Market optimism has been dented following a string of news that provided cause for pause on the consensus view over the upbeat global growth outlook. US data disappointed, Draghi sounded dovish, the White House confirmed its intentions for more China sanctions, the UK expelling Russian diplomats and the Libor/OIS spread widened again, further tightening offshore US Dollar short term funding. February US Retail Sales underwhelmed against expectations of a tax cut induced rebound. The headline reading printed a third consecutive reading of -0.1%mom against expectations of an uptick to 0.3%. The retail sales ‘’control group’’, which feeds directly into GDP, rose only 0.1% in February, despite near-record levels of consumer confidence.
To mark my 1525th 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 in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 25 points yesterday and is now ahead by 993 points for March, having made 2256 points in February, 879 points in January, 946 points in December, and 823 points in November. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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US equities opened higher, but then immediately headed south factoring the softer US data that had been released an hour earlier. Later in the afternoon session the White House confirmed it wants to reduce the US Trade deficit with China by $100bn, following yesterday’s reports on the administration’s plans to impose trade tariffs on $60bn of imports from China. The news dented to risk sentiment again, dragging US equities and US Treasury yields lower. Then the move was further compounded by the release of the Atlanta Fed GDPNow index showing a trim to US GDP growth for Q1-18 to 1.85% from 2.48%. Meanwhile, a Chinese foreign ministry spokesman said ‘’if the United States takes actions that harm China’s interests, China will have to take measures to firmly protect our legitimate rights’’. All major US equity indices closed in negative territory.
The move lower in US Treasury yields has been led by the back end of the curve with the 10y and 30y yields down 3.4bps and 4.6bps respectively. 10y UST yields traded to an overnight low of 2.7988%, coming close to the lower end of the 2.78%-2.95% range that has been in place over the past 5 weeks. The 10y rate now trades at 2.813% while the 30y rate is at 3.053%. The 2y10y curve flattened for a 3rd consecutive day with the spread currently at 55.5bps, its lowest level since January 26th. 10y UK gilts (-5bps) and Bunds (-2.6bps) also closed lower, at 1.4337% and 0.593% respectively. News that the UK had decided to spell 23 Russian diplomats and Draghi’s dovish remarks (see more below) were additional factors helping the move lower in European yields.
Meanwhile currency moves have been relatively contained with the USD little changed in index terms. SEK is the top G10 performer, up 0.48% with pair currently trading at 8.18. Yesterday Sweden CPI data for February printed in line with expectations at 0.7%mom. The mild risk aversion tone to yesterday’s trading session plus ongoing political concerns surrounding the Abe government has seen USD/JPY drift lower over the past 24hrs with the pair currently trading at 106.10, after trading to an intraday high of 106.75.
The Australian Dollar was higher seemingly still basking in the glory from yesterday’s better than expected China activity data, a factor that also boosted most commodities. Iron ore leading the way, up 0.59%, Copper 0.50% and oil prices up around 0.35% ( after some volatility on the back of news that OPEC raised its expectation for supply growth from the US and other producers for a fourth consecutive month). Steam coal, on the other hand, has remained under pressure down 1.02% on the day. Taking a step back, the AUD continues to find the air quite thin around the 0.7920/30 area, but at the same time the pair remains in a mild upward trend that began on the first day of the month which saw the currency trade down to a low of 0.7713.
The Euro currently trades at 1.2368, after trading to a low of 1.2347 yesterday afternoon following comments from ECB President Draghi noting that recent EUR gains ‘’weren’t all warranted by economic fundamentals’’. The President also noted that the ECB is more confident on ‘’inflation converging towards our aim over the medium term’’, but that further evidence is needed. Accordingly, monetary policy ‘’will remain patient, persistent and prudent’’.
This morning on the Economic Front we have no data of note due from either the UK or the Euro-Zone. At 12.30 pm we have US Empire Manufacturing, Philly Fed Index and the Weekly Jobless Claims. Finally we have the NAHB Housing Market Index and the Total Net TIC Flows at 2.00 pm and 8.00 pm respectively.
June S&P
With the March S&P Contract expiring tomorrow I have now rolled to the June Contract. This Contract trades at a 5 Handle premium to the Cash S&P
Yesterday my March S&P plan worked well with the market initially trading lower to my 2763 buy level before rallying to my revised 2767 T/P level as emailed earlier to my Platinum Members. Subsequently the S&P sold off to my second buy level at 2745 before rallying to my 2750 T/P level and I am now flat
The June Contract has strong support from 2736/2750 and as we have seen from the overnight price action it is so difficult to be short the market with the S&P rallying 18 Handles off its low. Today I will again look to buy the June Contract on any dip lower to 2740/2748 with a 2733 stop. Given how close we are to long term support I do not want to be short the market at this time but a break and close below 2730 will see me change my view.
EUR/USD
I am still flat the Euro which traded in a narrow range yesterday. Today I will leave my buy level unchanged from 1.2280/1.2325 with a 1.2245 stop. Remember a break and close below 1.2255 is a sell signal.
June Dollar Index
I am still long from yesterday morning at 89.25 with the same 88.85 stop. I will now lower my T/P level on this position to 89.50.
June DAX
I have now rolled to the June Contract which trades at a small 4 point premium to the cash market.
Surprisingly despite the US Equity Indices getting hit hard yesterday the DAX did not sell off and I am still flat. I have to respect the price action in the market although I am reluctant to chase this market higher. Today my only interest in buying the DAX is on a dip lower to 12130/12190 with a 12080 stop.
June FTSE
I have now rolled to the June Contract which trades at a hefty 85 point discount to the Cash Ftse
It took a while for my March 7110 initial buy level to get hit but finally overnight we traded lower to this buy level before rallying to my 7135 T/P level and I am now flat.
Given the size of the discount in the June Contract which as we know must converge with the cash Ftse by the middle of June, it is going to be difficult to be short the June Contract. Today I will be a buyer of the June Contract on any dip lower to 6990/7030 with a 6950 stop.
Dow Rolling Contract
Yesterday’s Dow plan did not work well. The last few months have seen exceptional gains for my Platinum Members as by and large we have been lucky with any surprise news releases. However yesterday on the news of the $100bn tariffs with China the Dow fell 400 points in one large red candle. This move lower had me long at an average rate of 24900 before stopping me out of this trade at 24730 and I am now flat. You cannot trade without stops and it is frustrating to see the market trading 140 points above where I was stopped out yesterday as yet again the buy the dip continued. Thankfully we made most of these points back with other trades yesterday. So far the 24750 major support level is holding but if the Dow cannot rally back above 24950/25050 over the coming days then we could well see this market accelerate to the downside. The Dow has initial support at 24600 and today I will be a small buyer on any dip lower to 24550/24650 with a 24480 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 24210/24320 with a 24150 stop. The McClellan Oscillator is still in positive territory which is one reason I am reluctant to go short the Dow at this time.
June NASDAQ
I have now rolled to the June Contract which trades at a 25 premium to the Cash NASDAQ 100 Index.
It took a while but finally overnight the March Contract traded lower to my 7110 buy level before rallying to my 7140 T/P level and I am now flat.
For the June Contract we have good support from 7035/7085 and today I will be a buyer on any dip to this area with a 6990 stop. I still do not want to be short the NASDAQ at this time.
June BUND
The Bund just missed my buy level before rallying on Dragi’s dovish comments and I am still flat. Even though the yield on the Bund at just 59 basis points is insane it is very difficult to be short the market. I have to respect the price action and today I will now raise my buy level to 157.10/157.50 with a 156.75 stop.
Gold Rolling Contract
The volatility in both Gold and Silver has collapsed this year with little or no movement each day. I am still flat Gold and today I will raise my buy level slightly to1304/1312 with a 1297 tight stop.
Silver Rolling Contract
No change as I am still long Silver from last week at 16.66 with the same 15.90 stop and 17.05 T/P level. I will lower my T/P level to 16.70 if my second buy level at 16.25 is filled.
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