Global markets moves on Wednesday are not quite the mirror image of Tuesday, but many of them are doing a passable impression. In FX for example, the Swedish Krone lost over 1.5% on Tuesday in the midst of the Italian bond market carnage, and yesterday it closed up 1.8%. Italian bond yields have retraced almost half of Tuesday’s spike at the short end (and more than half at ten years, aided by a respectable – in the circumstances – sale of 5.6bn worth of bonds). US Treasury and German 10-year bond yields are smartly higher (~6bps and 10bps respectively) while the S&P has closed higher by 1.3% for its biggest one day gain since May 4th.
To mark my 1600th 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 onbryan@tradernoble.com for details
For anyone following my Platinum Service it lost 20 points yesterday and is now ahead by 1752 points for May, having made 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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Relieving yesterday’s acute tension in Italy and which had some immediate global contagion effects via various financial linkages (or fears thereof) have been reports that the Italian President will allow Five Star and the League to have another attempt to form a government, with Five Star leader Di Maio saying he was willing to propose a choice of a new Finance Minister. The League, which has seen large gains in opinion polls since the election, seems more intent on going back to new elections, but the current indications are that this is going to be the case, it won’t be as early July and which, for now, is being viewed as a positive not a negative. Also helpful has been comment from Five Star leader Di Maio saying that the two anti-establishment parties never sought an exit from the Euro and that Five Star was willing to cooperate with the President (having earlier been calling for his impeachment following the rejection of the proposed candidate for finance minister).
EUR/USD has risen from 1.1525 to as high as 1.1676, partly on the less fraught Italian situation but also as inflation in Spain and Germany comes in above forecasts. Spain posted May preliminary HICP of +0.9% m/m for 2.1% y/y (vs 1.7% consensus). Germany printed 2.2% in both headline and HICP terms against the consensus of 1.8% prior to the staggered release of the various state numbers. This then poses clear upside risks for today’s pan-Euro-Zone HICP estimate where the earlier consensus was at 1.6% from 1.2%. Euro-Zone confidence data were also generally stronger than expected and while off their late 2017 peaks, are holding up better than the recent PMI activity data.
If the incoming inflation data does embolden the ECB to give some signaling with regards to the fate of the QE bond buying programme as early as June 14th (the next Governing Council meeting) then the Bank of Canada has already moved a step in front of it, shifting its language following the conclusion of yesterday’s policy meeting to put market back firmly on the scent of a next rate rise on July 11th. The market implied probability of July meeting has jumped from below 50% to above 75% after the BoC dropped the ‘’cautious’’ adjective previously in front of ‘’gradual’’ in terms of its approach to future rate rises. It also dropped reference to higher rates being needed ‘’over time’’. Markets had previously been given to belief that the BoC was parked on hold pending a successful resolution of NAFTA negotiations and evidence that business confidence was subsequently improving. Now, they seem confident that business confidence and conditions are sufficiently robust not to need to wait much longer. At the same time, Canadian PM Trudeau has been out saying he would rather no deal than a bad deal with respect to NAFTA.
Canada’s evident intent to proceed with policy tightening puts a spotlight on who else might be getting close to initiating a tightening cycle of their own.
Other things to note yesterday include the resurrection of Sino-US trade tension following Trump’s latest backflip that saw him announce tariffs on $50bn worth of China imports after saying just a week ago tariffs were off the table for now. Wilbur Ross is still planning to be in China June 2-4th for the latest round of trade talks. Oil is back higher again (+$1.50-2.0) amid speculation that whatever agreement OPEC and Russia strikes on increased output next month, it will only be aimed at stabilising the market near here rather than driving prices appreciably lower.
US data out has included the ADP Employment Report which at 178k verses the 190k consensus has some analyst knocking a bit off their picks for tomorrow’s Non-Farm Payrolls; revised Q1 GDP at 2.2% versus the 2.3% prior estimate (with core PCE price index down to 2.3% from 2.5%); the advance US goods trade balance at -$68.2bn against the -$71bn consensus; and Retail and Wholesale Inventories which came in flat versus +0.5% expected. The Atlanta Fed will be updating its ‘’GDPNow’’ estimate this afternoon (last at 4%)
This morning on the Economic Front we have German GDP at 7.00 am and this is followed at 9.30 am by UK Consumer Credit, Mortgage Approvals and Money Supply. At 10.00 am we have Euro-Zone Unemployment and CPI. Next we have US Weekly Jobless Claims and Personal Income/Spending at 1.30 pm. Finally we have the Chicago Fed Purchasing Managers Index and Pending Home Sales at 2.45 pm and 3.00 pm respectively.
Meanwhile the Fed’s Bullard, Bostic and Brainard are speaking this afternoon.
June S&P 500
As I wrote in an updated email to my Platinum Members yesterday afternoon, until we get a sell extreme that breaks and closes below both the 50 and 200 Day Moving Average then short positions are extremely difficult to maintain. On Tuesday the S&P traded to a low of 2675 which was just above the 2673, 50 Day Moving Average before rallying 10 Handles into the Chicago close and that rally continued yesterday with market regaining all of the loses on Tuesday to rebound to a high of 2730. Thankfully we had no sell levels in the S&P yesterday and are still flat. In my opinion it is only a matter of time before we have more test of the 2800 area before we see some real selling which last more than a few hours. Today I will raise my buy level to 2704/2714 with a 2698 stop. Remember a break and close over 2740/2745 is a short-term buy signal. As today is month end followed by the start of a new month tomorrow I do not want to be short the S&P at this time.
EUR/USD
When I starting writing my Daily Commentary yesterday morning at 6.00 am the Euro was trading at 1.1540 against the US Dollar. However by the time that I got to post the Euro was trading at 1.1600 as most traders had the same idea of buying a severely oversold Euro has flagged by the extreme negativity towards the Euro and bullishness for the Dollar. The Euro stopped where it should have at the November low of 1.1550 and as long as we can hold this now key 1.1500/1.1550 support level then the Euro should quickly test overhead resistance at 1.1750. Today I will now raise my buy level to 1.1560/1.1610 with a 1.1525 stop. To give you an example of how oversold the Euro got at Tuesday’s 1.1507 low print the DSI had fallen to just 4% bulls which is the lowest level of optimism since November 23, 2015 when the DSI had a reading of just 3%.
June Dollar Index
Just after I posted yesterday the Dollar traded lower to my 94.40 T/P level on my average 94.50 short position and I am now flat. Today I will again look to sell the Dollar on any rally higher to 94.70/95.10 with a 95.45 stop. I still do not want to be long the Dollar at this time. The Daily Sentiment Index has pushed to 94% bulls which is the highest reading since December 15,2016 when the DSI had a reading of 96%
June DAX
The DAX rebounded 250 points off its late Tuesday low as thankfully we had no sell levels in the market yesterday. Unless we break the Tuesday low at 12575 then this market will continue to be a buy on dips. Today I will now raise my buy level to 12610/12670 with a 12540 stop.
June FTSE
I am still flat the FTSE which has now corrected some of its severely overbought condition over the past few trading sessions. The FTSE has strong support from 7600.7640 and today I will be a buyer in this area with a 7570 tight stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow rallied nearly 500 points off its 8.30 pm 24245 low print on Tuesday with a rebound high of 24715. This move higher saw the Dow hit my 24600 sell level where I said just to go short in small size. As I was not comfortable with this position I emailed my Platinum Members to exit any short position for a small loss at 24630 and I am still flat. Yet again the 50 Day Moving Average proves what a fantastic support level it is for the US Indices. Today I will now raise my buy level to 24310/24460 with a 24220 stop which is just below last Tuesday’s low print. I do not want to be short the Dow at this time.
June NASDAQ
No change as I am still a seller on any rally higher to 7050/7090 with the same 7135 stop. I will now raise my buy level to 6880/6920 with a 6840 stop.
June BUND
The Bund collapsed yesterday falling over 300 points from the 164.17 high made on Tuesday when the yield on the 10 Year Bund hit 0.26% which is just insane. If Bund Yields stay near these levels it would be my conclusion that a major recession is about to begin in the Euro-Zone. The Bund has strong support from 160.50/160.90 and today I will be a buyer in this area with a 160.10 stop. Given the extent of yesterday’s sell-off I do not want to be short the Bund at this time.
Gold Rolling Contract
I am still flat Gold which traded in a narrow range either side of 1300. Today I will raise my buy level slightly to 1284/1292 with a 1276 stop.
Silver Rolling Contract
I am still long Silver at 16.50 with the same 15.90 stop. The Daily Sentiment Index has fallen again to just 10% bulls for the second time this month. This is a strong sign that Silver’s potential to rally is close. Today I will leave my T/P level unchanged at 16.70 and if this level is hit I will be back with a new update for my Platinum Members.
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