U.S. Equities rallied for a third day and yields on shorter-maturity Treasuries tumbled after the Federal Reserve struck a dovish tone in its latest policy statement. The US Dollar weakened against almost all its major peers. The benchmark S&P 500 pushed within striking distance of an all-time high set April 30, led by gains in the health care, real estate and utilities sectors. The yield on the U.S. two-year note fell by as much as 12 basis points to 1.74% after the central bank kept rates steady and signalled a readiness to cut interest rates for the first time in more than a decade. There is no doubt we are definitely hearing a decidedly more dovish Fed. While you could point the finger at pressure from the White House, it is key to remember that the Fed’s focus has always been on two things and two things only: Jobs and inflation. Chairman Jerome Powell and colleagues dropped a reference in their statement to being “patient” on borrowing costs and forecast a larger miss of their 2% inflation target this year. Policy makers kept their key rate in a range of 2.25% to 2.5%. As many of the world’s biggest central banks signal a shift to easier policy, traders are weighing that against trade war fears and signs of cooling global growth. U.S. President Donald Trump said Tuesday that he had a “very good” phone conversation with Chinese President Xi Jinping. The two leaders will hold an “extended meeting” at the G-20 summit on June 28-29 in Osaka.
To mark my 1850th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. 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 made 60 points yesterday and is now ahead by 848 points for June, having made 1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Equities
Stocks surged in China ahead of FTSE Russell index changes next week and saw more modest gains in Tokyo, Hong Kong and South Korea. U.S. and European futures rose. The S&P 500 Index closed 0.3% at 2929, while the Nasdaq Composite Index gained 0.4% and the Dow Jones Industrial Average increased 0.2%. This morning the S&P Futures are trading over 2940 less than 15 Handles from it’s May 3 all-time high.The Stoxx Europe 600 was little changed. The MSCI Emerging Market Index climbed 1.6%, the biggest increase in more than a week. The MSCI Asia Pacific Index surged 2%, the highest in six weeks on the largest jump in more than five months.
Currencies
Here is a summary of the main changes in F.X. Markets:
Yesterday was a story of a weaker Dollar with the Bloomberg Dollar Spot Index declining 0.4%, the most since May 3.
The Euro rose 0.3% to $1.1228 as yet again the key 1.1180/1.1220 support area held. This morning the Euro is trading at 1.1275 as I go to press, while the yen strengthened 0.3% at 108.10 per dollar.
The British Pound rose 0.7% to $1.2645, the biggest rise since May and is now trading higher again at 1.2690 this morning.
The MSCI Emerging Markets Currency Index rose 0.5%. Elsewhere, the peso strengthened versus the greenback late in the trading session after Mexico’s Senate ratified a trade deal with U.S. and Canada that will replace NAFTA.
Bonds
Bond traders are virtually certain that the Fed will ease policy as soon as next month. The rate implied for the July 31 Fed decision dropped by 7 basis points to about 2.06%. That suggests about 31 basis points of rate cuts by then. The January 2020 Fed Funds Futures Contract implies close to 75 basis points of easing by the end of 2019. Seven of 17 Federal Reserve officials now think it will be appropriate to lower the benchmark overnight rate by a half-percentage point by the end of the year, according to updated projections published Wednesday. The Fed cited “uncertainties” in the outlook that have increased the case for a rate reduction as officials seek to prolong the near-record U.S. economic expansion. The yield on 10-year Treasuries fell 3 basis points to 2.03%. This morning the 10 – year is trading below 2% for the first time since November 2016. Meanwhile, Germany’s 10-year yield climbed 3 basis points to -0.29%.
Commodities
West Texas Intermediate rose 0.9% to $54.37 a barrel. Gold closed 0.4% higher at $1,352 an ounce in New York. However overnight Gold has exploded to the upside rising another $30 or 1.4% to sit at its highest level since May 2013 at $1382 as I go to press.
This morning on the Economic Front we have UK Retail Sales at 9.30 am and this is followed at 12.00 pm by the Bank of England Rate decision. At 1.30 pm we have US Weekly Jobless Claims, Current Account and the Philly Fed Manufacturing Index. Finally, at 3.00 pm we have Euro-Zone Consumer Confidence.
September S&P 500
I have now rolled to the September Contract which trades at a Premium of 4.6 Handles to the Cash S&P. Remember the June Contract expires tomorrow. Yesterday the S&P missed my 2902 buy level with a 2911 low print before trading with a 2920 Handle for most of the last two hours of trading in last night’s Chicago session. However on the back of lower Bond Yields and a lower Dollar overnight the September S&P is now trading at 2947 this morning. The S&P has strong resistance from 2960/2970 and today I will be a seller on any rally to this area with a 2977 stop. I will also raise my buy level to 2919/2929 with a 2910 stop.
EUR/USD
The beauty of my Platinum Service is my updated emails especially as circumstances change during the day. Yesterday afternoon I emailed my Platinum Members to raise their Euro sell level to 1.1250 ahead of the FOMC Statement and after this price was filled I emailed again to cover this position at 1.1235 ahead of the Powell press conference and I am now flat. In hindsight I should have bought the Euro in front of 1.1180 given how many times I had mentioned this support all week. Today I will now look to buy the Euro from 1.1195/1.1235 with a 1.1155 stop. I no longer want to be short the Euro at this time.
September Dollar Index
My short 97.20 Dollar position worked well with the market now trading at 96.30 this morning. This move lower saw my 97.00 T/P level being filled and I am now flat. Today I will again look to sell the Dollar on any rally higher to 96.75/97.15 with a 97.50 stop.
September DAX
I have now rolled to the September Contract which trades at a 15 point Discount to the Cash Market. Unfortunately the June Contract just missed my 12270 buy level by 10 points yesterday before rallying 100 points this morning and I am still flat. The stronger Euro will hamper the rally in the DAX and today I will only be a small buyer on any dip lower to 12230/12295 in the September Contract with a 12185 stop.
September FTSE
I have now rolled to the September Contract which trades at a large 70 point Discount to the Cash Market. This means that the FTSE will rally almost one point a day to close in on the Cash FTSE as both prices will converge by the time the September Contract expires in three months. This large Discount makes it difficult to be short the FTSE at this time. Today I will be a small buyer of the FTSE from 7280/7320 with a 7245 stop. Given the large rally higher in the Pound since the lows of yesterday morning the FTSE will struggle to rise.
Dow Rolling Contract
The Dow has now rallied over 2000 points in just over two weeks with the market less than 350 points form its all-time high of 26951. Today I will raise my buy level to 26310/26470 with a 26230 tight stop.
September NASDAQ
I have now rolled to the September Contract which trades at a Premium of 28 points to the Cash NASDAQ. Today I will be a buyer on any dip lower to 7650/7710 with a 7605 stop. Despite the near 800 point rally in the market in the last two weeks I still do not want to be short the NASDAQ at this time.
September BUND
The DSI on the US Bond Markets again closed over 90% with a 91% print last night. The chase to the bottom in Bond Yields is insane in my opinion as there is no room to turn when these markets reverse which they will. I am still flat the Bund and today I will now lower my sell level to 171.75/172.15 with a 172.50 stop.
Gold Rolling Contract
With Gold trading $40 higher from where I marked prices 24 hours ago I am glad that I decided to stay out of the market yesterday. Gold is now trading near a six year high this morning as the $1359 high for this year was smashed overnight helped greatly by a weaker US Dollar. I have to respect this breakout in Gold and today I will be a buyer from 1360/1368 with a tight 1353 stop.
Silver Rolling Contract
Even though Silver is trading higher at 15.32 this morning the market continues to underperform Gold. I have bought Silver here at this price with a tight 14.95 stop. My T/P level on this position will be 15.70.
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