The US Equity markets made New and all-time closing highs for both the Dow and S&P 500, following upbeat comments from Fed Member Dudley who noted that financial conditions remain easy and that there is a need ‘’to tighten monetary policy very judiciously’’. His comments boosted the US Dollar and lifted US Treasury Yields. Meanwhile equity markets have regained their mojo with technology shares leading the way in the US, while materials and energy sectors were the outperformers in Europe.
To mark my 1350th 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 3 points yesterday and is now ahead by 536 points for June having made 1071 points 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 1750 points.
Speaking in New York, the Fed’s Dudley gave a pretty upbeat assessment on the US economy noting that the outlook was ‘’pretty good’’ and was optimistic that tight labour market might eventually lead to higher inflation. Dudley also noted that ‘’we haven’t tightened financial conditions to any significant degree’’ and it was important for the Fed to ‘’very judiciously’’ withdraw monetary policy accommodation in order to avoid having to move so rapidly in the future that tightening might cause a recession.
Dudley’s comments boosted the US Dollar across the board with both the BBDXY and DXY Indices closing 0.4% higher. US Treasury Yields also rose with the move led by the back end of the curve, with 10y UST yield climbing from a 2.1391% morning low to trade at 2.19% currently.
The decent jump in US Yields dragged the Japanese Yen to the bottom of the G10 leader board, down 0.61% over the past 24 hours. USD/JPY is currently trading at 111.60, which is just below this month’s high. European Currencies are also close to the bottom of the leader board with NOK down 0.50% and the EURO -0.44%.
The EU and UK have agreed Brexit negotiations priorities by moving the Exit Bill and Citizen Rights for both the EU and UK citizens to the top of the agenda. Early days, but it seems that the UK has yielded on Brussels long standing demands for the sequencing of negotiations. Sterling drifted lower during the London session and then continued its downward path after Dudley’s comments. However overnight Sterling has re-gained some of these loses with Cable currently trading at 1.2750.
Looking at commodities, oil prices dropped over 1% on the back of the stronger US Dollar and news of yet more oil been pumped out. US drillers added oil rigs for the 22nd consecutive week and Libya is pumping the most oil in four years after a deal with Wintershall AG enabled at least two fields to resume production. Meanwhile iron ore had a good trading session, closing up 1% to $56.3, while gold was down 1% in contrast to copper which climbed 1.1%.
This morning on the Economic Front we have the Euro-Zone Current Account at 9.00 am. In another quiet day for data the only other release of note is US Current Account at 1.30 pm.
Meanwhile both the Fed’s Rosengren and Kaplan are speaking at 12.45 pm and 8.00 pm respectively.
September S&P 500
There is no end to this rally as yet again the S&P has closed at a new all-time high by taking out the previous resistance from 2442/2445 which should now act as support on any subsequent sell-off today. I am still flat the market which has now left a small ‘’Open Gap’’ from Friday’s close at 2433 to yesterday afternoon’s Chicago low at 2439. Incredibly the McClellan Oscillator closed with just a +32 print which shows how narrow this rally is since we broke the previous March 1, highs at 2401. However until we break some key supports this market will continue to rally despite the fact that we are now trading at the top of the Daily Bollinger Band and Williams Index. The S&P has strong resistance from 2462/2470 and I will be a seller in this area with a 2475 stop. I have to respect the price action and as a result I will now move my buy level higher to 2437/2443 with a 2432 stop.
EUR/USD
The Euro sold off as expected yesterday given the fact that the Large Speculators (mainly hedge funds) continue to increase their net-long bets for a continued Euro rally. With the Euro currently trading at 1.1150, Large Spec’s are more bullish now than they were in May 2016 when the Euro was trading at 1.1617, and in August 2015, when the Euro was at 1.1712. The Commercials have naturally taken the opposite side of these trades and this measure of investor sentiment continues to convey a bearish message. As a result I will now lower my sell level to 1.1210/1.1245 with a 1.1275 stop. The Euro has strong support from 1.1055/1.1090 and today I will now lower my buy level to this area with a 1.1025 tight stop.
September Dollar Index
My Dollar plan worked well with the Dollar trading lower to my 96.75 buy level shortly before lunch before rallying to my 96.98 T/P level and I am now flat. With the Daily Sentiment reading so negative towards the US Dollar, it is only a matter of time before the Dollar rallies. However we may need to see a sell-off in the stock market first before the real Dollar rally starts. Today I will again look to buy the Dollar on any dip lower to 96.70/97.00 with a 96.40 tight stop.
September DAX
This morning the DAX is trading at new all-time highs with the Sept contract currently trading at 12940. The next resistance area is from 13020/13070 and today I will be a seller in this area with a 13120 stop. I will also raise my buy level to 12760/12815 with a 12720 tight stop.
September FTSE
Unfortunately the FTSE just missed my 7420 buy level before rallying into the close and I am still flat. I am not going to chase this market higher and today I will leave my buy level unchanged from 7390/7420 with the same 7360 stop.
Dow Rolling Contract
The Dow hit my long term target at 21500 yesterday afternoon. I went short the market here in small size but the market does not feel like it wants to rollover yet and as a result I have just covered this position here for a small loss at 21525 and I am now flat. The next target level in a severely overbought market comes in at 21600 and today I will try to go short again from 21595/21650 with a 21690 stop.
September BUND
This morning the Bund is trying to rally after an extremely quiet trading session yesterday. I am still flat the Bund and today I will now raise my sell level slightly to 165.20/165.50 with a 165.75 tight stop.
Gold Rolling Contract
Gold did trade lower to my 1243 buy level overnight. I did not buy the market myself and with Gold currently trading at 1247 I would take my gain here if you are still long. Gold has now closed lower for 8 of the past 9 trading sessions and is holding below its 1248 100 Day Moving Average. Today my only interest in buying Gold is on a dip lower to 1232/1239 with a 1226 tight stop. This buy range contains both the 200 Day and 200 Week Moving Averages.
Silver Rolling Contract
Silver has also closed lower for 8 of the past 9 trading sessions with the market eventually trading lower to my second buy level at 16.45 overnight. I am now long in reasonable size at an average rate of 16.68. Silver has strong support at 16.40 and I will now lower my stop slightly to 16.25 on this position. I will also lower my T/P level to 16.85 despite how oversold Silver is trading.
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