The headline Non Farm Payrolls released last Friday came in a lot stronger than expected with a +242K print versus 200K expected and an upward revision of 30K to December and January which initially led to a surge in both Equity markets and the US Dollar while Bond Yields rose. However the very weak Average Earnings which came in at -0.1 versus +0.2 expected saw a reversal with the US Dollar closing below its pre-payrolls levels at 1.10 having hit a low print of 1.0902.. Equities also gave back a large chunk of their morning gains in mid-afternoon, the S&P ending Friday just 0.33% higher. The latter came despite what could be regarded as a near perfect report for risk markets – alleviating concerns about US growth ‘rolling over’ but with inflation concerns from accelerating earnings growth put back in the box to allow the Fed in the words of the Eagles, to ‘Take it Easy’ for the time being.
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 new and existing members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 280 points on Friday and is now ahead by 600 points for March having made 2265 points in February and 3365 points in January.
The Unemployment Rate held steady at 4.9% even though the Labour Participation Rate rose by 0.2% to 62.9%, with the Underemployment Rate down 0.2% to 9.7%.
In other news we got confirmation over the weekend from China’s NPC that the 2016 target would be 6.5% – 7.0% as previously flagged, but mild relief perhaps that it is not a point target of 6.5% down from 7.0% in 2015. The inflation target is set at 3% and for Urban Unemployment, at ‘less than 4.5%’. There might be some disappointment though the budget deficit target for 2016 is set at 3% of GDP – up from a 2.3% outcome but foiling suggestions China’s policy makers might be willing to announce fiscal stimulus on a scale that would take the deficit up to 4%. The Shanghai stock market closed up 0.8% at 2800 this morning.
In FX, the narrow DXY Dollar Index lost 0.4% to 97.59, the broader BBDXY closing 0.34% lower with the NOK, NZD and AUD the three strongest currencies closing up 1.35%, 1.3% and 1.2% respectively. The AUD closed at 0.7440 which is its highest closing since August 2015 helped by a 5% rise in Iron ore. The EUR/USD closed over 1.10 aided in part by a Market News Report suggesting there was as yet no consensus on the ECB Council for policy action beyond a further cut in the Deposit Rate (currently -0.3%) when they meet on Thursday.
In US rates, 2 Year Treasuries finished the week 2bps higher at 0.86% and 10s 4 bps higher at 1.875% which is an 11bp rise on the week. Meanwhile Brent and WTI closed up by $1.80 to $38.88 and $36.33 respectively and some 12% on the week.
March S&P 500
The idea of selling rallies post the NFP data worked fantastic especially with the McClellan Oscillator closing at +332 on Thursday making this plan easier. The S&P traded higher to my 2000 sell level before having a nice sell-off to 1984 which enabled me to cover this position at my 1991 T/P level and I am now flat. Subsequently the S&P rallied higher before stopping at its 200 Day Moving Average which comes in at 2008 before selling off in the last hour of trading. The MO closed on Friday at a still very high +327 print and to me it is only a matter of time before we get a decent sell-off to correct this overbought condition. The fact we have the ECB meeting on Thursday and the FOMC Meeting the following Wednesday I would not expect a massive sell-off ahead of these two key events as we know form the last six years that markets nearly always rally into a ECB/FOMC Meeting. Today I will again look to sell the S&P on any further rally to 2001/2008 with a 2013 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2025 with a wider 2042 stop. For long term players they can look to put on a more Macro Short Position from 2010/2040 with a wider 2060 stop. Now that we have more or less filled the 1994/2010 ‘Open Gap’ from early January, the big question is are we going to fill the 2012/2035 ‘Open Gap’ before heading lower? Today my only interest in buying the S&P is still on a dip lower to 1969/1974 with a 1963 stop as the 1970 is good short term support.
EUR/USD
Unfortunately the Euro missed my 1.0890 buy level with a 1.0902 low print before having a quick 140 point rally and I am still flat. I would expect the Euro to remain under pressure into Thursday’s ECB Meeting and then if the ECB again disappoints then we will see a subsequent dramatic rise in the Euro. Today I will move my buy level higher to 1.0890/1.0920 with a 1.0865 stop. I still do not want to be short the Euro at this time.
March Dollar Index
The Dollar also just missed my 98.20 sell level with a 98.08 high print following the NFP release on Friday and I am still flat. Today I will lower my sell level slightly to 97.95/98.25 with a 98.60 stop.
March DAX
My DAX plan also worked well on Friday with the market spiking higher to a 9900 print following NFP release which enabled me to go short at 9880. Subsequently the DAX got hit hard which enabled me to cover this position at my 9810 T/P level as outlined earlier to my Platinum Members and I am now flat. With the ECB Meeting on Thursday I would expect the sell-off in the DAX to be limited ahead of this key event and today I will again look to buy the DAX from 9610/9660 with the same 9550 stop. Given the pressure that Dragi and the ECB are under this week to perform I do not want to be short the DAX at this time.
March FTSE
I am still flat the FTSE and today I will raise my buy level to 6075/6105 with a 6045 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
My Dow plan also worked well with the Dow trading higher to my 17010 sell level post the NFP release before having a nice sell-off which enabled me to cover this position at my 16930 T/P level and I am now flat. Today I will again look to sell the Dow on any rally higher to 17000/17060 with a 17110 stop. I do not want to be long the Dow at this stage especially with the MO closing on Friday over +320.
June BUND
I have now rolled to the June Contract which trades at an incredible 263 point discount to the March Contract making it difficult to chart with the June Contract trading at 162.70 which is the bottom of the current distribution. The June Bund has good support at 162.40 which so far this is this morning’s low print and today I will be a small buyer from 162.20/162.50 with a 161.90 stop. Given the large difference between the March and June Contracts I do not want to be short the Bund at this time.
Gold Rolling Contract
Gold traded in a wide range on Friday and thankfully I am still flat preferring to concentrate on Silver which again worked well on Friday. Gold has got good support at 1250 and today I will be a small buyer on any dip lower to 1245/1252 with a 1237 stop.
Silver Rolling Contract
Silver had a nice sell-off following the NFP release which enabled me to buy the market at 15.20 before subsequently rallying to a 15.85 high print which enabled me to cover this position at my 15.60 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 15.15/15.45 with a tight 14.90 stop.
This is a copy of an email that I sent to my Platinum Members at 1.45 pm on Friday following the NFP release.
Hi Everyone
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