The market has turned ‘risk on’ after I posted 24 hours ago with Commodity and Emerging Market Currencies back in favour for once, helped by the huge rise in oil prices on comments from Iran’s Oil Minister welcoming the prospect of cooperation between producers, though not specifying whether Iran would join in a production freeze. Of course it is not clear whether over-supply could be corrected in the event of oil production remaining at current levels. When I posted yesterday morning WTI was trading at $28.80 before rallying 10% to close at $31.60, despite the S&P downgrading four oil producing economies, including Saudi Arabia, seemingly on its outlook for oil prices. This led to a large rise in European and US equity markets with the Eurostoxx 600 closing 2.62% higher helped by the 3.35% rise in the Bank Index. Meanwhile the US markets closed higher by 1.6% (Dow) to 2.2% (NASDAQ)
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentaries which includes ¼ updated emails throughout the trading day. This offer is open to both existing and new members and if anyone is interested please email me bryan@tradernoble.com for details.
For anybody following my Platinum Service it lost 35 points yesterday but is still ahead by 1560 points for February. Since I started this service last June it has generated a return of over 18000 points.
The US equity markets were enhanced in the wake of the January Industrial Production Report which showed more resilience in US industrial activity, with production up a higher than expected 0.9%, supported by higher manufacturing output for once which showed a 0.5% rise, and higher utility output from Northern Winter effects.
The FOMC released it Minutes from their January 26/27 meeting last evening. There was very little market reaction to these Minutes given it comes after Fed Chair Yellen’s double dose of Testimony to the Senate and Finance Committee last week.
In Currencies, the hints of a return to carry trades saw the likes of the AUD and NZD perform strongly, while the Canadian Dollar got a nice boost from the oil rally as did the Russian Rouble and Norwegian Kroner. The rise in Oil did not effect base metals which remained unchanged as was Gold after its $60 sell-off over the past few days. The US Dollar made some gains against the EUR,JPY and the CHF before giving up some of these gains in the last hour of trading in New York.
Finally German Chancellor Merkel was speaking in Parliament yesterday ahead of the EU Summit, mentioning the challenges from the refugee crisis and that the UK and EU concerns on welfare seem justified.
This morning on the economic front we have the Euro-Zone Current Account at 9.00 am. This is followed at 12.00 pm by the Minutes of the ECB Meeting last month. At 1.30 pm we have the US Philly Fed Index and the Weekly Jobless Claims. Finally at 3.00 pm we have the Leading Index.
This evening at 8.30 pm the San Francisco Fed President will speak on Economic Outlook.
March S&P 500
When I was writing my commentary 24 hours ago the S&P was trading at 1881 and I must confess I did not see this massive 45 Handle rally that ensued after I posted. On the back of this rally the S&P has left a large ‘Open Gap’ from Tuesday’s close at 1887 to yesterday’s Chicago low at 1904, which is the second ‘Gap’ in a week with the still outstanding 1858/1870.50 from last Friday’s close to Tuesday’s low print. It is very rare that two large ‘Gaps’ are left open without at least one of these ‘Gaps getting filled. Above the market from the first week of trading in January we still have two very large ‘Open Gap’s from 1994/2010 and 2012/2035. The big question is where do we go from here as remember all ‘Open Gap’s get filled at some stage. Yesterday’s large move higher sees the McClellan Oscillator closing strongly with a positive 197 reading. Remember a reading over +250 is overbought.
My S&P plan did not work out yesterday as after the market traded higher to my 1908 sell level I was quickly stopped out of this position at 1915 and I am still flat. Given the huge move higher I have to respect this price action and today I will look to buy the market on any dip lower to 1905/1911 with a 1899 stop. If I am taken long and subsequently stopped out of this trade I will be a more aggressive buyer in front of 1890 with a 1883 stop. The S&P has strong resistance at the 1942/1950 rebound high from January and I will look to sell the market in this area with a 1955 stop.
EUR/USD
The idea of buying dips in the Euro continues to work with the Euro trading lower to my 1.1110 buy level before having a nice rally to 1.1155 which enabled me to cover this position at my revised 1.1130 T/P level as again outlined to my Platinum Members and I am now flat. I am surprised the Euro did not fall further on the back of the equity rally and today I will again look to buy the Euro on any dip lower to 1.1070/1.1100 with a 1.1045 stop. I still do not want to be short the Euro at this time.
March Dollar Index
The Dollar just missed my 97.20 sell level with a 97.10 high print and I am still flat. Today I will leave my sell level unchanged at 97.20/97.50 with a 97.80 stop.
March DAX
Finally the DAX broke the key 9250/9300 resistance area and this level should now act as good support going forward. Yesterday after the DAX hit my 9310 sell level I emailed my Platinum Members to cut this position at 9295 before the market made a low at 9280. After trading in a very narrow range for a few hours the DAX finally broke higher on the back of the US Indices and I am still flat. Given the break of this previous resistance I will look to buy the market on any dip lower to 9260/9310 with a tight 9235 stop. I do not want to be short the DAX at this time.
March FTSE
As mentioned yesterday the FTSE continues to be the strongest of the European Indices with the market nearly 10% higher from last Thursday’s low print. I am still flat the market and today I will raise my buy level to 5850/5890 with a tight 5825 stop.
Dow Rolling Contract
Thankfully we had no sell level in the Dow yesterday with the market now trading over 1000 points higher from last week’s low. Even though I am bearish of the US economy it is so difficult to be short the equity markets as your timing as to be spot on as the Central Banks will continue to do whatever they have to to prevent an all out crash. The Dow has good support at 16300 and today I will be a small buyer on any further dip lower to 16270/16330 with a 16220 stop. I still do not want to be short the Dow at this time.
March BUND
I am still flat the BUND and today I will look to buy the market on any dip lower to 163.80/164.10 with a tight 163.55 stop. I do not want to be short the BUND today ahead of the ECB Minutes at 12.00 pm.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1183/1192 as I do not want to chase the market higher from here. I will have a stop at 1175 on any long position.
Silver Rolling Contract
No change as I am still a buyer from 14.80/15.10 with the same 14.45 stop.
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