A lingering risk off tone remains evident in markets with equities on either side of the Atlantic ending the day with small losses. Oil prices are again lower weighing on energy shares and commodity linked currencies while US Treasury Yields are little changed after initially moving higher following the move in UK Gilts. Sterling has been the big mover in currencies amid a reopening of the Bank of England Interest Rate hike debate while after the New York close, the RBNZ has left the OCR unchanged at 1.75%. The language in the statement is very similar to the Mays MPS, but the NZD has rallied given some expectations for a dovish statement amid recent NZD strength and lower oil prices.
To mark my 1350th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it finished flat yesterday as only one of my calls got hit on what turned out to be a frustrating trading session of narrow misses. June is ahead by 612 points after making 1071 points in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
Last week the BoE unexpected 5-3 vote decision to leave the cash rate unchanged gave the pound an uplift while on Tuesday Governor Carney triggered a sell off as he seemingly shut the door on the idea of any tightening any time soon. Twenty four hours later the debate has been reopened again with BoE Chief Economist Andy Haldane admitting that he did consider voting for a rate hike last week and although in the end he sided with the 5-3 majority to stand pat, he noted that ‘’the risks of tightening too early have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected’’. All that said, a closer look at Haldane speech shows that his thinking is not that dissimilar to Governor Carney’s. Although Haldane clearly has a tightening bias, he also notes the high level of uncertainty, so if things pan out Okay, then a small tightening would be appropriate. The message from Carney on the other hand is that he wants to see how ‘’the extent to which weaker consumption growth is offset by other components of demand’’ before reassessing the inflation and stimulus trade off.
Reaction to Haldane’s comments triggered a Sterling rally across the board and a selloff in Gilts led by the front end of the curve. Pricing expectations for a December hike jumped from 20% to 44% and Cable jumped from 1.2591 to 1.2708. The Queen’s speech turned the focus back into politics and Brexit, noting the government’s plan to introduce eight new laws to ease Britain’s withdrawal from the European Union. The speech weighed on GBP, dragging cable down to 1.2672.
Excluding NZD, softness in oil prices (-2.2% to -2.6%) has been the dominant factor for commodity linked currencies despite the fact that other commodities such as copper (+1.5%) and iron ore (+0.7%) had an Okay day. So CAD (-0.48%) and AUD (-0.37%) are at the bottom of the G10 leader board, NZD has been boosted by a neutral RBNZ, despite some dovish expectations which has seen the Kiwi jump about 30 pips to 0.7253. The move higher in Sterling appears to have contributed to European currencies also outperforming the USD, although on Index terms the USD is little changed.
Looking at US equity markets performance is probably worth highlighting that as much as energy shares are again the underperformers, amid weakness in oil prices, Health care is the outstanding outperformer. The sector is up 1.23% boosted by speculation of deregulation on the drug industry and the prospect of Republicans unveiling their health care bill later this week. Watch this space.
This morning on the Economic Front the ECB will publish its latest Economic Bulletin at 9.00 am and this is followed at 11.00 am by the UK CBI Trends for Total Orders/Selling Price. At 1.30 pm we have the US Weekly Jobless Claims and Canadian Retail Sales. This is followed at 2.00 pm by US FHFA House Price Index and at 2.45 pm by the Bloomberg Consumer Comfort Index. Next at 3.00 pm we have Euro-Zone Consumer Confidence and the US Leading Index. Finally at 4.00 pm we have the Kansas City Fed Manufacturing Activity Index.
This morning the European Union starts a two-day Summit in Brussels while at 2.00 pm Fed Governor Powell speaks at a hearing of the Senate Banking Committee and whilst the focus is likely to be on regulation, he is known to have a dovish inclinations and any comment on the economy and monetary policy will be closely monitored.
September S&P 500
None of my parameters got hit in the S&P as my nervousness towards this market continues following the sizeable Downside Key Day Reversals on Tuesday for both the German DAX and the FTSE. As I mentioned yesterday the key level to watch is 2418 as a close below here tomorrow evening with be a Downside Key Week Reversal which is much more bearish than a Key Day Reversal and could well see an acceleration lower. Today I am going to lower my sell level to 2442/2448 with a 2453 which is just above Monday’s all-time high at 2451.50. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2460 with a 2466 stop. For today I will leave my buy level unchanged at 2416/2422 with the same 2411 stop.
EUR/USD
As I am now long the Dollar Index I will now raise my sell level slightly in the Euro to 1.1220/1.1250 with a 1.1280 stop. Remember the Euro needs to break last November’s high at 1.1300 for an extension of the Euro. However as mentioned on Tuesday with the large speculators (mainly hedge funds) holding a larger long position that they were in May 2016 when the Euro was trading at 1.1617, and in August 2015 when the Euro was trading at 1.1712 the odds of this happening are small in my opinion. Meanwhile I will leave my buy level unchanged from 1.1060/1.1090 with the same 1.1025 stop.
September Dollar Index
Late last night the Dollar traded lower to my 97.15 buy level. I am still long and today I will only add to this position on a move lower to 96.75 with a lower 96.55 stop. With the Daily Sentiment Index readings near single digits it is only a matter of time before the Dollar accelerates to the upside but we may well need to see a sell-off in the stock markets for this to happen.
September DAX
I am still flat that DAX and reluctant to chase the market higher following Tuesday’s Downside Key Day Reversal. The DAX has good support at 12660 and today I will look to buy the market on any dip lower to 12630/12680 with a 12580 stop. Despite Tuesday’s KDR I do not want to chase the market lower from here.
September FTSE
In a trading session of near misses the FTSE missed my 7345 buy level with a 7351 low print before having a nice rally and I am still flat. Today I will lower my buy level slightly to 7295/7330 with a 7265. Just like the DAX above I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow just missed my 21520 sell level with a 21501 high print before selling off 100 points and I am still flat. Today I will lower my sell level slightly to 21490/21550 with a 21600 stop. With the Dow up over 5% in the past month the market is due a correction and today I will now lower my buy level to 21270/21330 with a 21220 stop.
September BUND
With equity markets under pressure it is very difficult to be short the Bund despite the miniscule yield. However I have no interest in buying the market and today I will leave my sell level unchanged from 165.50/165.80 with a 166.10 stop which is just above the April high at 165.93.
Gold Rolling Contract
What a frustrating day as Gold missed my 1240 buy level with a 1240.60 low print before rallying this morning to a 1255 high print so far. The market has now held its 500 Day and Week Moving Average and is back above its 100 Day Moving Average of 1247. If Gold can break and close over 1279 then the bulls are back in control. Today I will now raise my buy level slightly to 1237/1244 with a 1231 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.68 with the same 16.25 stop. I will leave my T/P level unchanged at 16.85 and if I am stopped out of this position I will be an aggressive buyer on any dip lower to 15.80/16.10 with the same 15.45 stop. A break and close over 17.05 will be bullish and mean the bulls are back in control following the sequence of eight down days out of the previous 10 trading sessions.
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