After a lacklustre Asia pacific session, European and US equity Indices ended yesterday on a positive note bolstered by better than expected corporate earnings results. In the US, Morgan Stanley and Microsoft profits topped estimates while in Europe, SAP and VW also beat their forecasts. The US Dollar was stronger against most currencies and the VIX Index closed at its lowest level in two years. The improvement in risk sentiment helped core global Bond Yields drift higher while oil prices were little changed.
To mark my 1100th issue of Tradernoble.com Daily Commentary I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 25 points yesterday and is now ahead by 1092 points for July having made 2550 points in June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2200 points.
The steady rise in short dated US Bond Yields has been a major source in the recent US Dollar uplift. While the expectation of further easing by many central banks including the Bank of England, Bank of Japan and RBA is on the rise, the prospect of Fed tightening is back on the agenda supported by better than expected US Economic data releases and a solid start to the Q2 earnings season. US Indices like the Dollar Index have now broken the upper band of their recent ranges, suggesting we could be at the start of a significant US Dollar uptrend although I am not convinced. Two weeks ago the market was pricing in the probability of just a 12% chance of a Fed Rate hike in December while today that number is at 48%.
Looking at the G10 Currencies, Sterling and the Japanese Yen are once again at the opposite ends of the Leader Board. Sterling is the top performer following a better than expected Employment Report where Unemployment unexpectedly fell to 4.9%, albeit the report pre dates the EU Referendum, and comments from the Bank of England’s Forbes who said the Bank needs more evidence to cut rates. Meanwhile the Yen lost ground against the US Dollar following news the Japanese Government is considering over 20 trillion yen in stimulus to support the economy compared to previous numbers of 10 trillion yen.
Earlier this morning the RBNZ released its latest economic update where it said a decline in the New Zealand Dollar was needed. The OCR would also be cut if the currency stayed above projection.
This morning on the economic front we have UK Retail Sales and Manufacturing PMI at 9.30 am. This is followed by the long awaited ECB Meeting rate announcement at 12.45 pm. This is the first ECB Meeting post ‘’Brexit’’ and like the Bank of England to stand pat last week, no move is expected with President Dragi likely to emphasise a ‘’wait and see mode’’ in his press conference that follows at 1.30 pm. I would not be surprised if Dragi takes the opportunity to comment on potential solutions to the bad loan issue in the Italian Banking system. Also at 1.30 pm we have the US Weekly Jobless Claims and the Philly Fed Business Outlook. Next we have the FHFA House Price Index at 2.00 pm. Finally at 3.00 pm we have Existing Home Sales and the Leading Index at 3.00 pm
September S&P 500
The sentiment picture for the US stock market has rapidly morphed to an extreme, which raises the potential that an impending market high may just be around the corner. The 5 day Daily Sentiment Index reading has now risen to a level of optimism that in previous times has attended the start of prior market declines. With the VIX again closing at a two year low below 12 complacency is evident everywhere but as I have mentioned over the past two days until we get a sell extreme that sticks it is very difficult to be short the market for any length of time. Today I will continue to be an aggressive buyer on any dip lower to 2139/2145 with a 2133 stop. I will also leave my sell level unchanged at 2174/2179 with a wider 2186 stop.
EUR/USD
While the Dollar Index made a new high post ‘’Brexit’’ yesterday this was not confirmed so far by the Euro which continues to trade 90 points away from its post ‘’Brexit’’ low at 1.0910. This negative divergence could be significant especially if the Euro does not fall later today on both the ECB and Dragi. Today I will lower my buy level slightly to 1.0920/1.0950 with a 1.0880 stop. Given the developments yesterday I do not want to be short the Euro at this time.
September Dollar Index
No change as I am still short the Dollar at 97.00 with the same 97.50 stop. If I am stopped out of this position today I will be a more aggressive seller on any rally higher to 97.90/98.30 with a 98.65 stop.
September DAX
The DAX just exploded to the upside shorty after SAP and VW reported better earnings. In hindsight I probably should have stayed long the DAX from Tuesday as I had always expected the market to rally ahead of the ECB Meeting. Thankfully we were not short the DAX and as usual I will now stay flat until we get the Dragi press conference out of the way. The next major resistance for the DAX comes in at the 10330/10380 area and my only interest in selling the market is on a rally to this area with a 10440 stop. I know this level is a long way from where we are trading and given how strong this resistance is I would expect a decent sell-off to follow any test of this area over the coming days. My only interest in buying the DAX is still on a dip lower to 9850/9910 with a 9780 wider stop.
September FTSE
No change as I am still a buyer on ay dip lower to 6560/6590 with the same 6535 stop. I will still look to sell the FTSE on any test higher to 6710/6740 with a 6775 stop.
Dow Rolling Contract
The winning streak for the Dow stands at 9 consecutive trading sessions which is the longest run since March 2013 which was 10 days. This market is over-run, over-extended and over-bought but just like the S&P above we need to see a sell extreme that sticks before we can start to aggressively sell the market. I am still flat the Dow and today I will now lower my sell level slightly to 18660/18720 with an 18780 stop. I will continue to look to buy the market on any dip lower to 18340/18420 with an 18370 stop.
September BUND
I am still flat the Bund and today I am going to stay flat and see what Dragi and the ECB have in store for us later this afternoon. I do not have an edge here and I would prefer to sit on the sidelines until tomorrow.
Gold Rolling Contract
Gold traded lower to my 1314 buy level before having a small rally to 1320. As I was already long Silver and short the Dollar I emailed my Platinum Members to exit this position at 1316.50 and I am now flat. Today I will again look to buy Gold on any dip lower to 1295/1304 with a 1288 stop.
Silver Rolling Contract
Finally Silver traded lower to my 19.40 buy level. I am still long and I will now raise my stop on this position to 18.80.
Recent Comments