Risk sentiment was kicked off Friday by the President averting another government shutdown, even if by declaring a national emergency to procure his Wall funding. He was then briefed on Saturday by his key economic and trade officials on the trade talks at his Mar-a-Lago club Florida retreat. He tweeted that ‘’Trade negotiators have just returned from China where the meetings on Trade were very productive’’ In the meantime, Billions of Dollars are being paid to the United States by China in the form of Trade Tariffs! He had said on Friday that he might keep the tariffs on Chinese goods from rising. The two sides are working toward a ‘’memorandum of understanding’’ to form the basis of an agreement between the Presidents, whenever that might be. There are more talks in Washington this week between the US trade head Lighthizer and his Chinese counterpart Vice-Premier Liu He and Lighthizer.
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For anyone following my Platinum Service it made 2 points on Friday and is now ahead by 568 points for February, having made 1671 points in January, 2803 points in December, 1541 points in November and 2094 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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Trump also held out an olive branch to the Democrats, saying that ‘’any deal I make toward the end I am going to bring Schumer or at least offer him and Pelosi, to say please join me on the deal,’’ Trump said, referring to Senate minority leader Chuck Schumer and House Speaker Nancy Pelosi.
Yesterday was expected to be quiet with the U.S. closed for the Presidents Day holiday, and that is pretty much as it has transpired as far as market prices are concerned. After gains in Asia yesterday, most European main boards also made some gains, the Eurostoxx 600 index by 0.23%, the FTSE closing lower with seven Labour MPs leaving the party, introducing another piece of uncertainty over Brexit, if that is at all possible. EUR/GBP eased, though not dramatically so.
Adding to the unsettling tones from Villeroy and Coeure reported yesterday, Peter Praet, ECB Chief Economist, and someone close to Draghi, has said that the ECB has seen a marked increase in risks to the economy. Speaking to German newspaper Boersen-Zeitung, he went on to say that he looks for an economic rebound but that it is too early to say by how much. (Prospects of an exit from negative interest rates after the summer are dwindling day by day.) He also drew attention to political uncertainties persisting for so long, driven by protectionism and Brexit, also fearing how the financial sector would react, citing a risk banks could act even more pro-cyclically than usual.
Currencies
The EUR has pushed up through 1.13 despite these additional dovish comments and despite concern about the possibility of Trump imposing auto tariffs on European cars. (The US Commerce Department findings of an investigation into whether imported cars could pose a national security threat were received by Trump over the weekend.) A spokesman for the European Commission said that ‘’were this report translated into actions detrimental to European exports, the European Commission would react in a swift and adequate manner’’, threatening to cut back on American soybeans and LNG if European cars are hit with these tariffs.
Seven UK Labour MPs split away from the party, now to sit in Parliament as independents. They are against Brexit. Sterling was weaker as rumours swirled about a Labour split but recovered after the announcement. The move reduces the odds a little more perhaps of Prime Minister May getting her Brexit deal over the line, adding though to the odds of an extension of Article 50 when Parliament likely votes next week (February 27), pushing out the timing of any possible Brexit, Sterling positive for now.
Commodities
Australian coal imports into China are under pressure with vessels waiting to unload at Chinese ports. The reasons behind these delays are unclear as is how long such a dislocation will occur. Tania Constable, CEO of the Minerals Council of Australia, said companies were “deeply concerned” about the restrictions and the uncertainty of when they would be lifted. “We believe an unofficial quota system [has been] employed since the restructure of customs and quarantine administrative arrangements in October 2018,” she said. “It would have a significant impact on the industry if [restrictions] extend for too long.” Ms Constable said talks were ongoing with the Chinese embassy in Canberra and stressed the negative impact restrictions would have on the industry if allowed to continue
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Coal prices are little moved, Newcastle steaming coal up marginally, by 0.16% to $95/t, while met coal prices have not moved for some days from a high $207.50/t. Australia exports both to China.
Meanwhile with the U.S. Markets closed there was little movement in the precious metals.
This morning on the Economic Front we have Euro-Zone Trade Balance at 9.00 and this is followed at 9.30 am by UK Average Earnings and Unemployment. At 10.00 am we have Euro-Zone Construction Output and the latest ZEW Survey including Germany. Finally at 3.00 pm we have the NAHB Housing Market Index.
March S&P 500
The S&P which just missed my 2725 buy level with a 2729 low print shortly after the European Markets opened on Friday turned around and rallied to New Year to date high of 2783. An incredible move higher as yet again anyone trying to short the S&P gets slammed. Thankfully we had no sell levels in any of my Indices on Friday and are still flat. The S&P is now severely overbought after a near 100 point rally in one week. The market has strong resistance from 27922808 and today I will be a seller on any rally to this area with a 2819 stop. I will also raise my buy level to 2748/2760 with a 2739 stop which is just below the 200 Day Moving Average.
EUR/USD
My Euro plan worked well with the market trading lower to my 1.1240 buy level before bouncing 80 points. Unfortunately I covered this position too early at my revised 1.1255 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1210/1.1250 with a 1.1165 stop.
March Dollar Index
No Change as I am still a seller on any rally higher to 97.20/97.60 with a 97.95 tight stop.
March DAX
The DAX finished flat yesterday following Friday’s large move higher and I am still flat. The market has resistance from 11470/11570 and today I will be a seller on any rally to this area with a 11630 stop. Given how overbought the DAX is trading I do not want to be long the market at this time.
March FTSE
Unfortunately the FTSE just missed my buy level on Friday before turning around and following the other main Indices higher. Today I will move my buy level higher to 7070/7110 with a 7035 tight stop.
Dow Rolling Contract
Frustratingly the Dow missed my buy level on Friday by 40 points before rallying over 600 points and I am still flat. The Dow has strong resistance at is December 3 high of 26000 and today I will be a seller from 25980/26120 with a 26230 stop.
March NASDAQ
The NASDAQ struggled on Friday and I am still flat. Today I will raise my buy level to 6930/6980 with a 6885 stop.
March BUND
No Change as I am still a seller on any rally higher to 166.95/167.35 with the same 167.75 stop.
Gold Rolling Contract
Gold continue to hold above the key 1300/1310 support area. I am still flat and today I will now raise my buy level to 1298/1307 with a 1291 stop.
Silver Rolling Contract
Finally I exited my long 15.83 Silver position for a small loss at 15.70 and I am now flat. Today I will again look to buy the market on any dip lower to 15.20/15.60 with a 14.85 stop. If Silver can break and close over 16.20 it will be a bullish breakout.
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