U.S. equities fell on the last day of a solid quarter, comments from Fed Dudley drag 10y UST below 2.40% and the US Dollar had a mixed trading session, softer against GBP and JPY, but stronger against most other G10 currencies. US data releases were also mixed and didn’t have much of an impact on markets. The S&P 500 ended Friday down 0.2%, but up 5.5% for the quarter. The Dow dropped 0.3% on Friday, but sealed the quarter with a solid 4.6% gain and the NASDAQ ended the week almost unchanged at 0.04% but up a whopping 9.8% in Q1, its best quarter since 2013. The VIX closed the week at 12.37, almost unchanged on the week and marginally higher than its average of 11.73 year to date.
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For anyone following my Platinum Service it made 35 points on Friday, and finished March with a gain of 1335 points 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 1750 points.
The US Dollar ended the week under a little bit of pressure, following the move lower in UST yields in last few hours of trading. In the event, DXY was little changed on the day (- 0.06%) and after trading to a low of 98.78 on Monday, it closed the Quarter above 100 and up 0.73% on the week (BBDXY was -0.1% on Friday and up 0.27% on the week). Looking at G10 currencies, EUR remained under pressure on Friday with the EU CPI data printing below expectations (headline CPI for March printed at 1.5% y/y versus 1.8% exp. while core CPI fell to 0.7% vs 0.8% exp.) and consistent with the softer German and Spanish CPI reading the previous day. On Monday EUR reached an intraday high of 1.0906, but it closed the week at 1.0652 weighed by a pull back in expectation for the timing on the ECB QE exit strategy. Sterling was not only Friday’s top G10 performer against the USD (0.62%), it was also the best performer for the week (0.66%), despite the fact that the UK formally commenced its divorce process with Europe. Cable ended the week at 1.2550 and with speculators still severely short, the risk of short covering as well as key technical levels suggest the pound can still tick a little bit higher.
Meanwhile the Australian Dollar has remained contained within its 0.7585 and 0.7685 range held since March 22. The pair closed the week at 0.7629, little changed on the week. AUD support from steady to stronger commodity prices has been offset by hesitant risk appetite amid uncertainty surrounding US trade and fiscal policy.. Similarly NZD has also been treading water, the NZ economy remains buoyant, but the outlook for dairy continues to weigh on the NZD. The kiwi ended the week just above the 70c mark, -0.31% on the week, but near the middle of its 0.6970-0.7090 range held over the past 10 days.
The Japanese Yen is still a beta play on UST yields and with 10y USTs rallying on Friday from a high of 2.428% to close the week at 2.387%, USD/JPY followed the move dropping from ¥112.20 to ¥111.39. The move lower in UST yields was triggered by dovish comments from Fed Dudley with the NY Fed president noting that three interest-rate hikes in 2017 is a “reasonable” projection and that the Central Bank may also begin shrinking its balance sheet later this year or in 2018, possibly pausing rate increases in the process. However his comment that “we have maybe 100, 150 basis points of tightening ahead, perhaps” was interpreted as dovish as it suggested a terminal rate of somewhere in between 2% to 3% rather than the 3% suggested by the median dot plot.
US core PCE edged up a little on a yoy basis from 1.7% to 1.8% yoy (+0.2% m/m, Jan revised up), but the reading remains slightly below the Fed’s 2% goal. US Personal Income and Spending for February printed broadly as expected (income +0.4% in line, with a one-tenth upward rev, spending one tenth below f/c at +0.1%, with no rev). So the spending data continues to suggest Q1 is going to be soft for private consumption. The Atlanta Fed’s GDP Now estimate slipped to just 0.9% for Q1.
As for commodities, WTI oil consolidated above the $50 mark ending the week up 5.5% and in contrasting fortunes, iron ore closed the week at $80.39, down 1.7% on the day and 5.5% on the week. Met coal was unchanged on Friday but up 14.8% on the week while gold and thermal coal were little changed on the day. On Saturday and against the trend seen in the official PMI reading, China’s Caixin PMI fell to 51.2 in March from 51.7 previously. Weakness was concentrated in exports, clouding the outlook on foreign demand.
This morning on the economic front we have German, Euro-Zone and UK Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone PPI and Unemployment. Next we have US Manufacturing PMI at 2.45 pm. Finally at 3.00 pm we have ISM Manufacturing and Construction Spending.
June S&P 500
Friday, was another day of small margins with the S&P missing my initial 2367 sell level with a 2366.50 high print before having a late sell-off on the revised Atlanta GDPNow forecast of Q1 growth coming in at just 0.9%. As I mentioned last week I believe we will get a better shot at getting short the S&P in the coming days and this upcoming sell-off could well last a few weeks before we see new all-time highs before the real bear market starts at the end of this year. The key data to be released this week is Friday’s Non-Farm Payrolls. Today I will again look to sell the S&P on any rally higher to 2370/2376 with a 2381 stop. I will also raise my buy level slightly to 2348/2354 with a 2343 stop.
My Euro plan worked well with the Euro trading lower to my initial buy level at 1.0675 before rallying back above 1.07. I n continuing with my theme of banking points when available I emailed my Platinum Members to exit this trade at 1.0695 and to look to re-buy the Euro on any subsequent dip lower to 1.0655. This latest buy level was filled just before the New York close and as I want to get the month of to a positive start I have just cut this position here at 1.0670 and I am now flat. The Euro has very strong support from 1.0610/1.0640 which is a three month uptrend and if this trend is to continue we should not see the Euro break 1.06. For these reasons I will again look to buy the Euro in the above support area with a 1.0585 tight stop. Despite the negative price action over the past week, I still do not want to be short the Euro ahead of this three month uptrend.
June Dollar Index
The Dollar traded in narrow range on Friday. I am still flat and I will leave my sell level unchanged at 100.75/101.10 with the same 101.40 stop.
The rally in the DAX continues with no apparent inclination to decline. As the DAX approached my sell range on Friday I emailed my Platinum Members to cancel this order as I did not want to be short the DAX over the weekend despite its severely over bought condition. For those members who did sell the DAX the market traded to the top of my 12370 sell level before trading to an overnight low at 12325. However this morning the DAX has tested and broken the key 12400 resistance level which is just above its 6 year trend line at 12350/12370. Even though the DAX is trading above this key trend line, I cannot buy this market and today I will again look to sell the DAX on any further rally to 12420/12475 with a 12520 stop. Again I am only trading the DAX in very small size as I know most of my members do not trade this market.
Twice the FTSE missed my 7245 buy level by juts two points before rally strongly and I am still flat. The strength of Sterling is certainly weighing on the market especially with EUR/GBP trading below 0.85. Today I will lower my buy level slightly to 7200/7230 with the same 7170 stop. I will still look to sell the market on any rally higher to 7315/7345 with a 7370 tight stop.
Dow Rolling Contract
The Dow also traded in a narrow range on Friday with the market trading above and below positive territory all day. However internally the market again improved with the McClellan Oscillator closing higher with a +107 print. I am still flat the Dow and I will continue to look to sell the market on any rally higher to 20780/20840 with a 20895 stop. I do not want to chase this market higher and today I will leave my buy level unchanged at 20530/20580 with the same 20470 stop.
The Bund also traded in a narrow range on Friday and I am still flat. The Bund is overbought short term and today I will lower my sell level slightly to 161.80/162.10 with a 162.40 stop. Meanwhile I will leave my buy level unchanged from 160.45/160.85 with the same 160.15 stop.
Gold Rolling Contract
Gold continues to have difficulty in breaking its key 1260/1265 resistance level. However if we do break and close over this level we could we see a quick move higher to at least $1300. Today I will move my buy level slightly higher to 1228/1235 with a 1222 stop.
Silver Rolling Contract
Silver rallied to an afternoon high at 18.27 on Friday just missing my 18.30 T/P level. In keeping with my theme of banking points when available I emailed my Platinum Members to exit this trade at 18.20 and I am still flat. Silver has very strong support from 17.70/18.00 and as long as we do not break and close below 17.70, we could well see a spike higher to at least $19. Today I will again look to buy the market on any dip lower to 17.75/18.05 with a 17.40 tight stop.