European and US equities have come under pressure with the tech sector leading the decline. The technology led equity slump started during the Asian trading session early yesterday morning following reports that Apple has made significant investment in the development of next-generation MicroLED screens. The news triggered a sell-off in OLED display makers in Asia. Then reports from Europe suggested the European commission is planning to impose a 3% tax (on gross revenue) on large digital companies operating in the EU based on where their users are located. Lastly, Facebook shares posted their biggest decline since 2015 (6.85% after an intraday low of -8.04%) as US and European officials demanded answers to reports that a political advertising firm (Cambridge Analytical) retained information on millions of the social network’s users without their consent. The latter has raised concerns that politicians will investigate and eventually will aim to regulate the sector.
To mark my 1550th 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 in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 10 points yesterday and is now ahead by 1048 points for March, having made 2256 points in February, 879 points in January, 946 points in December, and 823 points in November Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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So the tech triple whammy of bad news has resulted in the NASDAQ losing 1.84% on the day with the S&P 500 (-1.42%) and Dow (-1.35%) not too far behind. All major European indices also closed in negative territory with the STX Europe 600 ending the day down 1.04%.
The other big news from yesterday has been the joint UK-EU announcement that a transition deal has been agreed outlining the UK’s relationship with Europe after the triggering of Article 50 at the end of march 2019. The agreement defines the terms of the transition deal that will last for 21 months until the end of December 2020. So while this is a positive step, the deal still needs to be ratified by the 27 EU countries at a meeting on Friday and because the Irish border issue has not been resolved the document is not legally binding. So like Lenny Kravitz would say ‘’It ain’t over til it’s over’’, in other words nothing has been set in stone yet. The UK government of course has hailed the news as a great step and has told businesses there is very little (if any) risk here and that they can go and invest. Meanwhile, Mr Barnier, EU chief negotiator, said the new draft legal text marks a “decisive step” but added that it was “not the end of the road”.
Looking at currencies performance, the US Dollar has given back almost all the gains recorded in the previous two days ( BBDXY -0.29% and DXY -0.44%) largely reflecting Sterling and EUR outperformance following the Brexit/transition deal news. Worth noting too that USD underperformance has occurred despite large overall short USD position and still tight USD liquidity. The 3 month Libor- OIS spread closed again above 50bps overnight ( At 50.6 bps after trading to an intra-day high of 51.17bps)
So Sterling is the G10 outperformer. Cable is up 0.62% over the past 24hrs and currently trades at 1.4045. Before the transition news the pair traded to a low of 1.3918 and after the news it reached an intraday high of 1.4088. The Euro has also outperformed. Reuters reported that ECB policy makers are said to be shifting their debate to the future path of rate hikes. The report noted that policy makers were comfortable with market forecasts, including for a rate hike by mid-2019, and the debate is increasingly about the steepness of the rate path thereafter. This has helped support EUR, alongside the positive news on Brexit negotiations. EUR traded to an overnight high 1.2354 and now trades at 1.2340.
Meanwhile the Australian Dollar is little changed at a 0.7705 against a soft US Dollar backdrop. Yesterday the pair traded to a low of 0.7687, the first time since Dec 21st it has trade sub the 77c mark. Commodities were mostly lower yesterday, gold was up amid the risk-off tone in equities and iron ore and copper were the biggest losers, down -1.13% and -0.98% respectively. The AUD remains a risk sensitive currency with current concerns over the US-China trade tension suggesting the AUD/USD is probably the best G10 pair to express that view.
There has been no fresh news to drive US Treasuries and they seem to have found a bid as equity markets come under pressure. The 10-year rate is down 1bp to 2.83% after earlier reaching as high as 2.88%. Rates should remain in a holding pattern until the FOMC announcement tomorrow.
This morning on the Economic Front we already had the release of German PPI which came in weaker at -0.1% versus +0.1% expected. At 9.30 am we have UK CPI, PPI and Retail Sales. This is followed at 10.00 am by the German and Euro-Zone ZEW Survey Current Situation/Expectations. Finally we have Euro-Zone Consumer Confidence at 3.00 pm as we have no US data today as we wait for the FOMC Rate announcement tomorrow followed by the Fed Chair Powell’s first press conference.
June S&P 500
After the S&P traded the whole of my 2737/2745 buy range for an average buy level at 2741 the market rebounded to a high of 2745.25 which unfortunately was below my too aggressive 2747 T/P level before the market got slammed to a low at 2697 thus stopping me out of this long position at 2730 and I am now flat. Yesterday was an ugly trading session with a number of key stocks getting hit hard. However in anticipation of tomorrow’s FOMC Meeting the S&P has rallied hard and currently trades at 2724 having hit an overnight high at 2729. This is a difficult trading market as shown by the VIX which rose 20% yesterday to close over 19. We have to have smaller position size and wider stops otherwise we will get stopped out of our positions. The S&P has strong support from 2692/2702 and today I will be a buyer in this area with a 2685 stop. The 2740/2750 is strong resistance and today I will be a small seller in this area with a 2756 stop.
EUR/USD
My Euro plan worked well with the Euro trading lower to my 1.2260 buy level before rallying to my 1.2288 T/P level and I am now flat as the Euro trades much higher at 1.2340 this morning. I still believe we will have one luck at the 1.25/1.27 resistance area before we see a more meaningful sell-off in the Euro. Today I will again look to buy the Euro on any dip lower to 1.2250/1.2290 with a 1.2220 tight stop as the Euro continues to hold the key 1.2255 support level.
June Dollar Index
Late yesterday the Dollar traded lower to my 89.40 buy level. I will only add to this position on any further move lower to 89.00 with a tight 88.70 stop. I will now lower my T/P level on this position to 89.60.
June DAX
My DAX plan worked well as the sideways trading range for the market continues which it has done for the last three weeks. Yesterday after the Dow traded lower to my 12230 buy level the market rallied to my 12365 T/P level. Subsequently the DAX traded lower to my second buy level at 12190 before again rallying to my 12230 T/P level and I am now flat. The DAX has strong support from 12080/12140 and today I will be a buyer in this area with a 12030 stop. I still do not want to be short the DAX at this time.
June FTSE
My FTSE plan did not work well as after the FTSE traded lower to my average buy level at 6995 I was stopped out of this trade near the low of the day at 6950 and I am now flat. This is frustrating especially as the FTSE is back trading at 6990 this morning. The FTSE having traded sideways for most of the past month has now broken down and this break has to be respected. The FTSE has strong resistance from 7025/7055 and today I will be a seller in this area with a 7085 stop. My only interest in buying the market is on a dip lower to 6900/6940 with a 6870 tight stop.
Dow Rolling Contract
The volatility in the Dow has increased to such an extent that at times we are getting more volatility in a couple of hours of trading than we did in a whole month last year. Yesterday after the Dow traded lower to my initial 24730 buy level we traded sideways to higher for a time before the market got hammered for a further 300 points only to re-gain those loses overnight. As I was already long both the S&P and FTSE I emailed my Platinum Members to exit any long Dow position at my revised 24765 T/P level and I am still flat. The Dow has strong resistance at 24850/24950 and today I will be a small seller in this area with a 25050 stop. My only interest in buying the Dow is on a dip lower to 24380/24500 with a 24310 stop.
June NASDAQ
My NASDAQ plan did not work well as after the NADDAQ traded lower to my average buy level at 6970 I was quickly stopped out of this position at 6920 and I am now flat. The NASDAQ traded to an intra-day low at 6806 before bouncing small. However the Downside Key Week Reversals in Facebook, Google and Amazon last week is a big worry for the bulls as these three shares have played a huge part in the NASDAQ rally over the past few years. Today I will look to sell the market on any rally higher to 6990/7040 with a 7075 stop. My only interest in buying the NASDAQ is on a dip lower to 6790/6830 with a 6760 tight stop.
June BUND
My Bund plan worked well with the market trading lower to my 157.80 buy level before bouncing 50 points. However as I had so many open positions on board at the same time I covered my long Bund too early at 157.92 and I am now flat. Today I will again look to buy the Bund on any dip lower to 157.25/157.65 with a 156.95 stop.
Gold Rolling Contract
My Gold plan also worked well with the market trading lower to my 1307 buy level before rallying on the renewed weakness in the equity markets. Just like the Bund above I covered this position too early at 1311.50 and I am still flat. This morning Gold is back on the defensive and I must say I am worried about the price action in both Gold and Silver. Gold has huge support at 1290 which is the 200 Day Moving Average and any break and close below here is a strong sell signal. Today my only interest in buying Gold is on a dip lower to 1293/1303 with a 1286 stop.
Silver Rolling Contract
I am concerned about my long 16.45 Silver position as I do not like the price action in this market. Silver has good support at 16.09 and a break and close below here is a sell signal for 15.50 which is long-term support. Today I will raise my stop on my long position to 16.05 while I will now lower my exit level for a small loss at 16.35. If either of these scenarios play out I will be back with a new update for my Platinum Members.
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