The August Employment Report turned out to be something of a Goldilocks affair – not hot enough to further eliminate the risk of a September Fed move but not cold enough to instill serious doubts that the economy might be a slowing more broadly after the jolt from last Thursday’s weak Manufacturing ISM Survey.
To mark my 1150th 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 ended flat on Friday to close down 70 points for September having made 1722 points in August and 1682 Points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
Payrolls rose by 151K against a consensus of 180K, with largely offsetting revisions to July and June. Unemployment stayed at 4.9% rather than fall to 4.8% as had been expected with Participation unchanged at 62.8%. Average Hourly Earnings rose by just 0.1% against a 0.2% expectation and this pulled annual growth down to 2.4% from 2.6%, though statistical quirks probably depressed the August outcome.
Stocks liked the inference from the report – that the economy is still travelling okay but the Fed probably won’t move at least before December – with all three major US Indices gaining 0.4% and the VIX dropping back below 12.0 to close at 11.98. The US Dollar ended the day little changed after a bungee jump after the NFP was released.
Bill Gross was out again ascribing a near 100% probability to a September Fed move, but the US Money Market voted otherwise, knocking down September Fed tightening odds to 29% from 33% while keeping December about where it was on Thursday at 69% versus 68%. US Bond Yields rose slightly over the 24 hours through Friday’s New York close though were unchanged relative to pre-NFP levels having initially fallen by some 5bps. Meanwhile 10 Year Treasuries ended the day +3.4bps to 1.603%.
IN FX, the narrower DXY Dollar Index finished 0.2% higher while the broader BBDXY Index finished virtually unchanged. This disguises a fair amount of post-Payrolls volatility, with the US Dollar initially dropping sharply as the algorithmic trading outfits dutifully responded to weaker than expected headlines for Payrolls, Unemployment and Earnings. Losses were subsequently fully retraced and in the case of USD/JPY, extended to a high of 104.32 before finishing at 103.92.
Commodities were stronger for the most part, with Gold rallying $11 to close at 1325 and Oil (WTI) +$1.28 to $44.44.
The only Fed Official to speak after the Payrolls number was Richmond Fed Lacker who is a noted hawk but not a current FOMC voter. He said the weaker price of hiring in August still left the job market on a strengthening path and the case for higher rates would only grow stronger unless job growth slowed ”significantly in the months ahead”.
This morning on the economic front we have German, EuroZone and UK Services/Composite PMI at 8.55 am, 9.00 am and 9.30 am respectively. With the US Markets closed today for Labour Day, the only other economic release is Euro-Zone Sentix Investor Confidence and Retail Sales at 9.30 am and 10.00 am respectively.
September S&P 500
Both the S&P and Dow closed higher for last week as the markets twice rebounded from sell-off’s on Wednesday and Thursday proving yet again until we get a sell-extreme that you can only be short these markets for a few hours before we see aggressive buying return. The S&P has two strong levels of support from 2150/2158 and then the major one at 2130/2135. For me to start to set up a Macro bearish position I will need to see the S&P break and close below 2130. The rally on Friday was strong with the McClellan Oscillator improving to close with just a small negative -5 reading. The S&P has strong resistance at its previous high at 2193 and to me it is only a matter of time before we break this level and trade well into the 2200’s. Last week was a frustrating trading week for me as I was twice stopped out of long S&P position’s near the low of the day before each time the market turned around and rallied into the close. With the US Cash Markets all closed today, the S&P Futures Globex Market will close at 4.30 pm this afternoon. Today I will move my buy level higher to 2168/2174 with a 2162 stop. Meanwhile I will leave my sell level unchanged at 2191/2196 with a 2202 stop.
EUR/USD
I am still flat the Euro and today I will raise my buy level slightly to 1.1110/1.1140 with a 1.1065 stop. Remember the 1.1070/1.1100 is strong support and it will take a break and close below here before we see the Euro accelerate to the downside. The Euro has strong resistance from 1.1245/1.1295 and I will be a small seller in this area with a 1.1325 tight stop.
September Dollar Index
Today I will lower my sell level in the Dollar to 96.10/96.40 with a 96.75 stop. Despite the upside Key Day Reversal for the Dollar on August 26th I still do not want to be long the Dollar at this time.
September DAX
The DAX finally hit my 10690 sell level after the NFP was released on Friday. As I was already stopped out of my FTSE position I no longer wanted to be short the DAX and I emailed my Platinum Members to exit this position for a small gain at 10670 and I am still flat. With the Euro unable to hold on to its gains on Friday post-Payrolls this was another reason to exit any short DAX position. The DAX continues to trade in a sideways range, but eventually I expect this market to break higher and challenge its 10800 high for the year. Today I will raise my buy level to 10625/10675 with a 10570 stop. I no longer want to be short the DAX at this time.
September FTSE
The last two days has seen me getting whipsawed in the FTSE. After going long on Thursday I was stopped out of this trade near the low of the day before the FTSE rallied strongly into Thursday’s close and this rally continued on Friday with the market now 200 points higher from the low made on Thursday afternoon. To compound my woes the FTSE eventually traded higher to my 6850 sell level on Friday before stopping me out of this position for a small loss at 6880 and I am now flat. The price action is now telling me that it is only a matter of time before the FTSE finally breaks its 2000 all-time high at just over 7000. Today I will now raise my buy level to 6840/6870 with a 6810 tight stop. The break and close over 6830 on Friday was a strong buy signal.
Dow Rolling Contract
I am still flat the Dow and today I will now raise my buy level to 18410/18465 with a 18350 stop. I still do not want to be short the Dow at this time.
December BUND
I have now rolled to the December Contract which trades at an incredible 268 point discount to the September Contract. My September Bund plan worked well on Friday with the market trading lower to my 166.95 buy level before rallying strongly this morning. Unfortunately with the September Contract expiring on Wednesday I emailed my Platinum Members to exit this position at 167.00 and I am now flat. Today in the December Contract I will be a buyer on any dip lower to 164.10/164.40 with a 163.70 tight stop.
Gold Rolling Contract
Gold has now rallying strongly off its 1300/1310 now strong support and I am still flat. Today I will raise my buy level slightly to 1306/1313 with a 1299 stop.
Silver Rolling Contract
Silver had a very strong trading session on Friday with the market managing to close over its key 19.20 resistance level. I am still flat and today I will now raise my buy level to 19.10/19.30 with a 18.70 stop.
IG Index in Dublin are running a Trading Ecosystem Event in Dublin on September 14 from 6.00 pm to 8.30 pm. I am one of six speakers at this key event and if anyone of my members would like to attend they can register on the following link:
https://www.ig.com/uk/trading-ecosystem-with-tradernoble
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