While equity markets had day of consolidation, the USD and US Treasury yields had a decent move higher aided by increasing hopes over US Tax reform. However, nothing concrete has been announced, but there is a growing feeling that something will be done amid Trump’s bipartisan approach along with the need for Republican to score some runs ahead of next year’s election. Meanwhile quietly in the background, commodities had another mixed day, oil is up, but copper and nickel are down. The USD range traded early in the yesterday’s trading session, but then tweets and news reports over a possible Republican announcement on US Tax reform lifted the USD across the board.
To mark my 1400th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 52 points yesterday but is still ahead by 155 points for September, having made 1560 points in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
Kevin Brady chairman of the House Ways and Means Committee, told the chamber’s Republicans that White House leaders and congressional leaders “ will release a consensus document with the core elements of big, bold tax reform” during the last week of September. White House Budget Director Mick Mulvaney said the target date is September 25. The news lifted USD indices (BBDXY +0.40% and DXY +0.61%) and saw the big dollar outperform across the board. The CAD managed to only lose 0.05% thanks to an uptick in oil prices, but all other G10 currencies fell between 0.4% and 0.90%.
After trading to an intra-day high of 0.8044, the AUD drifted down to a low of 0.7971 and now it has settled around 0.7985. This dip in the currency tested the upward trend established since mid-May and now the AUD is sitting on the trend line. AU Labour force today and US CPI tomorrow are important data releases and could have an influence on the near term direction of the currency. US CPI numbers have printed below expectations for 5 months in a row and another soft print this afternoon would raise serious question over the possibility of a Fed rate hike in December.
Sterling fell 0.65% to 1.3209 despite the fact that UK Unemployment (ILO measure) dropped to another new all-time low at 4.3%. Earnings for July were lower than forecast at +2.1%y/y (vs +2.2% f/c) and unchanged vs June. This after Tuesday’s spike in (Aug) CPI to 2.9%, meaning real incomes are lower still. The lack of real income growth muddies the waters for the BoE which meets this morning.
The NZD is down 0.78% to 0.7241, weighed down by broad USD outperformance but is still trading within a range of around 0.7150-0.73. The Euro also suffered the same faith, dropping almost one big figure from 1.1980 to 1.1885. At the margin Euro’s underperformance is also explained by the small decline in 10y Bunds, 1bps to 0.40% against a the rise in 10y UST yields to 2.188%, from 2.155%.
The Swedish Kroner (SEK) was the big underperformer (-0.93%) given back all of its CPI gains after the final 2Q GDP reading showed that Sweden grew 1.3% q/q versus the preliminary figure 1.7%.
Looking at commodities oil prices are up between 1.6% and 2.3% aided by reports from the IEA and OPEC forecasting stronger demand. Meanwhile copper fell 1.7% to $2.9835, the lowest in more than three weeks and Nickel had another bad day, dropping 5.3%. Gold ended 0.5% lower and iron ore was essentially unchanged at $76.6.
This morning on the Economic Front we UK Retail Sales at 9.30 am. This is followed at 12.00 pm by the Bank of England rate announcement where the consensus view is for an unchanged outcome, however recent media stories suggest the Bank is likely to warn investors, businesses and households that they underappreciate how soon rates may rise in the UK. That said, after yesterday’s stronger than expected CPI reading, the market has brought forward expectations of a BoE rate hike to May 2018 from December 2018. This is followed at 1.30 pm by US CPI where the risk is for a higher print due to the 5% rise in gasoline prices since Hurricane Harvey. Finally we have the Bloomberg Consumer Comfort Index at 2.45 pm.
At 4.30 pm the Bundesbank’s Weidman speaks in Frankfurt.
December S&P 500
I have now rolled to the December Contract which trades at a small discount of 2 full points to the September Contract. The S&P traded in a very narrow range on low volume as we wait for the Quadruple Expiration tomorrow. These Expiration weeks are difficult to trade especially for the September Contracts and this for me has been the most challenging time for trading since the first two weeks of September 2016. Yesterday the NYSE TRIN closed at 0.89, which is the most over-bought level since mid-December of last year. This implies that another temporary high is close but we will probably have to wait until next week for this sell-off to start. Today I will be a buyer on any dip lower to 2479/2485 with the same 2474 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2458/2464 with a 2453 stop. Remember we still have the large ‘’Open Gap’’ from 2461/2472 in the December Contract from last Monday.
EUR/USD
As mentioned above this is a challenging market with the Euro selling off yesterday on the hope we will finally see some tax cuts announced by September 25. Yesterday the Euro traded the whole of my 1.1895/1.1935 in one large red candle which now has me long at an average rate of 1.1915. I will leave my stop unchanged at 1.1860 and if I am stopped out of this position I will be a more aggressive buyer from 1.1790/1.1840 with a 1.1760 stop. The 1.1800 area is key as a break below here would imply that we have seen a top at the recent 1.2092 high that should last for a while. My own view is that we will have at least one test of the 1.20/1.21 resistance area before finally selling off.
December Dollar Index
I am still flat the Dollar which rose sharply yesterday. I still believe the Dollar will have one more sell-off before finally putting in a floor and today I will be a seller on any rally higher to 92.60/93.00 with a 93.30 stop.
December DAX
I have now rolled to the December Contract which trades at a small 10 point discount to the September Contract. Yesterday the DAX traded in a narrow range with strong resistance at the 12570/12620 area after its 550 point rally in a week. Thankfully we have not been short and today I will continue to look to buy the market on any dip lower to 12390/12440 with a 12350 stop. Despite the DAX been severely overbought I still do not want to be short the market at this time.
December FTSE
I have now rolled to the December Contract which trades at a 40 point discount to the September Contract. Unfortunately the Sept Contract just missed my buy level after I posted yesterday morning before rallying 50 points. The December Contract has support from 7250/7290 and today I will be a buyer in this area with a 7220 stop.
Dow Rolling Contract
I am still short the Dow in tiny size at 22030 with the same exit level of 22055. Yesterday the McClellan Oscillator closed at +110 down slightly from Tuesday’s +128 close and may be a warning sign that we may finally see the Dow have some profit taking. The Dow continues to hold below its August 8, high at 21179 but the market will probably hold in until we get the Expiration out of the way tomorrow. Today I will again look to sell the Dow on any further rally to 22190/22250 with a 22300 stop. If I am taken short at this sell range I will then raise my T/P level to 22120.
December BUND
I am not have much luck this week as the Bund just missed my 162.10 exit level on my 162.12 long position with a 162.07 rebound high before stopping me out of this trade in the last few minutes at 161.60 and I am now flat. This is frustrating as the market is nervous ahead of the Bundesbank’s Weidman who speaks later at 4.30 pm in Frankfurt. Today I will now lower my sell level to 162.05/162.40 with a 162.70 stop. The Bund has strong support from 160.95/162.30 and today I will be a buyer in this area with a 160.65 stop.
Gold Rolling Contract
I am still flat Gold which again sold off small after I posted yesterday morning. As I am still long Silver I will now reduce my buy range to 1306/1314 with the same 1299 stop. The 1300/1310 is key support and any test of this area should lead to a decent rally.
Silver Rolling Contract
Finally Silver traded lower to my second buy level at 17.70 which has me long at an average rate of 17.87. I am now holding this long Silver position too long and today I will use any rally to 17.95 to exit this position. If I manage to T/P at this level I will be back with a new update for my Platinum Members.
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