The outcome from this weekend’s Australian Election remains too close to call with the prospects of a minority Government and for a more diverse Senate cross bench than previously. This uncertainty and lack of a clear majority has had a mild negative influence on the AUD/USD Exchange Rate on the open last night but this morning the AUD has reversed course and is back trading above 0.75 this morning, helped no doubt by a stronger Gold market overnight.
To mark my 1100th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 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 anyone is interested please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 30 points on Friday which was the first trading day of July having made 2550 points in June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this service in June 2015 it has averaged a monthly gain of over 2200 points.
Risk assets closed Friday on a positive note, aided by the expectations of a lower for longer yield environment as major Central Banks grapple with the added uncertainty from ”Brexit” while at the same time a sense of calm has also been a factor, courtesy of the UK political vacuum which is not expected to be resolved until early September.
Amid low trading volumes ahead of a long holiday weekend, US equities ended the week higher with the S&P 500 up 0.19% for the day closing at 2103 and 3.2% for the week. On the other side of the Atlantic, the FTSE 100 rose smartly on Friday by 1.3% to close at 6578. Amazingly it is now 240 points higher or 3.8% than where it was before the Brexit Referendum result. Last week was the best week for the FTSE since 2010.
In Bonds, 10y Treasury Yields briefly traded to a new historic low at 1.385% before recovering later in the session to end the week at 1.44%. Meanwhile 30y Treasuries and 10y UK Gilts closed at new historic lows at 2.225% and 0.86% respectively. Incredibly an extra $1 Trillion of Government Bonds have ended the week with a negative yield for a grand and mind boggling total of $12 Trillion world wide.
The uncertainty post ”Brexit” has increased expectations of further easing by some Central Banks and in the case of the Fed, delay and rate hikes over the short to medium term. These factors have contributed to the move lower in core global yields and it will be interesting to see what extent a strong US Payrolls Report this Friday changes this perception. On this point a solid ISM Manufacturing print at 53.2 versus 51.4 expected coincided with a move higher in US Treasury Yields. Notably, as well, at 50.4 the Employment sub index was back above the break even line.
As for currencies, a fall in long dated UST yields and an increase in risk appetite appear to have weighed on the US Dollar. Excluding Sterling, all other G10 currencies outperformed the US Dollar on Friday. The Yen was the top of the leader board while Sterling’s underperformance could probably still be attributed to Thursday’s comments from Bank of England Governor Carney that ‘some monetary easing will likely be required over the summer’.
As for Commodities Gold is back trading over $1350 this morning while Silver continues to explode to the upside reaching at high of $21.15 overnight before easing back to $20.40 currently.
In an interview on CNBC, Fed Deputy Chair Fisher sounded cautious and gave the impression that the Fed is on a wait and see mode noting that May’s Payrolls was a ’cause for concern’. Meanwhile speaking in London, the Fed’s Mester said that risks and uncertainty have increased after the UK’s Referendum and she also noted that one mechanism in which ”Brexit” could affect the US economy is through US Dollar appreciation, which could dampen US export growth and delay inflation’s return to 2%.
With the US markets closed today for Independence Day we have no US data releases. This morning at 9.30 am we have UK Construction PMI and at 10.00 am we have Euro-Zone PPI.
September S&P 500
With the US markets closed today I would expect the S&P to trade in a narrow range. Unfortunately after I posted on Friday the S&P just missed my 2076 buy level with a 2081 low print before going on to have a 20 Handle rally and I am still flat. There is no doubt the Central Banks are still in control of the World’s equity markets doing everything in their power to prevent any sort of major sell-off. As mentioned countless times over the past few years it is just a waste of hard earned capital in trying to sell these market for more than a few hours/few days before aggressive short covering returns. However as we are approaching the pre ”Brexit” level I will now look to sell the S&P on any further rally to 2112/2120 with a 2125 stop. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of the all-time high at 2134 with a 2142 stop. I will also raise my buy level slightly to 2080/2086 with a 2075 stop.
EUR/USD
I am still flat the Euro and I will leave my buy level unchanged at 1.1010/1.1050 with the same 1.0970 stop. I will also be a small seller on any further rally to 1.1190/1.1230 with a 1.1265 tight stop. Remember a break and close over 1.1240 that hold for more than a few days will be very constructive.
September Dollar Index
I am still flat the Dollar and today I will now lower my sell level slightly to 96.30/96.70 with a 97.05 stop.
September DAX
Unfortunately the DAX just missed my 9810 sell level with a 9803 high print this morning before the market sold off and I am still flat. Given the fact that we have so few traders at their desks due to the US Holiday we could see some more volatility in the DAX. Today I will now raise my sell level to 9840/9890 with a 9935 tight stop. I will also raise my buy level to 9595/9650 with a 9545 stop.
September FTSE
In hindsight I should have just stayed long the FTSE all week as it is the one market that I have been very bullish on as shown by the IG interview that I did last Monday morning when the FTSE was trading under 6000. As mentioned in my economic commentary above the FTSE has had its best week since 2010 and as shown by the comments from Bank of England Governor Carney the Bank will do whatever it takes to keep the UK from having a stock market crash. There is no doubt that over time the 12% devaluation of Sterling will help the UK maintain a competitive advantage over Europe despite what ever transpires after the UK Government finally implements Article 50. However The FTSE is very overbought after last week’s move but despite the market trading at the top of its Bollinger Band and Williams Index I still would not go short. Today I will now move my buy level higher to 6480/6530 with a 6440 stop.
I am still flat GBP/USD and today I will lower my buy level slightly to 1.3160/1.3210 with a 1.3110 stop.
Dow Rolling Contract
The Dow is back above where it was trading ahead of the UK Referendum result having traded down 1000 points before reversing all of those losses in the past few days. Thankfully we were not short the Dow for any of this move and I am still flat. Today I will be a small seller on any further rally higher to 18080/18140 with a 18200 stop. Given how overbought the Dow is trading I do not want to be long the Dow at this time.
September BUND
Unfortunately the Bund twice just missed my 167.50 sell level on Friday before selling off this morning and I am still flat. Today I will now lower my sell level to 167.25/167.55 with a 167.85 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1312/1320 with a 1305 stop.
Silver Rolling Contract
The move in Silver has just been incredible over the past week with as mentioned above in my economic commentary Silver traded as high as 21.15 over night before selling off 100 points. Thankfully after I posted on Friday Silver traded back below my initial level at 19.10 before unfortunately as I wanted to book some points for Friday I covered this position at 19.40 and I am still flat. The main reason that I covered this position is the fact that the Daily Sentiment Index for Silver is near all-time highs at over 90%. However I did mention that once Silver broke 19.00 it has no real resistance until 21.50 but stupidly I did not believe this myself and cut my position too quickly. Today I will again look to buy the market on any further dip lower to 19.40/19.90 with a 18.95 stop. The next major support for Silver comes in at 18.10 and I would be a very aggressive buyer on any dip lower to this level over the coming days.
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