, money market rates and Bond Yields rose, and US equities sold off. These directional moves were already underway ahead of the PCE release thanks to an unexpected upward revision to Q4 US GDP to 1.0% from 0.7%, albeit inventory driven. US Treasury Yields pushed higher throughout last Friday’s NY session with 2 years finishing 7bps higher at 0.79% while 10 year rose 5bps to 1.76%.
Weaker than expected German CPI at -0.2% y/y on the HICP measure from 0.4% previously, and deterioration in EC Confidence Survey readings, conspired with the stronger US data to pull the EUR/USD below 1.10 on a closing basis for the first time since 2 February. The S&P 500 finished -0.2% at 1948, while the VIX finished +0.7 at 1981, very close to its long term average of around 20.
In FX, the narrow FXY Index rose by 0.9% to 98.15 which is its best level since 3 February, with the AUD the worse performing Currency in the G10 closing down 1.5% at .7125.
Commodities saw Crude 20-30 cents lower, while the LMEX Index of industrial metals rallied by 1.65% which is definitely out of kilter with the stronger US Dollar. Iron Ore gave back over $2 after its recently strong rally to close at $48.29.
This morning European markets are opening weaker after the 3% fall in the Shanghai overnight while the Nikkei closed 1% lower at 16026.
This morning on the economic front we have Euro-Zone CPI at 10.00 am. This is followed at 2.00 pm by the ISM from Milwaukee. Finally we have the Chicago Purchasing Manager’s Survey, Pending Home Sales and the Kansas Fed Manufacturing Index at 2.45 pm, 3.00 pm and 3.30 pm respectively.
March S&P 500
Friday was another frustrating trading session as I was looking for a reversal in the US markets based on the Daily Bollinger Band, Williams Index and the high McClellan Oscillator reading but unfortunately both the S&P and Dow missed my sell level before getting hit hard to the downside. Subsequently the S&P missed my initial 1948 buy level with a 1949 low print before having a 10 Handle rally, and after another sell-off to 1947.50 I emailed my Platinum Members to reduce their buy level which again was frustrating as the S&P had a nice rally to 1956 after hitting the 1947.50 low print before rolling over in the last 30 minutes of trading. Hopefully for any member who bought the S&P at 1948 were able to make some nice points. Last night the S&P opened at my 1937 original stop level and I am still flat. Given that fact the we have month end today and the beginning of a new month tomorrow I am reluctant to go short the market here and for these reasons I will again look to buy the S&P on any dip lower to 1921/1927 with a 1916 stop. I do not want to be short the S&P today.
EUR/USD
My Euro plan did not work well with the Euro trading lower to my 1.0965 average buy level following the release of the US GDP before stopping me out of this trade at 1.0925 and I am now flat. The Euro has very strong support from 1.08/1.09 and if Dragi again surprises by not doing enough QE/cutting Interest Rates at next week’s now key ECB Meeting then we could have another bloodbath in both the Dollar and the DAX as occurred on December 3rd last. There is no doubt in my opinion that the Bundesbank want the Euro to fall further. Today I will again look to buy the Euro on any further dip lower to 1.0850/1.0880 with a tight 1.0815 stop. Despite the negative price action I do not want to be short the Euro at this time.
March Dollar Index
Fortunately after the Dollar hit my 97.90 sell level I emailed my Platinum Members to cover this position at 97.75 as we were already long the Euro and I wanted to reduce our short Dollar exposure and I am now flat. Today I will look to sell the Dollar on any rally higher to 98.30/98.60 with a 99.05 stop.
March DAX
Just like the S&P above the DAX missed my initial 9430buy level with a 9433 low print before rallying over 100 points after I posted on Friday. This morning the DAX is trading below my initial buy range as outlined on Friday and I have decided to buy the market here in small size at 9360 with a 9295 stop. The lower Euro on the Foreign Exchange market should give the DAX some support which hopefully will transpire into a higher DAX later today.
March FTSE
I am still flat the FTSE which missed my 6140 sell level on Friday. With the market trading lower this morning and the fact that we have month-end today I will look to buy the FTSE on any further dip lower to 5960/5990 with a 5935 stop.
Dow Rolling Contract
The Dow missed my 16850 sell level by 5 points on Friday which is really frustrating when you see the market trading 350 points lower this morning. As mentioned above Friday was the most frustrating trading session that I had in a long time. Given the huge move lower in the Dow the both the Bollinger Band and Williams Index proved what valuable trading signals they are when set up correctly on the Daily Chart. Today given how much the Dow has fallen since Friday and the fact that we have month end I will look to buy the market on any dip lower to 16380/16440 with a 16340 stop. I do not want to be short the Dow today.
March BUND
No change as I am still a seller on any rally higher to 166.40/166.70 with a 167.05 stop.
Gold Rolling Contract
My Gold plan worked well on Friday with Gold hitting my 1213 buy level before having a nice rally this morning to 1234 which has enabled me to cover this position too early at 1220 and I am now flat. Today I will again look to buy Gold on any dip lower to 1210/1218 with a 1203 stop.
Silver Rolling Contract
Unfortunately I was stopped out of my long 15.20 Silver position at 14.75. Subsequently I re-bought Silver at 14.70. I am still long and I will leave a 14.25 stop on this position.
Recent Comments