Stocks gained and volatility receded as the prospect of war between the U.S. and North Korea cooled. Safe Havens such as gold, Treasuries and the yen fell. Oil retreated.U.S. shares were broadly higher, with the S&P 500 Index gaining the most since April and the Dow Jones Industrial Average and Nasdaq Composite Index also rising. Volatility retreated, as the CBOE Volatility Index, or VIX, fell below 12.5 after topping 16 on Aug. 10.The Stoxx Europe 600 Index posted its first gain in four days, tracking increases across markets including South Korea, Australia and Hong Kong. Most European government bonds followed Treasuries lower. Bitcoin posted yet another surge.
To mark my 1400th 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 30 points yesterday and is now ahead by 490 points for August, having made 1096 points in July, 1023 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.
US Treasury yields rose 3.3 bps to 2.22%. Comments by the Fed’s Dudley helped yields off their session lows. Dudley said he was in “favour of doing another rate hike later this year” and that expectations of a September Balance Sheet announcement was not unreasonable. Pricing for a December rate hike also shifted up in response to 38% from 26%.
Dudley again argued that even with inflation somewhat below target there are other reasons why you would want to gradually remove policy accommodation, namely: (1) the level of short-term rates is pretty low; and (2) financial conditions have been easing rather than tightening and financial conditions are easier today than they were a year ago. In some concession to recent soft inflation prints, he did note that the next four to six months will be important to monitor, though he still expects inflation to pick up over the next six months.
In FX, the US Dollar was stronger across the board with the DXY up 0.3%, reversing the fall Friday after the soft CPI data. The biggest mover was the Swiss Franc, – 1.08% as risk aversion eased. Most other major pairs moved in line with the rise in the US dollar: EUR -0.3%; Pound -0.4%; Yen -0.4%. The Aussie was slightly weaker at -0.5% with weaker than expected Chinese data weighing alongside a stronger US dollar.
Chinese activity data disappointed with misses to the consensus for Industrial Production (+6.4% y/y v 7.1%), Fixed Asset Investment (+8.3% y/y v 8.6%) and Retail Sales (10.4% y/y v 10.8%). The pull back in the data seems to be more a shift back towards trend levels after strong data in June.
The oil price was also weighed down by the weaker than expected Chinese data – the details showed oil processing/refining in July fell 4.4% in the month, the largest fall in three years. WTI oil fell 2.7% to $47.56 while Brent is down a similar 2.8% to $50.66. Prices for Australia’s major commodity exports were more resilient with iron ore -0.6% to $74.7 and coking coal -0.5% to $193.5; these prices were supported by continued strength in Chinese steel production in July.
In contrast to the Chinese data, Japanese GDP was stronger than expected, up 1.0% q/q. Given the easing in risk aversion, the Yen was caught and ended down 0.4% on the day.
After the New York close last night, US President Trump has signed an executive order to consider whether an investigation into “unfair Chinese trade practices” is warranted. U.S. Trade Representative Robert Lighthizer will lead this investigation.
This morning on the Economic Front we have German GDP at 7.00 am. This is followed at 9.30 am by UK CPI, PPI and the House Price Index. Next at 1.30 pm we have US Retail Sales, Empire Manufacturing and the Import Price Index. At 3.00 pm we have the NAHB Housing Market Index and Business Inventories. Finally just before the close at 9.00 pm we have the Total Net Long Term TIC Flows.
September S&P 500
I am sorry to keep emphasising the importance of my updated emails that are attached to my Platinum Service but as volatility picks up so will the importance of my Platinum Service. With markets trading on a 24 hour basis you never know when something important is going to happen to drive the next move in asset classes. Yesterday morning when I woke up in Florida the S&P had already hit my 2455 sell level. As I did not like the price action plus the fact that the McClellan Oscillator after just two down days gave a rare buy signal I emailed my Platinum Members to exit any short S&P position at 2453. After I sent the email the S&P traded between 2452/2454 for most of the next hour before spiking higher. Subsequently I went short again at 2463 before covering this position for a small loss at 2463.50 and I am now flat. The S&P still has an ‘’Open Gap’’ from last Wednesday’s close at 2471.25 and this is been tested as I finish this commentary. Today I will now look to sell the S&P on any rally higher to 2473/2479 with a 2484 stop. There was an invited closed economic summit on the East Coast of America which was held 10 days ago. One contact of mine was at this event and a poll went around among the attendees to see what each forecast was for the S&P in 12 months. Incredibly the average result was 1340 and this is not a miss-print. I would not be this bearish but there is no doubt we are well overdue a major correction. If this 1340 level or indeed anywhere close to this level was hit America would be in a major recession. However until we get a sell extreme that lasts for more than a few days and takes out some key level such as the major support from 2400/2420 the S&P is still a buy on dips. Today I will now move my buy level higher to 2449/2455 with a 2444 stop.
EUR/USD
I am still flat the Euro which traded in a narrow range yesterday not helped by the absence of any major economic news. Today I will leave my buy level unchanged from 1.1670/1.1710 with the same 1.1635 stop. I will also leave my sell level unchanged from 1.1870/1.1910 with a 1.1940 tight stop.
September Dollar Index
My large long 93.20 Dollar position again worked well yesterday with the market trading higher to my revised 93.35 T/P level and I am now flat. The idea of buying the Dollar on dips has worked well for most of the past 10 weeks despite the aggressive sell-off of the Dollar since the 103.80 high on January 3, 2017. Today I will again look to buy the Dollar on any dip lower to 92.85/93.20 with a 92.55 stop.
September DAX
Thankfully we had no sell level in the DAX yesterday which rallied strongly and in the process corrected a lot of its severely oversold condition. As mentioned in yesterday’s commentary the 11900/11920 low from last Friday is strong support as this is the 200 Day Moving Average and it will take a break and close below this level for a more accelerated decline takes place. Today I will now move my buy level higher to 12060/12110 with an 12010 stop. If I am taken long and subsequently stopped out of any long position I will be a more aggressive buyer in front of 11920 with a 11860 stop.
September FTSE
With EUR/GBP trading near 0.91 it is extremely difficult to be short the FTSE market. I am still flat as the market did not come near my buy range yesterday. Today I will now raise my buy level to 7270/7300 with a 7235 stop.
Dow Rolling Contract
Thankfully we used last Thursday’s sell-off to exit any remaining short position. The -247 reading in the McClellan Oscillator was in hindsight a large buy signal but normally when the MO is so negative the US Indices are trading at the bottom of the Daily Bollinger Band and Williams Index. However the Dow and S&P had both fallen less than 2% so it was so unusual so see such a negative MO after such a small sell-off in the markets. Lat night the MO improved substantially to close at -105. I am still flat the Dow and today I will now raise my buy level slightly to 21790/21860 with a 21740 stop. The Dow has strong resistance at 21100 and today I will be a small seller on any further rally to 22080/22150 with a 22195 stop which is just above last Wednesday’s 22179 all-time high.
September BUND
Unfortunately the Bund just missed my 164.60 sell level on the European open yesterday morning and I am still flat. Today I will now lower my sell level slightly to 164.40/164.80 with a 165.15 stop. The Bund has now rallied over 430 points since the July low which as I keep saying is incredible 8 years into an economic recovery in Germany.
Gold Rolling Contract
Gold is struggling to break key resistance at 1300 while at the same time holding its 1265/1275 support level. I am still flat and today as I have just got hit in Silver I will now lower my buy level slightly to 1260/1267 with a 1254 stop.
Silver Rolling Contract
Silver just missed my initial 16.90 buy level with a 16.94 low print before spending the rest of the trading session trading higher. As I go to print Silver has just hit my 16.85 buy level with a 16.79 low print so far. My concerns with this market are now justified and I will only add to this position on any further move lower to 16.55 with the same 16.35 tight stop.
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