US equity markets have started the new week on a positive note and after two consecutive days of negative returns, European equities play catch up, posting gains across the board. Excluding the back end of the curve, US Treasury yields are marginally higher and the US Dollar has given back Friday’s gains. Commodities are up, helping the AUD outperform and late in the session President Trump unveiled his infrastructure plan to fix America’s crumbling infrastructure.
To mark my 1500th 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 This offer is open to both new and existing members and 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 214 points yesterday and is now ahead by 1226 points for February having made 879 points in January, 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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After taking a beating over the past two weeks, US equities are showing signs of stability as they recorded a second consecutive day of gains. Looking at the S&P500 sector breakdown all 11 sectors are up on the day with materials and financials leading the way. Meanwhile the steady rise in US equities since late Friday has helped the VIX index settle around the 26 mark and early in the session all major European equity indices closed in positive territory, ending a two day losing streak.
Ahead of the US CPI data tomorrow, US Treasury yields opened the day higher, but then drifted a bit lower over the course of the day. The 2y rate is essentially unchanged at 2.07%, 10y UST are currently trading at 2.85%, half a bps higher, but the back end of the curve has been the big mover with the 30y tenor down 2.5bps to 3.135%.
Yesterday after I posted, the USD eased a little bit and after a brief rally during the morning, it has eased again. DXY trades at 90.21, a smidgen above yesterday’s low of 90.073.Price action in G10 currencies has also been a little bit subdued although notably the NOK and AUD are up 0.54% and 0.36% respectively. A positive day for commodities is probably one factor supporting these currencies, although after a solid opening, oil prices have started to roll in the past few hours. Meanwhile copper and iron ore have led the way with both commodities up over 1%.
EUR is a little bit stronger at 1.2310, up 0.37% after ending a fourth consecutive day with a 1.22 in front of it. Meanwhile and ahead of the UK CPI release this morning, Sterling is little changed at 1.3850. Yesterday, the Bank of England’s Vlieghe endorsed last week’s view of the MPC in commenting that a bit more than three 25bp policy rate increases were probably needed over the next three years. Under current market pricing of three hikes over three years the economy would still have excess demand and would not get inflation back to target. Fellow policy-maker McCafferty seemed to endorse that view as well, suggesting in a radio interview that it is likely rates would need to go up earlier. Sterling hardly moved on the above comments.
Late yesterday, President Trump unveiled a $200bn infrastructure plan aimed at fixing America’s crumbling infrastructure. The plan aims to encourage about $1trn of extra investment from the private sector, state and localities, but it falls short of the $2trn needed according to the American Society of Civil Engineers. States and localities budgets are tight and after the recent federal deductions, support for infrastructure is unlikely to come easily, the plan is also likely to face opposition in Congress from both Republicans and Democrats. Democrats have already unveiled an alternative plan of $1trn in direct Federal spending and after passing the huge budget and tax plan, fiscally Conservative Republicans are unlikely to support additional spending. So best guess is that after some wrangling in Congress the infrastructure plan, if passed, will look very different to the current proposal.
This morning on the Economic Front we have UK CPI and PPI at 9.30 am. This is followed at 11.00 am by the only US data, the NFIB Small Business Optimism. However at 1.00 pm the Fed’s Mester will discuss Monetary Policy and the Economic Outlook at 1.00 pm.
March S&P 500
My S&P plan worked well yesterday with the market spiking to my 2655 sell level shortly after I posted before selling off in the afternoon to close last Friday’s Gap at 2620 before rallying 50 Handles to a rebound high at 2670 before a late sell-off took the market lower. This initial sell-off enabled me to cover my short position at my 2648 T/P level and I am still flat. This huge rally since last Friday’s low was flagged by the severely oversold McClellan Oscillator which has now improved to close with a negative 120 print as yet again all dips are bought. Also supporting this recent rally is the Daily Sentiment Index which declined to just 9% bulls last Friday from a peak of 96% two weeks earlier. I am now looking for more upward action before we see some more selling pressure that will eventually take out last week’s double bottom at 2530. Today I will now raise my buy level to 2625/2633 with a 2618 stop which is just below yesterday’s low print. I will also be a small seller on any rally higher to 2670/2678 with a 2685 stop. My target price for this rebound is from 2750/2775 and I will be an aggressive seller if we reach this sell area over the coming week with a 2792 stop.
EUR/USD
The buy the dip in the Euro continues to pay dividends. Unfortunately the Euro just missed my 1.2225 buy level with a 1.2232 low print before rallying strongly and I am still flat. Today I will now raise my buy level to 1.2235/1.2275 with a 1.2205 stop. I still do not want to be short the Euro at this time.
March Dollar Index
Just before I posted the Dollar traded lower to my 89.75 buy level and I have just cut this position here for a small gain at 89.81 and I am now flat. Today I will again look to buy the Dollar on any dip lower to 89.00/89.40 with a 88.60 stop.
March DAX
I do not want to chase the DAX higher especially with the Euro strong this morning. Therefore I will leave my buy level unchanged from 12090/12160 with the same 12030 stop.
March FTSE
The renewed weakness in Sterling certainly helped the FTSE yesterday to rally. I am still flat and today I will raise my buy level slightly to 7030/7075 with a 6985 stop. Ahead of this morning’s key inflation data I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan worked well yesterday with the Dow spiking after I posted to my 24550 sell level before eventually selling off 300 points after the US Markets opened. This sell-off enabled me to cover this position at my 24480 T/P level. Subsequently I emailed my Platinum Members to go short again at 24630 before the market again sold off to my 24565 T/P level and I am now flat. The Dow has huge resistance from 24725/24850 and today I will be a seller in this area with a tight 24910 stop. I still do not want to be long the Dow at this time as following last week’s aggressive sell-off, surprises will now occur on the downside.
March NASDAQ
I am glad I stood aside in the NASDAQ yesterday as the market traded in a narrow range. I still do not see a good risk/reward trade at this time and I will continue to stand aside and observe.
March BUND
Unfortunately the Bund just missed my 157.45 buy level with a 1.5754 low print before rallying and I am still flat. Today I will now raise my buy level slightly to 157.20/157.60 with a 156.85 stop.
Gold Rolling Contract
On the back of the weaker US Dollar Gold is rallying this morning. I still do not trust the price action in Gold as everyone that I talk to and read are long the precious metal. I think it is significant that when equity markets were under so much pressure last week that the Gold price did not move higher. However I still do not want to short Gold and today I will raise my buy level slightly to 1303/1310 with a 1295 stop.
Silver Rolling Contract
Silver finally rallied to my revised 16.50 T/P level on my aggressively long 16.47 position and I am now flat. I know Silver is trading higher this morning but I am glad to be out of this position that I have held for the previous week. I still do not trust this market and my only interest in buying Silver is on a dip lower to 16.05/16.35 with a 15.70 stop.
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