Yesterday was a quiet trading session with markets essentially marking time ahead of key risk events tomorrow and later in the week. 10y US Treasury yields are back above 2.60% with long dated corporate issuance seemingly a key driver and after being on the back foot for most of Friday the US Dollar has traded in a sideways pattern. That said if the move in US Treasury yields is sustained the US Dollar could well be the performer today. European equity indices have ended the day up between 0.13% -0.33% and US equities ended the day mixed with the Dow closing down 0.1% while both the S&P and NASDAQ closed higher.
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For anyone following my Platinum Service it made 84 points yesterday and is now ahead by 484 points for March having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
We have had lots of headlines coming from the UK, but market reaction has been rather muted. Scottish First Minister Sturgeon said she’ll seek authority from the Scottish Parliament next week for a second referendum to leave the UK, but PM Theresa May has been quick to rule it out telling the BBC that Sturgeon’s decision sets Scotland on a course for “more uncertainly and division” at a time when evidence suggests the majority of Scottish people do not want a second vote. Sterling hardly moved on the headline as the decision to call a referendum needs to be agreed by the UK Government and PM May has made it clear she has no interest in going there ahead of Brexit.
On the Brexit subject, late last night the House of Commons rejected amendments to the Brexit Bill and now the Bill will be reconsidered by the House of Lords. The Bill is expected to pass with no objections over the coming hours. This means PM May could trigger article 5o as early as tomorrow, but Downing Street sources have said the PM will wait until the end of the month to officially pull the Brexit trigger. The news has seen Sterling slide 80 points to 1.2140.
Bloomberg’s currency ranker is showing the Swedisk Kroner as the top G10 performer over the past 24hrs (up 0.74%), but a closer look at the intraday chart shows most of the gains were achieved yesterday followed by sideways price action in the overnight session. EUR and DKK are the underperformers down – 0.14% and -0.16% respectively with the dip in the EUR seemingly reflecting a belated reaction to Belgian CB Chief Smets’ comments denying the “ECB had taken even a small step toward an exit last week”. AUD traded in a 28 pips range overnight and is currently at 0.7575, essentially unchanged relative to Sydney’s closing levels.
As for commodities, oil appears to have found support just above the $48 mark, gold is unchanged but copper, steam coal and iron ore have had a good day, up 1%, 3.0% and 1.8% respectively.
This morning on the economic front we already had the release of German CPI for February which printed +0.6% as expected. This shows that inflation is picking up in Germany and the Bund market is getting hit as a result. At 10.00 am we have Euro-Zone Industrial Production and the ZEW Survey for both Germany and the Euro-Zone. This is followed at 11.00 am by the US NFIB Small Business Optimism Survey. Finally at 12.30 pm we have US PPI.
March S&P 500
The S&P traded in a very narrow range as the market essentially goes on hold ahead of the FOMC and Yellen press conference tomorrow. Interestingly, despite the narrow ranges the prevailed in both the Dow and S&P, the McClellan Oscillator improved to close with a -134 print. It was only last Thursday that this indicator closed oversold with a -266 print. Today I will move my buy level slightly higher to 2362/2367 with a 2357 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 2347/2352 with a 2342 stop. I still do not want to be short the S&P at this time as I want to see if the market can re-group and test the March 1 all-time highs at 2401.
After the Euro hit my 1.0665 buy level the market had a small rally. As I was long both Gold and Silver, I emailed my Platinum Members to exit this Euro position for a small gain at 1.0674. With the Euro trading lower overnight I have again bought the market here in small size at 1.0638. I will add into this position only on a further move lower to 1.0610 with a tight 1.0585 stop. I will look to exit this trade on any move higher to 1.0665. Given the huge move higher in US Treasury Yields I am surprised that the Euro is not lower but with German inflation showing a rise of 0.6% for February I believe the scope for the Euro to move much lower is limited.
June Dollar Index
Overnight the Dollar traded higher to my 101.50 sell level. I am still short and I will now lower my stop to 101.85. If I am stopped out of this position I will be a more aggressive seller in front of 102.20 with a 102.55 stop which is just above the key 102.45 resistance and pivot point.
The DAX traded in a sideways fashion all day yesterday and that theme has continued this morning despite the weakening Euro and Bund. Today I will raise my buy level slightly to 11860/11910 with a 11815 stop. I still do not want to be short the DAX ahead of tomorrow’s Dutch Elections and FOMC Meeting.
The renewed selling of Sterling is certainly helping the FTSE to make new all-time highs this morning. I am still flat the market and today I will now raise my buy level to 7315/7345 with a 7290 tight stop. Naturally given the weakness of Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
Yesterday after I posted the Dow just missed my buy level before having a small rally and I am still flat. The Dow is struggling in comparison to both the S&P and NASDAQ which is not surprising given its out-performance since the Trump Presidential Election win in early November. The improving McClellan Oscillator is a sign not to short the Dow for the moment until we see what the Fed has to say tomorrow and more importantly the press conference with Yellen. Today I will lower my buy level slightly to 20730/20790 with a 20680 stop.
My Bund plan worked well after I bought the market at 159.00 before the market rallied to a high at 159.68 after I posted early. Hopefully you were able to get long near my buy level before the market spiked to my 159.45 T/P level. Subsequently the Bund sold off after lunch as it followed the US Treasury market lower. Speaking of the US Treasuries, the market is severely oversold after its aggressive move lower over the past two weeks with sentiment getting to extreme levels again. The 30 year Bond has made new lows for this move but so far the 10 Year Treasuries has not which may mean some positive divergence. Meanwhile the Bund is trading nearly 90 points lower from its mid-morning high of yesterday and is also due a correction. Today I will be a buyer on any further dip lower to 158.45/158.80 with a 158.15 wider stop which is just below the January low at 158.29. Given how oversold the Bund is trading I do not want to be short the market at this time.
Gold Rolling Contract
Gold traded in a sideways direction for most of yesterday. After Gold hit my 1203 buy level the market had a small rally to 1207 and in keeping with my theme of banking points when available I emailed my Platinum Members to exit this position at 1206 and I am now flat. Today I will again look to buy Gold on any further dip lower to 1188/1195 with a 1181 stop.
Silver Rolling Contract
In a rush of blood to the head moment, yesterday morning I bought Silver at 17.10. I am still long and today I will add to this position on any move lower to 16.70 with a tight 16.45 stop which is just below the key 16.60 support level from end January which resulted in an Upside Key Day Reversal. I must say I am very surprised how weak both Gold and Silver are trading especially given the economic and political risks in the world at this time.