Technology shares dove gains in US Equities yesterday, while Natural Gas and Crude lifted commodities. The US dollar strengthened with Treasuries as investors prepare to analyse second Quarter earnings for more evidence that global economic activity is back on track. The S&P 500 rose for the second consecutive trading session as Technology shares rebounded from last week’s sell-off. Trading was light with volume 15% below the 30 day Moving Average. Meanwhile European equities closed higher following a strong finish to the Asian markets yesterday morning.
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For anyone following my Platinum Service it made 38 points yesterday and is now ahead by 356 points for July, having made 1023 points in June, 1071 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
With stock markets close to all-time highs investors are shrugging off political uncertainty and placing their faith in continued earnings expansion on broadening global growth. Germany’s Trade Surplus was higher than expected as May exports beat forecasts, while US employers added most jobs in four months in June.
Otherwise it was a very lack lustre trading session with little or no movement as both Treasuries and German Bund Yields declined by 1 basis point and 3 basis points respectively.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 11.00 am we have the US NFIB Small Business Optimism. Finally at 3.00 pm we have the JOLTS Job Openings and Wholesale Trade Sales/Inventories.
Meanwhile this morning the ECB’s Coeure is speaking while at 7.00 pm the Fed’s Brainard speaks on Monetary Policy in New York.
September S&P 500
On Friday the US stock market recorded its seventh Hindenburg Omen meaning that this signal is now valid until early November. I do not know when this series of HO’s is going to affect the S&P as this is only the 47th HO since 1986. However yet again we saw the S&P sell-off in the last 30 minutes of trading from a high of 2430. The end of QE by the Fed when they reduce their Bond buying programme by $600bn per year will put further pressure on the Economy even though growth as measured by GDP is weak at just 1.2% for the first Quarter. The PE Ratio continues to trade at 25 which is well above the historic norm. Remember as I have consistently mentioned all year the Fair Value for the S&P as measured by the very expensive Ned Davis Research is 1655. This market is not sustainable but until we get a major sell extreme that lasts for more than a few days it is a waste of capital in trying to pick a top. However if you have most of your pension fund tied up in equities you need to think about reducing your exposure. Today I will now lower my sell level in the S&P to 2431/2437 with a 2442 stop. I will also lower my buy level to 2406/2412 with a 2401 stop which is just below the 2402.25 low print from two weeks ago.
Yet again the Euro traded in a narrow trading range despite the extreme Daily Sentiment Index reading for the single currency. I am still flat the Euro and today I will now lower my sell level slightly to 1.1435/1.1475 with a 1.1505 stop. My only interest in buying the Euro is on a dip lower to 1.1290/1.1330 with a 1.1260 stop.
September Dollar Index
Speculators continue to hold their largest short position since May 2016. In my opinion it is only a matter of time before we see a large rally in the Dollar to correct its severe oversold condition. I am still flat and today I will now raise my buy level to 95.45/95.75 with a 95.15 stop.
Unfortunately the DAX just missed my 12370 buy level before rallying into the European close. I do not want to chase this market higher especially as the FTSE is struggling while the US Markets continue to trade weak into the close. This US weakness late in their trading sessions has been a recent theme. Today I will now lower my buy level to 12270/12330 with a 12230 tight stop. However despite my concerns for the DAX, I still do not want to be short the market at this time.
My short 7320 FTSE position finally worked out with the market trading lower to my 7305 T/P level shortly after I posted yesterday morning and I am now flat. I was surprised that the FTSE could not rally further yesterday especially given how weak Sterling is. Today I will again look to sell the market on any rally higher to 7335/7365 with a 7395 stop. I still do not want to be long the market at this time despite the huge discount between the September Futures Contract and the Cash Market.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 21240/21310 with the same 21180 stop which is just below the recent 21197 low print. Remember the Dow needs to break and close below its March 1, previous all-time high at 21169 for me to start to put on a more macro short position on board.
Unfortunately the Bund just rallied after I posted yesterday morning and I am still flat. Given how oversold the Bund is trading I will now raise my buy level to 160.25/160.65 with a 159.90 tight stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold tried to follow the afternoon rally in Silver yesterday without much headway. We still have this massive divergence between the two metals and I still prefer to be long Silver rather than Gold at this time given how cheap Silver is trading. I am still content to stand on the side-lines and observe the movement in Gold.
Silver Rolling Contract
Thankfully after I posted yesterday morning Silver traded at or near my latest 15.22 buy level for many hours before rallying late to a 15.70 rebound high. This move higher enabled me to cover this position at my 15.45 T/P level and I am now flat. Given the latest DSI reading of just 9% coupled with the fact that the large speculators have reduced their long position from 98,845 contracts three months ago to just 1854 contracts now. This is a massive turnaround in sentiment and exposure and as a result I will now look to buy Silver again on any dip lower to 15.20/15.55 with a 14.90 stop.