Another volatile trading session with the Dow reversing an earlier 200 point loss to close 1.13% higher helped in no uncertain terms by the move in the US Dollar where Foreign Exchange markets had their biggest day of the year so far. The US Dollar was dumped quite unceremoniously and across the board in a move that I have been calling for since the Euro had its major Key Day and Key Week Reversal following the ECB Meeting on December 3 last. In G10, four Currencies have posted gains in excess of 2% since I posted 24 hours ago namely NZD (+2.6%), JPY (+2.3%), NOK (+2.1%), and AUD (+2.1%). No Currency has gained be less than 1.5% – that dubious honour bestowed on the British Pound. That this is a very broad based US Dollar sell-off encompassing all major currencies and most Emerging Market Currencies shows the extent of the move.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/4 updated emails throughout the day. This offer is open to both existing and new members and if anyone is interested please email me on bryan@tradernoble for details.
For anybody following my Platinum Service it made 240 points yesterday and is now ahead by 550 points for February having made 3365 points in January. Since I started this Platinum Service last June it has made a return of 18000 points.
Since deepening US growth concerns are the proximate cause of this Dollar capitulation (see below) it might surprise some to see Oil prices more than $3 higher – despite another bigger than expected build in Oil Inventories reported by the EIA. It seems pretty clear on this occasion, it is the weaker US Dollar which makes oil cheaper for non – US Dollar based purchasers that has driven the bounce.
Equities were a sea of red throughout the Euro-Zone and the US shortly after the American markets opened but then turned around after comments from New York Fed President Dudley in which he said ‘One thing I think we can say with more confidence is that financial conditions are considerably tighter than they were at the time of the December Meeting, so if those financial conditions were to remain in place by the time we get to the March Meeting, we would have to take that into consideration in terms of that Monetary Policy decision’. And then ‘On the one hand, you look at the U.S. And the direct effect of that to the U.S. Is pretty limited, but obviously if the global economy were to take a significant downturn, or if all this pressure were to lead to a significant appreciation of the US Dollar, then it could have significant consequences back to the U.S.’.
Less than two hours later after Dudley spoke the US Non-Manufacturing ISM was released and came in almost two points below consensus at 53.5 from 55.3 previously. This included a fall in the Employment sub Index to 52.1 from 56.3 which was the lowest reading since April 2014. The ADP Employment Reading came in at 205K versus 190K expected. Tomorrow’s NFP data might now be revised down after this awful ISM Report.
At 8.00 am ECB President Dragi has just spoken in Germany and here are his main points
- sees no reason for permanently lower inflation
- specific Eurozone challenges don’t justify inaction
- monetary policy can not be relaxed about aeries of supply shocks
- ECB will not surrender to low inflation
- no doubt that if we needed to adopt a more expansionary policy the risk of side effects would not stand in our way
- risks of acting too late outweigh risks of acting too early
On the back of these comments the DAX is selling off again having opened higher while the Euro is not back trading above 1.11
This morning on the economic front we have German Construction PMI at 8.30 am. This followed at 10.00 am by the latest Economic Bulletin from the ECB. At 12.00 pm we have the Bank of England Interest Rate decision and Asset Purchase Target. At 1.30 pm we have the US Weekly Jobless Claims. Finally at 3.00 pm we have US Factory Orders and Durable Goods.
March S&P 500
Since I posted yesterday morning the S&P has traded as low as 1865 after the release of the ISM Report before having another famous Wednesday turnaround and trade as high as 1922 earlier this morning. Yesterday’s move lower closed the ‘Open Gap’ from last week at 1879/1892.50 while this morning’s move is on the way to closing the 1910/1929 ‘Open Gap’ from earlier this week. Remember all Gap’s in the S&P get filled at some point. Yesterday after I posted the S&P traded lower to my 1895 buy level with an initial 1894 low print before having a nice rally to 1910. Unfortunately as all my Indices were getting hit at the same time and I wanted to reduce my exposure, I emailed my Platinum Members that I was cutting my S&P position way too early at 1896. The only consolation was as soon as I sent the email the S&P rose dramatically. Subsequently after the S&P got crushed on the ISM data I used my 5 Handle Rule to go long at 1870 and after trading around this price level for a while the market finally rose which enabled me to cover this position at my 1882 T/P level and I am now flat. As I mentioned yesterday my technical levels were still positive as shown by the MO reading at +60 and this scenario has again improved with yesterday’s turnaround in the markets which saw the MO close at +105 last night. These markets are not easy to trade and if you do not take your profit it will quickly evaporate. I still like the S&P and the weaker Dollar should help the US markets form here. Today I will be a small buyer on any dip lower to 1900/1907 with a 1894 stop. A break and close over 1916 will be positive and my only interest in selling the S&P is on a rally higher to 1945/1952 with a 1958 stop.
EUR/USD
Finally the Euro is breaking higher and is the reason why I have been so stubborn in my view that the Dollar was due a major correction after the Key Week Reversal in the Euro off the 1.0520 low print on December 3 last year. Key Week Reversals are rare and have to be respected. In my opinion the Fed should not have hiked Interest Rates last December as the US is in or about to enter recession. The ISM Report yesterday was awful and if the Euro can break and close over its major resistance at 1.1150/1.1300 then we will quickly see a move higher to the 1.18/1.20 area. Remember no Country wants a strong currency at this time. Today I will look to buy the Euro on any dip lower to 1.1060/1.1110 with a 1.1025 stop.
March Dollar Index
I am still flat the Dollar which got hosed yesterday falling 150 points which is in itself a huge move for the Dollar Index. Today I will move my sell level lower to 97.40/97.80 with a 98.10 stop.
March DAX
The DAX continues to trade heavy mostly due to the weaker economic data and of course the strong Euro. Despite the US Markets rallying strongly the DAX is only marginally higher. However for me to turn bearish the DAX I need to see the market break and close below key support at 9250/9300. Yesterday my DAX plan worked well as shortly after the DAX hit my 9430 buy level we had a nice rally to 9510 which enabled me to cover this position too early at 9455 as I had too many positions on board at that stage. Subsequently I emailed my Platinum Members to buy the DAX again at 9350 and were able to cover this position for a nice gain at 9410 and I am now flat. Today I will again look to buy the DAX on any dip lower to 9310/9370 with a 9240 stop.
March FTSE
My FTSE plan also worked well as shortly after I posted the FTSE traded lower to my 5805 buy level before having a nice rally to 5860 which enabled me to cover this position at my revised 5825 T/P level and I am now flat. Today I will again look to buy market on any dip lower to 5770/5800 with a 5735 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
For anyone who followed my initial Dow plan yesterday then it worked out very well for you as shortly after I posted the Dow traded lower to my 16160 buy level with a 16138 low print before having a nice rally to 16260 before subsequently the market got crushed. Unfortunately as I was already long the S&P, DAX and FTSE I emailed my Platinum Members to lower their buy level to 16090 which frustratingly after getting hit was stopped at my 16030 level and I am still flat. It is no coincidence that the Dow was the best performer of the US Stock Indices yesterday as the Dow companies are crying out for a weaker Dollar to help their earnings. For these reasons I will continue to look to buy dips in the Dow and today my buy level will be 16250/16320 with a 16190 stop.
March BUND
Thankfully after I posted yesterday morning the BUND traded higher than my 163.70 sell level before having a nice sell-off to 163.28 which enabled me to cover this position at my 163.35 T/P level as outlined earlier to my Platinum Members and I am now flat. Incredibly after cutting my position at 163.35 the BUND rallied to a new Contract high at 164.22. This is insane but you have to respect the price action. However despite the positive price action I will again look to sell rallies from 163.95/164.25 with a 164.55 stop.
Gold Rolling Contract
Thankfully we have not been short Gold over the past few weeks which has now risen over $100 from its 1040 low made late last year and I am still flat. This morning Gold is trading outside its Daily Bollinger Band and at the top of its Williams Index and is obviously sue a correction. I will not sell Gold for this correction preferring instead to look to buy the market on any move lower to 1122/1130 with a 1115 stop.
Silver Rolling Contract
Finally my long 14.30 Silver position was exited at my 14.60 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 14.15/14.45 with a 13.80 stop.
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