The FOMC announced no change in the Fed Funds Rate as expected with no overt smoking gun that a September rise is in the offing. This saw some selling in the US Dollar with compensating rises in the majors and extended a rally in US Treasuries that was already underway, with the market this morning barely pricing in a 50% chance that the Fed will hike rates by the end of the year. Meanwhile there has been a modest rally in the front end of the Fed Funds curve.
To mark my 1100th issue of Tradernoble 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 33 points yesterday and is now ahead by 1395 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.
While there was no smoking gun as far as a rate hike in September is concerned, the FOMC Statement is essentially a ‘’holding’’ one, and keeps the door ajar to a September hike should the data between now and then strongly suggest that this is the right course of action. The Fed in the end will be data dependent, while the Statement noted that near-term risks to the economic outlook ‘’have diminished’’. The Statement was tweaked slightly to recognise the strong pick up in jobs and strong household spending, but also that business investment has been soft.
I also note that Durable Goods Orders for June released yesterday was another soft one, resulting in the Atlanta Fed’s GDPNow estimate for Q2 shaved as a result from 2.4% to 2.3%.
In other news the Japanese Yen weakened after reports the Bank of Japan was considering issuing 50 year JGB’s. Stories also emerged that the Japanese Government was going to announce the stimulus plan yesterday afternoon but that was further delayed until an expected announcement next Tuesday. There is now talk that the stimulus could be a sizeable 27 trillion yen though no details are forthcoming and how much of this sizeable package is new money remains to be seen.
This morning on the economic front we have German Unemployment at 8.55 am. This is followed at 10.00 am by Euro-Zone Business Climate Indicator while later at 1.00 pm we have German CPI. At 1.30 pm we have the latest US Weekly Jobless Claims and Trade Balance. Finally we have the Bloomberg Consumer Comfort and Kansa City Fed Manufacturing Activity Index at 2.45 pm and 3.00 pm respectively.
Meanwhile this afternoon the ECB’s Coeure will speak on Financial Crisis Management.
September S&P 500
If anyone kept my initial 2154 buy level into the FOMC announcement then you would have had a nice gain as the S&P rallied to 2162 shortly after. Personally I was flat into this announcement and I am still flat. With the November Elections only just over three months away there is a fair chance that the Fed will leave rates on hold until we see who the new President will be. As one report that I read which to me summed up the present situation when it said that Fed Chair Yellen is risk averse and does not want to be responsible for any deviation in financial markets from the norm. She is content to stay under the radar and not to rock the boat and it will be fascinating how she responds to a financial crisis or a ‘’Black Swan’’ event. Meanwhile measures of sentiment remain elevated and the S&P has virtually stopped rallying or declining. To sum up what a boring month for trading that July has been, yesterday was the ninth consecutive trading session which the S&P has closed less than 0.5% from its previous close. This is the longest nine-day tight oscillation in 21 years while with the DSI still at 81% the risk of a larger pullback remains elevated. Today I will again look to buy the S&P on any dip lower to 2148/2154 with a 2143 stop. If I am taken long and subsequently stopped out of this position I will be a very aggressive buyer in front of 2135 with a 2129 stop. Until we get a sell extreme that sticks I still do not want to be short the market at this time.
EUR/USD
Frustratingly the Euro just missed my 1.0950 buy level with a 1.0960 low print before the market rallied over 100 points. This is why I do not want to be short the Euro as to me it is only a matter of time before the Dollar gets slammed as there is no chance the Fed are going to hike rates in the short-term for reasons outlined above. Today I will now raise my buy level to 1.0990/1.1030 with a 1.0955 stop which is just below yesterday’s low print.
September Dollar Index
I am still flat the Dollar and today I will now lower my sell level to 97.10/97.40 with a 97.75 tight stop.
September DAX
No change as I am still an aggressive seller on any further rally higher to 10370/10430 with a 10470 stop. Meanwhile I will raise my buy level slightly to 10120/10170 with a 10065 stop.
September FTSE
The FTSE tried to break higher before getting hit into the close and I am still flat. The FTSE needs to sell-off to correct its overbought condition but so far any selling has been contained. Today I will leave my buy level unchanged at 6590/6630 with a 6560 stop. I will also leave my sell level unchanged at 6750/6780 with a 6810 tight stop. A break and close over 6800 for a couple of days will be very positive in the short-term, hence my tight stop on any short position.
Dow Rolling Contract
The 7% rally in Apple shares yesterday helped to stop any decent sell-off in the Dow and I am still flat. Today I will raise my buy level slightly to 18350/18415 with an 18295 stop. Just like the S&P above I do not want to be short the Dow at this time despite the elevated Daily Sentiment Index reading.
September BUND
Initially the BUND hit my 167.40 sell level but as I wanted to be flat ahead of the FOMC announcement I emailed my Platinum Members to cut this position at 167.32 and I am still flat. Today I will again look to sell the Bund on any rally higher to 167.95/168.35 with a 168.70 stop. Given how bid the Bund is and the fact that we again closed over the now key 166.50 support level I will now raise my buy level to 166.60/167.00 with a 166.25 tight stop.
Gold Rolling Contract
Both Gold and Silver exploded to the upside on the Fed no action and I am still flat. Today I will now raise my buy level to 1318/1326 with a 1309 stop which is just below last week’s low print.
Silver Rolling Contract
My long 19.60 Silver position worked very well for those who held their position through the FOMC Statement. Personally I covered my position at my 19.85 T/P level as outlined to my Platinum Members and I am now flat. Given how strong Silver rallied today I will now look to buy the market on any pullback to 19.70/20.10 with a 19.35 stop which is just below yesterday’s low print.
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