Just when many market participants including myself had started to write the US Dollar’s epitaph, it roared back to life against all major Currencies in the wake of last Friday’s Non-Farm Payrolls Report. However the Equity markets did not like the Report as it was not weak enough to keep the Fed stuck where it is indefinitely, but was not strong enough to allay fears that the economic slowdown evident in the fourth Quarter might be more than temporary as corporate profit margins look set to get squeezed further given the evidence that wages growth is finally accelerating.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/4 updated emails throughout the day. This offer is open to 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 made 190 points on Friday helped by the fact that I sent four updated emails following the release of the NFP data and is now ahead by 875 points for February having made 3365 points in January. Since I started this service last June it has made a return of over 18000 points.
The S&P 500 traded south throughout the New York trading session to close down 1.85% while the NASDAQ lost a cool 3.25% led by the 40% slide in Linkedin which wiped over $9bn off its share value. This is another great example of why I do not trade individual shares. US Treasury Yields ended the day virtually unchanged after having added 5bp from the pre-release NFP Report. This was after the algo crowd had dutifully sold the US Dollar and bought Bonds on the weaker than consensus headline Payroll number.
The Payrolls Report showed headline NFP at +151K – beneath the 190K consensus but probably not far short of the whisper number going into the release. A downward revision to December now 262K from 292K was offset by an upward revision to November to 280K from 252K. The Unemployment Rate fell to 4.9% from 5.0% even though the participation rate rose to 62.7% from 62.5% with the U-6 Underemployment Rate steady at 9.9%. The most market moving element of the report was Average Hourly Earnings, jumping by 0.5% on the month not the 0.3% expected. Annual growth is now at 2.5% down from a sharply upward revised 2.7% in December, thanks to a high side print last January at 0.6%.
In Currencies the Dollar Index gained 0.58% to 97.03, led by the 0.6% fall in EUR/USD to 1.1140 but held back by a virtually unchanged USD/JPY.
Commodities saw Brent Crude close down 1% at $34.06 while WTI lost over 2% to close at $30.89. The LIMEX Index lost 1.74% but Iron Ore added 20 cents to close at $45.73 and now well ahead of the $40 low made earlier last month. Gold was flat at $1158 – sandwiched between ‘risk off’ support and the US Dollar’s revival.
In other news China reported on Sunday its January FX Reserves data. After adjusting for for valuation changes arising from weakness in estimated non – US Dollar reserve holdings during the month, and reserves boosting impact of ongoing trade surpluses of more than $50bn a month, it looks like the PboC will have sold some $130bn worth of FX Reserves last month to limit weakness in the Renimbi.
Overnight the Nikkei closed 1.10% higher at 17000 while European Equity markets are opening higher this morning following this Chinese data. Chinese markets are closed all week for the Lunar New Year Holidays.
March S&P 500
The S&P had another wild trading session on Friday following the release of the NFP data. The S&P plan worked well as initially after the S&P traded lower to my 1892 buy level we had a nice rally to 1900 which enabled me to cover this position at my 1898 T/P level as outlined earlier to my Platinum Members and I am now flat. As I mentioned last week given the volatility it is important not to over-trade these markets and you have to take profit when you see it before it evaporates quickly. On Friday the large fall in the S&P was affected in part by the huge 3.25% slide in the NASDAQ on the back of the 40% hammering in Linkedin shares. Despite the large fall in share prices on Friday the McClellan Oscillator sill closed with a positive 49 reading. I still see positive divergence in the US stock market and this why I do not want to be short the market at this time preferring instead to continue to buy dips with a tight stop but at the same time not to be afraid to take profit early. The S&P has strong support at the recent 1865 low print and today I will look to buy the market from 1863/1869 with a 1857 stop. Again if I am taken long and subsequently stopped out of this position I will use my 5 Handle Rule to go long again with a stop below whatever new low is printed.
EUR/USD
My Euro plan worked well as shortly after the NFP was released on Friday the Euro traded lower to my 1.1120 buy level before having a nice rally which enabled me to cover this position at my 1.1155 T/P level and I am now flat. Yet again the Bollinger Band and Williams Index on the Daily chart showed how overbought the Euro was trading pre the NFP release and was due a correction. Today I will again look to buy the Euro on any dip lower to 1.1060/1.1090 with a 1.1025 stop. I will also lower my sell level in the Euro to 1.1240/1.1280 with a 1.1310 stop. The 1.13 level is key as a break and close over this level will be very bullish.
March Dollar Index
I am still flat the Dollar and today I will raise my sell level slightly to 97.65/97.95 with a 98.20 stop.
March DAX
On Friday I had lower buy levels for each Index which in effect were in a stair step fashion and this plan worked very well as I was not long more than one Index at any stage. The DAX was the last position to get hit when the market traded lower to my 9250 buy level before the market had a nice 100 point rally off its 9225 low print on Friday. However as I had a good trading day and wanted to be flat for the weekend I covered this position at 9270 and I am still flat. The DAX is trying to hold the key 9200/9300 now major support level and today I will look to buy the DAX on any further dip lower to 9150/9215 with a 9110 stop. Given how oversold the DAX is trading I do not want to be short the market at this time.
March FTSE
The FTSE plan also worked well on Friday as shortly after the NFP was released the FTSE traded lower to my 5810 buy level before the market had a nice rally to 5840 which enabled me to cover this position at my revised 5825 T/P level as outlined earlier to my Platinum Members and I am now flat. As mentioned over the past two weeks the FTSE has major support from 5600/5700 and today I will again look to buy the market on any further dip lower to 5710/5750 with a 5675 stop.
Dow Rolling Contract
The Dow is trading the best of the US Indices despite closing 200 points lower on Friday. Shortly after the NFP data was release the Dow traded lower to my 16260 buy level before having a nice rally to 16325 which enabled me to cover this position at 16300 as again outlined by email to my Platinum Members and I am now flat. As mentioned countless times the volatility that we are experiencing since last July demands that we have to T/P on any position when we see it. Today I will use any further dip to 16060/16130 to buy the Dow with a 16010 stop. I still see positive divergence in the US stock markets at this time and I will continue with my strategy of buying dips in the market.
March BUND
My BUND plan worked well on Friday with the BUND trading lower to my 163.35 buy level before having a nice rally to 163.90 this morning on the back of the weaker stock markets. Unfortunately I covered my long position too early at 163.55 and I am now flat. Today I will continue to look to sell the BUND on any further rally to 164.15/164.45 with a 164.70 stop.
Gold Rolling Contract
Gold traded as low as 1144 following the NFP release before rallying to near 1170 this morning. I am still flat Gold and today I will raise my buy level to 1145/1153 with a tight 1139 stop.
Silver Rolling Contract
Silver just missed my 14.50 buy level on Friday with a 14.60 low print and I am still flat. Today I will raise my buy level to 14.40/14.75 with a 14.10 stop.
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