Yesterday’s trading session was devoid of any major data releases, however the huge rally in oil has been the main catalyst for most of the moves in markets over the past 24 hours. It all started just before I posted yesterday morning with the release of a joint statement from the energy ministers of Saudi Arabia and Russia concluding that the current production cuts agreement should be extended until Q1 2018.WTI and Brent jumped over 1.5% on the news and then continued to rally for most of the session gaining over 3% at one point. Prices have eased a little over the past few hours however, capping the gains to 2%. Copper (+1%), Aluminium (+0.9%) and gold (+0.25%) have followed the move in oil, but iron ore has been one exception, down 0.9%, closing the day at $60.8.Equities also benefited from the move with energy, materials and financial sectors leading the gains on both side of the Atlantic.
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For anyone following my Platinum Service it was flat yesterday as none of my trades got executed in a trading session of very narrow misses on my calls, and we are still ahead by 583 points for May, having made 1276 points in April, 1335 in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
The news has helped commodity linked currencies outperform while softer US data also played a part for the broad USD weakness. The CAD is at the top of the G 10 leader board +0.56% while the AUD (+0.40%) and NZD (+0.20%) have also outperformed, but looking at the tick chart with oil prices easing over the past few hours both currencies have given up a big part of yesterday’s gains. AUD traded to an overnight high of 0.7446 and now is trading at 0.7420 and NZD reached a high of 0.6918, but now is back below the mark at 0.6880.
The Euro has also been one of the major USD outperformers, up 0.40%. Yesterday the Euro was trading at 1.0930 when I posted yesterday morning and now the pair is trading at 1.1010. The softer than expected Empire State Manufacturing Index (-1 vs 7.5 exp. and 5 prev.) weighed on the USD and gave the Euro an initial lift which was further compounded by a rise in EU Bond Yields while US Treasuries were little changed. 10y Bunds closed the day 3.8bps higher while 10y UST yields are currently trading at 2.34%, 1bps higher relative to 24 hours ago.
Other news boosting the Euro came from ECB Praet commenting that the Central Bank will assess the balance of risk at the June meeting, noting however that the Euro Area still needs ‘high degree’ of stimulus. Ahead of the Bank’s June meeting I would not be surprised to hear similar commentary from other ECB board members. Amid a buoyant economy and dissipation of political risk after the French election, I think the ECB will slightly alter its guidance at the June meeting by removing the words ‘or lower’ from the pledge to have unchanged or lower rates for the foreseeable future. I now see the Euro trading around the 1.10 in June forecasting higher levels thereafter.
Sticking with Europe, Emmanuel Macron has named Edouard Philippe as PM. Philippe is a 46-year old centreright former mayor of the port city of Le Havre. Philippe is thought to be pro-business and a liberal on social issue. Meanwhile Merkel and Macron have also vow to create a roadmap to revive the bloc and have planned joint German-French cabinet talks for July. A more united Europe is unlikely to make the Brexit process easier for the UK.
This morning on the Economic front we have UK CPI, PPI and the House Price Index at 9.30 am. This is followed at 10.00 am by Euro-Zone GDP, ZEW Current Situation/Expectations and the Trade Balance. At the same time we will get the German ZEW Survey. At 1.30 pm we have US Housing Starts and Building Permits. Finally at 2.15 pm we have US Industrial Production.
Speaking wise the ECB’s Nowotny is due to speak in Vienna at 4.30 pm.
June S&P 500
Yesterday was extremely frustrating trading session with the S&P missing my 2388 buy level with a 2388.25 low print shortly after I posted and I am still flat. A strong market open in Chicago carried the S&P to a new all-time high at 2404.05 for the Cash Market, while the Dow again failed to break its equivalent March 1 high at 21,169 again emphasising the huge negative divergence between both the NASDAQ and S&P against the Dow. The advance in the S&P is being helped by the NASDAQ which traded to a high at 6150 which itself is just shy of an 8 year trend line and resistance level at 6175. The move higher in the NASDAQ has just been straight up since October’s 5000 low print. Given the extreme sentiment to the US stock market I am very bearish as this will end in tears but I am still not short which is important as the market has not as yet given a sell extreme. The S&P will continue to be a ‘’buy on dips’’ until the market tells us otherwise. Today the S&P will have strong support from 2389/2395 and I will be a buyer in this area with a 2384 stop. I will also raise my sell level to 2415/2422 with a 2427 stop.
Unfortunately the Euro was trading at 1.0930 when I posted yesterday morning which just missed my 1.0925 buy level before rallying above 1.10 this morning. Thankfully we had no short positions as apart from Unemployment the rest of the US economic indicators are slowing down. I spoke to my Tax Consultant in Florida last night and he confirmed what I have been saying for the past number of months about a real slow- down in economic activity since January. This weakness in economic activity will be enhanced if the Fed continue to hike rates 2/3 more times this year as Money Supply will continue to contract. Today I will now move my buy level higher to 1.0965/1.0995 with a 1.0935 tight stop. My only interest in going short the Euro is on a rally higher to 1.1150/1.1200 with a 1.1235 stop.
June Dollar Index
The Dollar traded lower to my second buy level at 98.80 which put me long at an average rate of 98.95. Unfortunately the Dollar just missed my revised 99.00 T/P level and I will leave my stop unchanged at 98.50 which is being tested as I write this commentary. I know most of you do not trade the Dollar Index given the enormous spreads that the Spread Betting Firms charge compared to the one point spread on the Ice Exchange. If I am stopped out of this trade I will stand aside and take another look tomorrow.
Finally we are seeing some weakness in the DAX on the back of the stronger Euro with the DAX unchanged from where I a marked prices 24 hours ago. Today I will now lower my sell level slightly to 12880/12930 with a 12970 tight stop. Given the weakness in the Dollar I still do not want to be long the DAX at this time.
Earlier this morning I emailed my Platinum Members to exit any short FTSE position on the back of the weaker Sterling especially with EUR/GBP now trading at 0.8520. As a result I covered my short 7415 position for a breakeven and I am now flat. In fact in a complete turnaround in my view I will now look to buy the FTSE from 7385/7415 with a 7355 tight stop. After the heaviness of the FTSE Market yesterday it is only a matter of time before the market makes new all-time highs above 7448.
Dow Rolling Contract
Just like the S&P above, the Dow also juts missed my 20870 buy level with a 20884 low print before rallying strongly. However for the Dow to continue to rally it needs to break and close over its March 1, high at 20,169 to eliminate this negative intra market divergence. There is no doubt that the weakness in the US Dollar is helping the US stock market as we only have to look at the massive rally in the FTSE since ”Brexit”. Today I will now raise my buy level in the Dow to 20870/20925 with a 20835 tight stop. Given the significance of the 21169 resistance level I will be a small seller form 21160/21210 with a 21255 stop.
This morning on the back of the stronger Equity Markets the Bund has just hit my 160.37 buy level with a 160.31 low print. I will only add to this position on any move lower to 160.10 with a 159.90 tight stop. I will now lower my T/P level on this position to 160.50 as I prefer to get long at my second buy level from yesterday on any further dip lower to 159.20/159.50 with a 158.95 stop which is just below the 3.5 month trend line at 159.35.
Gold Rolling Contract
With sentiment levels in neutral Gold is struggling to push above key resistance at 1240/1250 despite the weaker US Dollar and I am still flat. I am not going to chase this market higher and for the time being I will leave my buy level unchanged at 1213/1220 with the same 1207 stop which is just below both the 500 Day and 100 Week Moving Average.
Silver Rolling Contract
The Weekly Commitment of Traders Report for Silver speculators show that Managed Money accounts have rapidly reduced their number of net-long Futures and Options Contracts which I have been saying for the past number of days. Silver has bounced strongly off last week’s 16.04 low print as the market tested 16.80 yesterday. I am still flat Silver as the market missed my 16.45 buy level and today given the fact that the DSI data is now pointing to higher prices I will now raise my buy level to 16.35/16.70 with a 16.00 stop.