What started in the European session as a risk-positive mood with the Dax up 0.9% and the FTSE +1.1% reversed course in the US session with the Dow closing down 166 points, -0.68%, the S&P down 0.86%, and the Nasdaq off 1.54%. Flowing notably against the tide of selling were energy stocks that rose 1.34% on the back of another step up in oil prices, WTI jumping $1.85 to $72.39 (+2.62%) and Brent up $1.10 to $77.40 (+1.44%) on the back of a four times larger weekly drawdown in crude inventories in the week of 22 June, -9.891mb against the 2.572b expected decline, taking WTI to its highest level since 2014.
To mark my 1625th 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 133 points yesterday and is now ahead by 839 points for June, having made 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Reported and refocused on again yesterday, President Trump confirmed Tuesday’s news reports that he would use the existing committee that scrutinises foreign acquisitions of US companies to limit Chinese investments in sensitive American technologies rather than use a more confrontational approach of executive orders. Initially this helped markets, but US equities reversed course after Trump;s economic advisor Larry Kudlow said that China’s reply to US trade demands has so far not been satisfactory, that Trump was not retreating on China and that the committee’s powers would be beefed up.
Adding to the further outbreak of a risk off mood was some coverage of what looked to be a worrying internal Chinese think tank report on deleveraging and liquidity that had appeared briefly on the Internet on Monday, before being removed. The National Institution for Finance & Development warned “we think China is currently very likely to see a financial panic. ‘’Preventing its occurrence and spread should be the top priority for our financial and macroeconomic regulators over the next few years’’. How much credence to give the report is not known, but it did add to negative investor sentiment.
This all comes after the Chinese monetary authorities cut the RRR over the weekend and have continued to set a higher fix for the USD/CNY above what might have been expected from day-to-day movements in the USD resulting in some net depreciation of the Chinese currency against the backdrop of trade tensions. While the AUD/USD is lower again this morning, so are other major crosses that have lost ground to a resurgent USD, the DXY index up 0.67% to 95.316 in what has turned out to be a session for a stronger dollar/ weaker China risk.
The AUD/USD is back to the lowest level for the year, trading only marginally higher at 0.7340 with EM currencies down, the BRL for example off 1.75% (sugar was down 3.21% ) and the ZAR off 1.68%. Technically, on the downside, 0.72 looks to be the next level of major support for the AUD should this risk off mood persist. Note also that we are coming up to the July 6 deadline when the $34bn of US-China tariffs are due to kick in with threats of another $200bn. There has been a small measure of NZD interest after last night’s RBNZ on hold decision and guidance.
US Durables Goods Orders were softer than expected in May, offsetting other more positive trade and inventories data also for May. The smaller than expected Trade Deficit for May was a nine month low and was, adding to the case for a bounce-back in net exports in Q2 GDP. As a result of this data, the latest Atlanta GDPNow estimate for Q2 GDP was pared back ever so slightly to 4.5% from 4.7%. Fed hawk Rosengren (non-voter this year but is next year) said in a speech yesterday that ‘’we do need to think about is inflation picking up faster than we think’’ but at ‘’if you really think expectations are really well-anchored, maybe we can take a little more risk’’.
Ahead of the BoC July 12 meeting, Governor Stephen Poloz was speaking yesterday afternoon running through the various positives and negatives facing the Canadian economy, trade tensions, potential growth and inflation impacts, robust business investment, still some uncertainty on housing, and so on. The market has priced in an equal risk of either a hike or leaving rates unchanged. The CAD was bid higher t after the speech (it jagged even higher initially), having also garnered relative support earlier among the commodity currency pairs on the boost in oil prices.
This morning on the Economic Front we already had the release of German GfK Consumer confidence which came in at 10.7 versus 10.6 expected. At 10.00 am we have Euro-Zone Consumer Confidence and this is followed at 1.00 pm by German CPI. Next we have the US Weekly Jobless Claims and GDP at 1.30 pm. Finally at 2.30 pm the Bank of England’s Chief Economist Haldane speaks in London.
September S&P 500
What a day with the S&P just missing my initial 2705 buy level before rallying to my average sell level at 2744.50 shortly after the US Markets opened before having an initial sell-off to my revised 2738 T/P level. Following the comments from Trump’s Economic Advisor, Larry Kudlow the S&P got hit hard with the market reversing all of its gains to finally trade lower to my 2705 buy level before rallying to my 2712 T/P level and I am now flat. The S&P ended the day with a sizeable Downside Key Day Reversal while also closing below its 50 Day Moving Average which is now above the market at 2719. So far we are holding the 100 Day MA at 2700 while the more important 200 Day MA is not far below here at 2670. With the NASDAQ still above its Key Moving Averages, the Dow closed well below its 200 Day MA so we are certainly seeing a lot of divergences between the main US Indices. The VIX which was trading at 15 spiked to close at 17.91 and this move higher added to yesterday’s reversal. We need also to keep an eye on the McClellan Oscillator which closed last night at -132. Remember a reading of greater than -250 will see me look to be an aggressive buyer of the S&P. Today I will only be a buyer of the S&P on any dip lower to 2688/2696 with a 2681 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2664/2673 with a 2656 stop. My only interest in selling the S&P is on a rally higher to 2735/2743 with a 2749 stop which is just above yesterday’s high print.
EUR/USD
Unfortunately my Euro plan did not work well as after the Euro traded higher to my average 1.1595 buy level I have been stopped out of this position at my revised 1.1535 stop in the last 30 minutes and I am now flat. The Euro has so far held its Double Bottom of 1.1510 and a break and close below here should see a quick move lower to 1.1450 where we have the 500 Day Moving Average. Today my only interest in buying the Euro is on a dip lower to 1.1420/1.1470 with a 1.1380 stop.
September Dollar Index
After the Dollar traded higher to my initial 94.70 sell level I emailed my platinum Members to exit any position at my revised 94.65 T/P level. The main reason I cut this position was because I was already long the Euro and did not want any more short Dollar exposure and I and now flat. I do not have a strong view in the Dollar at this time and I am going to stand aside today and observe.
September DAX
My DAX plan worked well with the market trading lower to my 12120 buy level before rallying to my 12165 T/P level and I am now flat. Incredibly the DAX rallied another 300 points after I took my gain before giving up a portion of those gains into the close, proving how significant the 12050/12120 support level is at this time. There is no doubt that the renewed weakness in the Euro is certainly helping the DAX to outperform the US Markets yesterday. Today I will be a buyer of the DAX on any dip lower to 12150/12230 with a 12080 tight stop. I still do not want to be short the market at this time.
September FTSE
Frustratingly the FTSE just missed my 7440 buy level by 7 points after I posted yesterday before rallying over 150 points and I am still flat. Sterling has fallen sharply against the US Dollar over the past 48 hours and this has certainly helped the gains in the FTSE. Today I will move my buy level higher to 7435/7480 with a 7395 stop.
Dow Rolling Contract
The Dow just missed my 24050 buy level before rallying to an intra-day high of 24570. Subsequently the Dow fell 450 points off this high and in the process had a huge Downside Key Day Reversal. This move lower saw the Dow close below its 200 Day Moving Average which comes in at 24300. I am still reluctant to go short especially as we have not seen the S&P and NASDAQ break their equivalent MA’s. The last time in April when both the Dow and S&P broke their 200 DAY MA, the markets quickly reversed to the upside as yet again short positions got hit hard. Today I will lower my buy level slightly to 23895/24025 with a 23750 stop.
September NASDAQ
Just before the Chicago close the NASDAQ traded lower to my 6990 buy level. As I did not want to have a long position on board overnight after yesterday’s Key Day Reversal I emailed my Platinum Members to exit any long position at 6998 and I am now flat. While the S&P closed below its 50 Day Moving Average the NASDAQ is so far holding the 50 Day MA which comes in at 6980. As I mentioned yesterday the 6950 area is key for this market and today I will again look to buy the market on any dip lower to 6930/6975 with a 6895 stop.
September BUND
No change as I am still a buyer on any dip lower to 161.45/161.85 with the same 161.15 stop.
Gold Rolling Contract
Gold continues to have these narrow trading ranges that has persisted for most of the past three months. Gold is oversold and with the Daily Sentiment Index down to 9% bulls this market is ripe for a robust countertrend rally. I still believe that Gold will make a tradeable bottom ahead of the 1236 trendline support. Today I will lower my buy level slightly to 1236/1244 with a 1229 stop.
Silver Rolling Contract
Yesterday Silver traded lower to my 16.10 buy level. With the DSI at 9% bulls I will look to add to this position on any further move lower to 15.80 with the same 15.45 stop. Even if Silver shrinks lower from current levels, the degree of bullishness will likely shrink even further, enhancing the potential for a robust rally. My T/P level on this position is 16.30 and if any of these levels are hit I will be back with a new update for my Platinum Members.
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