Well if Mr Draghi says it is so, we’d better get used to it. Bond Yields, particularly in Germany, continued their rise yesterday; despite the ECB’s Draghi telling us that they are committed to their QE programme. Seemingly unconcerned about higher yields (and yes, they are implementing QE to lower yields…) he noted that if interest rates are so low, asset prices are going to be more volatile.
For anybody following my new Platinum Service the results so far this week are Monday +460 points, Tuesday +40 points and yesterday + 310 points. If anybody has any interest in this new service please email me on bryan@tradernoble.com for more info.
So there. With more positive news about Greece inching towards a deal with its creditors, risk sentiment was modestly positive, allowing equities to move higher and rate differentials to “carry” the day in FX – the EUR outperformed. In FX, it is all about the EUR at present, with the moves in Bund Yields and the increasing focus on Greece. This left the USD being dictated by what was happening on the other side of the ditch, rather than its own information. Commodity prices didn’t follow the script, and were lower mostly across the board. That helped CAD and the NZD to be the underperformers in the G10 FX world; but AUD managed to scrape a small positive against the USD- helped by yesterday’s strong GDP outcome.
It is a fine balance; better global growth is positive for the earnings outlook and allows Bond Yields to rise; but too much and too fast runs the risk of quashing the burgeoning move to something more akin to normal. While Mr Draghi might be complacent; many investors are not. He is right though, this breeds volatility. EUR, and Bond Yields, were supported by the ECB’s press conference as (apart from the volatility comments) there was a slight upgrade to 2015 CPI forecasts, and they noted that inflation “bottomed” at the beginning of 2015. And the fact that growth was not better was blamed on trade i.e. a stronger EUR. Given this, the market was not convinced at all by his reassurances that they will implement their full QE programme. Maybe the ECB should talk to their Fed counterparts about the role forward guidance and expectations play in a “successful” QE implementation.
Services PMI’s were released and somewhat surprising in both the US and the UK – they were weak. Yesterday’s China data was also a little softer. That added to the US Dollar’s underperformance but didn’t get much attention. Also in the US, the Trade data was much better than expected. Some of this was due to the port strikes but overall, it adds another positive to the Q2 GDP outlook. Exports were up 1% and imports down 3.3% leaving the best trade deficit. Markets ignored it, but that’s not unusual. The Fed’s Beige Book was somewhat positive, with seven of 12 districts reporting modest to moderate growth. The Fed’s Evan’s wasn’t so upbeat, but he is a known dove.
With Germany closed today the only economic release this morning is the UK Bank of England Rate decision and Asset Bond Purchase at 12.00 pm. This is followed at 1.30 pm by US Weekly Jobless Claims and Non-Farm Productivity. Finally at 5.00 pm the Fed’s Tarullo will speak at a Financial Conference in New York.
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June S&P 500
The S&P plan worked well yesterday as the market had nice rally before lunch which enabled me to go short at an average rate of 2115 before having a nice sell-off shortly after the US Markets opened which enabled me to cover this position at 2109 and I am now flat. There is no doubt the much weaker Dollar is helping the S&P to stabilise above 2100 but with the weaker than expected economic data continuing to be released in the US sooner or later the stock market is going to wake up and hit the exit door. However until we get a close below 2095 there is no point in been short the market for more than a few hours/1 day. As I have mentioned over the last few weeks the market is stuck between 2095/2100 on the bottom and 2120/2126 on the topside and a break and close over one of these levels will lead to the next major move. Tomorrow I will again be a small seller on any further rally higher to 2125/2132 with a 2137 stop. Despite my concerns yesterday I will again be a small buyer on any dip lower to 2099/2105 with a 2093 stop.
EUR/USD
My Euro plan worked very well if you were up to trade when the European Markets opened at 7.00 am as shortly after this time the Euro was trading at my 1.1185 sell level before having a nice sell-off which enabled me to cover this position at 1.1130 before literally the Euro having hit a low at 1.1079 following the Dragi press conference for the market then to explode 200 points higher in a straight line. As I mentioned yesterday a break and close over 1.1250 will be very constructive and opens up a move to at least 1.1500 and possibly 1.1800 over the coming weeks. Today I will be a small buyer on any dip lower to 1.1210/1.1240 with a 1.1170 stop. I certainly do not want to be short the Euro at this time.
June Dollar Index
Just like the Euro above if you were up and trading early then you were able to buy the Dollar at 95.70 before the market had a nice rally which enabled me to cover this position at 96.30 and I am now flat. Looking at the charts the Dollar does not have any real support until the 92.80/93.20 area which is the recent low. Today I will be a small seller on any further rally to 95.60/96.00 with a 96.30 stop. I do not want to be long the Dollar at this time until we hit the major support listed above.
June DAX
Unfortunately the DAX just missed my 11280 buy level by 20 points before going on to have a 200 point rally and I am still flat. The DAX is a caught because of the much stronger Euro which is giving support to the US markets as mentioned above but is definitely hindering the progress of the DAX over the past month. Today I will raise my buy level slightly to 11310/11360 with an 11260 stop. I still do not want to be short the market at this time.
June FTSE
The FTSE also just missed my 6875 buy level and I am still flat. Just like the S&P above the FTSE has huge support since the General Election at 6850/6900. Today I will raise my buy level slightly to 6890/6910 with a 6865 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow plan worked very well yesterday as shortly before lunch the Dow rallied to my 18120 sell level before having a nasty sell-off which enabled me to cover this position near the lows of the day at 18020 as outlined in my Platinum Service and I am now flat. Today I will again look to go short on any rally higher to 18200/18250 with an 18290 stop. I will also be a small buyer on any dip lower to 17990/18040 with a 17950 stop.
September BUND
The BUND got slammed again today with the market now nearly an incredible 600 points lower since Tuesday morning. The amount of losses that Pension and Hedge Funds are sitting on is now incredible. The move lower in the BUND eventually hit my 150.50 buy level. I am still long and I would expect my 149.90 stop to get hit. If I am stopped out of this trade I will be a more aggressive buyer in front of 149.30 with a 148.70 stop. Given how oversold the BUND is currently trading I do not want to be short the market at this time.
Gold Rolling Contract
Surprisingly Gold had a very weak day especially when you consider the sell-off in the US Dollar. The market eventually traded lower to my 1184 buy level. I am still long and I will leave my stop the same at a tight 1175.
Silver Rolling Contract
No change as I am still long at 16.70 with the same 16.20 stop.
Silver Rolling Contract
No change as I am still long at 16.70 with the same 16.20 stop.
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