Three remains the number of times the Fed thinks it will most likely raise rates this year in total, and again in 2018. Together with the absence of any reference to when balance sheet shrinkage might commence (either in the FOMC statement or in Janet Yellen’s press conference) and a view that inflation – currently described as below target ex-food and energy – is likely to stabilise around 2% over the medium term rather than move above, marked out the Fed affair as slightly more dovish than some were positioned for going in to the FOMC pronouncements. The dissent of one FOMC member, Neel Kashkari, in favour of no change today was noted though really no surprise. The Fed wasn’t dovish per se, but with near record short speculative positioning in the US interest rate futures markets, and an expectation that if the Fed was going to do anything today with the ‘dots’ it would be to ratchet three up to four for either this year or next, markets really only had one way to react. Hence 10yr yields are down some 10bps (to 2.498%) and 2s down 7 bps.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 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 can you please contact me on firstname.lastname@example.org
For anyone following my Platinum Service it made 19 points yesterday and is now ahead by 615 points for March, having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
That reaction has been most pronounced in currency markets and where the Aussie dollar – already in the ascendancy during the late APAC and European morning session – has jumped a full cent to spend time briefly back on a 0.77 handle (high of 0.7719). The New Zealand dollar isn’t far behind, up 1.5% since this time yesterday and for the first time in over a week, to a high of 0.7039. I should also acknowledge here a very past 14 hours for commodities either side of the Fed, with oil up around a dollar, gold by almost $20 and iron ore up $2.79 to $90.93 – the first time above $90 since the beginning of the month.
Ahead of the Fed, US data showed CPI and Retail Sales coming in much as expected. With the core CPI measure rising 0.2% and, meaning year-on-year at 2.2% down from 2.3% (the Fed’s preferred PCE deflator core measure, implicitly reference in the FOMC statement, remains below 2%). Headline CPI, at 2.7% is now at its highest since December 2012. Retail Sales rose by 0.1% as expected on the headline, 0.2% ex-autos versus +0.1% expected and with some favourable back revisions. The NAHB Housing Index was very strong at 71 from 65, probably the result of very favourable weather. Earlier Wednesday, UK labour market data shows employment strong (and unemployment down) but Average Earnings weak (down to 2.2% 3M Y/Y from 2.6% previously).
In other news the Dutch Election results came in better than expected for the ruling VVD party and current PM Mark Rutte which positioned him for a third successive term as Prime Minister. The Freedom Party led by Geert Wilders only gained five extra seats for a total of 20 and well below what was expected. This news helped the Euro to trade higher to 1.0735.
This morning on the economic front we have Euro-Zone CPI at 10.00 am. This is followed at 12.00 pm by the UK Rate Decision from the Bank of England. At 12.30 pm we have US Housing Starts, Building Permits, Weekly Jobless Claims and the Philly Fed Business Outlook. Finally at 2.00 pm we have the JOLTS Job Openings.
June S&P 500
With the March Contract expiring tomorrow I have now rolled to the June Contract. This contract trades at just a 3.5 Handle discount to the Cash S&P which is the lowest discount that we have seen in a few years. None of my parameters got hit in the March S&P yesterday and I am now flat. As expected the S&P is trading higher as Quarterly Expiration week is certainly from past experience not a week to go short the market especially when we have a Fed Meeting in the same week. Today I will look to sell the June S&P on any rally higher to 2399/2405 with a 2411 wider stop. It may take until we get the Expiration out of the way tomorrow before we see the S&P under pressure. Yet again the McClellan Oscillator has proved what a valuable signal it is for the US Stock market especially when we have a negative reading greater than -250 which we had last Thursday with its -266 print. Lat night the MO improved substantially to close at -38. Today I will also look to buy the S&P on any dip lower to 2372/2378 with a 2367 stop.
Unfortunately in keeping with my strategy of going flat into a major announcement I covered my latest long 1.0624 Euro position before the FOMC Statement at 1.0628 and I am now flat. The Euro has broken out to the upside again as expected and to me it is only a matter of time before we trade higher to 1.0980. Although the Euro is trading at the top of its Daily Bollinger Band, the Williams Index is still on a buy signal and I would not sell the Euro here. Today I will look to buy the Euro on any dip lower to 1.0650/1.0685 with a 1.0620 stop. The Euro has very strong resistance at its early February high at 1.0830 which I would expect initially to be difficult to break on the first attempt. However a break and close over 1.0830 will be extremely bullish opening up my next target level at 1.0980.
June Dollar Index
Unfortunately the Dollar just missed my 101.90 sell level before getting hit hard as the Down trend reasserts itself following January’s very rare Downside Key Month Reversal when the Dollar lost 5% of its value. Today I will now lower my sell level to 100.90/101.30 with a 101.70 stop which is just above yesterday’s high print.
I have now rolled to the June contract as none of my parameters in the March Contract got hit yesterday. The June Contract currently trades at a 30 point premium to the Cash DAX. This morning’s higher opening sees the DAX trying to test its 5.5 year trend line at 12195. The DAX is overbought and my only interest in selling this market is on a further move higher to 12325/12375 with a 12420 stop. I will also look to buy the market on any dip lower to 12040/12100 with a 11995 stop.
I have now rolled to the June Contract which trades at a discount of a hefty 75 points to the Cash FTSE. This huge discount makes it very difficult to short the market especially with the FTSE trading at new all-time highs this morning. The continued weakness in Sterling is certainly a big factor in this regard. Today I will be a buyer of the June Contract on any dip lower to 7270/7310 with a 7240 stop. There is no point in trying to sell this market despite its severely overbought condition
Dow Rolling Contract
The Dow as expected is rallying strongly following the Fed’s more dovish assessment in yesterday’s FOMC Statement. I am still flat the Dow and today I will continue with my strategy of looking to sell the market on any rally higher to 21140/21200 with the same 21260 stop. I will now raise my buy level to 20850/20920 with a 20795 stop.
Unfortunately for the second consecutive trading session the Bund rallied shortly after I posted before giving me a chance to buy the market and I am still flat. Today I will move my buy level higher to 159.25/159.60 with a 158.95 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
I was very unlucky with my 1196 Golkd buy level as the market bottomed at 1196.80 before rallying $30 and I am still flat. This is the breakout in both Gold and Silver that I have been looking for after the previous two week correction in both metals. Today I will move my buy level higher to 1207/1214 with a 1201 stop. The fact that Gold managed to close over its previous resistance level at 1210 should be short-term positive.
Silver Rolling Contract
Unfortunately Silver missed my second buy level at 16.75 with a 16.80 low print before rallying to hit my 17.25 T/P level. With Silver having a massive Upside Key Day Reversal yesterday I have now bought Silver again this morning at 17.48. I will add into this position on any move lower to 17.15 with a 16.95 stop.
Please note that with Ireland closed tomorrow for the Saint Patrick’s Day Holiday my next Daily Commentary will be on Monday. However for my Platinum Members if any of my positions get hit or some dramatic news event happens I will be back with an updated email.
Following our successful live trading sessions over the US Non-Farm Payrolls in 2016, Paul Wallace and I are hosting are next event in London for the April NFP data on April 7th. All details of this event are on the following link and if any of my members would like to attend please click on the £150 link which is £100 off the main rate.