Global Equity markets extended their Friday rally helped along by a strong lead from Asia. ECB President Dragi complemented the positive mood by yet again hinting at the possibility of further stimulus ahead at its upcoming March 10 Meeting, while the continuing stability in oil prices was also a positive contributing factor. Markets are again opening higher this morning following on from the 3.3% rise in the Shanghai Index while the Nikkei closed flat after yesterday’s 7% rally.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/4 updated emails throughout the trading day. This offer is open to both existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 20 points yesterday and is now ahead by 1495 points for February having made 3365 points in January. Since I started this service it has generated a return of over 18000 points.
Yesterday’s lower CNY fix by nearly 200 points helped USD/CNY trade sub 6.5 for the first time this year and was a source of stability for the region. China’s soft Trade figures and Japan’s bleak Q4 GDP Report did little to affect the positive mood with the Nikkei’s gain yesterday boosted by news of Softbank’s $4.4bn share buyback plan.
The rally in European equities was led by banks and auto sectors with the Euro Stoxx 600 ending the day 3% higher. Markets in the US were closed for the President Day Holiday but stock futures suggest the potential for a 1.5% opening gain for the S&P 500.
The US Dollar is stronger against safe haven currencies and softer against commodity ones. The AUD was the top performer up 0.45% while the Yen was the biggest looser at -1.17% with the Swiss Franc close behind at -1.05%.
Comments from ECB Dragi dragged European core and peripheral Sovereign Bond Yields lower with Portuguese and Greek Bond Yields closing 20bps lower while 10 Year German Bunds dropped 2.4bps to 0.23%.
Dragi noted that the ECB deliberation will focus on two areas. Firstly, the pass – through from low imported inflation such as oil and commodity prices to wages and inflation expectations, and secondly the transmission mechanism from the financial system, particularly banks. He said if either of these entails downside risk to price instability, ‘we will not hesitate to act’.
Ahead of the 10 March Policy Meeting, there is a general consensus that the ECB will lower its Deposit Rate and while other additional measures aimed at boosting banks are also expected, what these may entail is still not very clear. To me it sounds like the ECB will be at its most creative in trying to shore up share prices which in turn could allow it to be more aggressive in lowering the Deposit Rate.
As for Commodities, WTI and Brent Oil grinded higher yesterday with both closing up 1% while Gold was down over 3%.
This morning on the economic front we have the ZEW Survey for Current Situation/Expectations for both Germany and the Euro-Zone at 10.00 am. This is followed at 1.30 pm by the US Empire Manufacturing Index. Finally at 3.00 pm we have the NAHB Housing Market Index.
March S&P 500
The S&P just missed my 1895 sell level after I posted yesterday with a 1892.75 high print so far and I am still flat. With the market closing at 1858 on Friday I just cannot see the US traders when they return to their desks later this morning leave such a massive ‘Open Gap’ without at least partially filling this Gap. Remember all ‘Open Gap’s in the S&P get filled at some stage. We now know that the line in the sand for the S&P is at the recent 1800/1805 twice tested major support which coincidently is also the October 2014 low print before we embarked on another massive rally. If you look at the Daily Chart a break and close below 1800 could well see a test of the 1550/1660 area over time. The huge rally in all major Indices over the past few days again shows how difficult it is to short stock markets as you do not know when the next major spike higher will come form as I have repeated countless times the Central Banks will do whatever they have to to prevent a full out crash where stock markets remain weak for a pro-longed period. It is amazing to think that the majority of my points generated for the Platinum Service so far in 2016 have all been made on the buy side of the ledger despite the near 20/25% fall in all Indices. Today I will raise my sell level slightly to 1896/1902 with a 1908 stop. I will also raise my buy level to 1863/1870 with a 1857 stop.
EUR/USD
My Euro plan worked well with the Euro trading to a low at 1.1127 following Dragi’s comments yesterday which enabled me to buy the market at 1.1135. Subsequently the Euro traded as high as 1.1184 overnight but as I wanted to book some points for yesterday I covered this position at my revised 1.1155 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1090/1.1120 with a 1.1065 stop. The Euro has good support at 1.1080/1.1100 and I would expect the market to have difficulty initially in breaking this key support level.
March Dollar Index
I am still flat the Dollar and today I will use any further rally to 97.10/97.40 to go short with a 97.70 stop.
March DAX
I am still flat the DAX and today I will raise my sell level slightly to 9300/9330 with a tight 9380 stop. My only interest in buying the market is still on a dip lower to 9040/9100 with a 8995 stop.
March FTSE
The FTSE has had a huge near 6% rally since Friday morning as yet again the Daily Bollinger Band and Williams Index prove what a valuable trading tool they both are. I am still flat the market and today I will raise my buy level to 5710/5750 with a 5670 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
Similar to the S&P above I just cannot see the US traders leave such a massive ‘Open Gap’ from last Friday’s close at 15973 to its current pricing at 16210 without at least some of this Gap get filled. For these reasons I will look to sell the Dow on any further rally higher to 16280/16340 with a 16380 stop. I will also look to buy the Dow on any dip lower to 16000/16060 with a 15950 stop.
March BUND
No change as I am still a buyer on any dip lower to 163.30/163.60 with the same 162.95 stop. I will also look to see the BUND on any move higher to 164.80/165.10 with a 165.50 stop.
Gold Rolling Contract
Gold is continuing its recent sell-off from its 1263 high print last Thursday with Gold trading as low as 1190 overnight. I am still flat and today I will leave my buy level unchanged at 1179/1187 with a 1169 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 14.80/15.10 with a 14.45 stop.
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