With the US out celebrating President’s day, Europe was always going to be the focus in yesterday’s trading session. European stocks ended the day marginally higher following the positive lead from Asia. Losses from Uniliver (-5%) after Kraft Heinz withdrew its $143bn bid for the food-maker, were largely offset by gains in other sectors, particularly Telecoms and materials with the latter benefiting from a recovery in oil and copper, up 0.6% and 1.85% respectively.
To mark my 1275th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 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 40 points yesterday and is now ahead by 1133 points for February having made 1734 points in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
European political risk has also remained a prevalent theme. An OpinionWay poll showed an increase in first round support for France’s anti-euro candidate Le Pen, up 1% to 27% while Macron and Fillion were unchanged at 20%. The Poll also suggested that Macron would beat Le Pen by 58% to 42% in the second round, but his advantage has halved in less than two weeks. So while political uncertainty is only exerting a mild downward pressure on the EUR, French bonds have remained under pressure. 10y French government bonds (OATs) ended the day 2.3bps higher at 1.051%, but at one point during the night they did trade as high as 1.135%. Meanwhile the OAT spread to 10y German bonds ended the day at 76.48, close to its year to date high and similar to levels not seen since late 2012.
Greek bonds were also making headlines following news that Euro-area finance ministers have agreed to resume talks with Athens on reforms needed for its bailout. 10y Greek government bond rallied 30bps to 7.571% and 2y bonds rallied 58bps to 9.09%.
In currencies the US Dollar closed changed. However this morning the Dollar is stronger with DXY trading higher at 101.20. USD gains against JPY and SEK were offset with losses against GBP and AUD. GBP was the G10 top performer, +0.34%, recovering a bit of lost ground from Friday’s night sell off and ahead of the House of Lords 2 day Brexit debate. The pound was also supported by better that expected data with the UK CBI industrial orders index jumping to 8 in February from 5 previously (Export orders however were at -10 from -9 in January). The AUD continues to find support around the 0.7650 area and it is currently trading at 0.7662 following another solid trading session in commodities. Iron ore in particular gained +2.2% and closed the day at $92.3.Meanwhile USD/JPY has crawled its way back above ¥113 following the marginally softer trading tone in 10y UST futures.
This morning on the economic front we have German and Euro-Zone Manufacturing PMI/Services PMI at 8.30 am and 9.00 am respectively. This is followed at 9.30 am by UK Public Sector Net Borrowing. Finally at 2.45 pm we have US Manufacturing PMI and Services PMI.
The Fed’s Kashkari (voter), Harker (voter) and Williams (nonvoter) are on the roster today. Based on recent appearances and publications we know that Fed Kashkari is a solid dove and has made his case for holding rates steady. Meanwhile, Fed Harker is probably one of the most hawkish voter on the FOMC this year and Fed Williams is somewhat in the neutral camp although early in February he noted that three hikes was a “reasonable perspective to have as a base case”.
March S&P 500
My short 2354 position from early yesterday morning finally worked out with the S&P hitting my 2350 T/P level and I am now flat on what turned out to be a very dull trading session. This non-action in the markets gave me time to do lots of reading and one particular piece stood out from Mr Nicholas Colas in Barrons Weekend Newspaper. According to this article in Barron’s to remain long of US Equities you have to believe in the following;
Trump’s recent troubles are just the typical pains of any new Administration. The Fed Reserve only hikes Interest Rates twice, not three times in 2017, and the Yield on 10-Year Treasuries stays at or below 3%. For once The Street, is too pessimistic on earnings, but since analysts already forecast profit growth of 10.5% in 2017 and 11.7% in 2018, lower taxes must goose growth.
To this list Mr Colas added the following:
Trump doesn’t introduce overly protectionist policies, US growth stays in the 2-3% range until Trump’s economic agenda passes Congress. And no geopolitical event either increases global energy prices or dampens US Consumer Confidence.
As Mr Colas said ”A lot has to go right and not much can go wrong, but that is what equity markets discount at the moment.”
I am sorry to keep with this recurring theme nearly every day but with P/E’s at near all-time highs at 26.37 in the S&P plus my comments on the Greed &Fear Index yesterday it is hard to ignore. However until we get a sell extreme that lasts for more than a few days then this market will continue to trade higher first before it all comes crashing down. Today I will look to buy the S&P on any dip lower to 2332/2338 with a 2326 stop. I will also look to sell the market again on any rally higher to 2359/2365 with a 2370 stop.
EUR/USD
Early this morning the Euro hit my 1.0580 buy level. I will look to add to this position on any move lower to 1.0540 with a 1.0525 stop. Obviously nervousness ahead of the French Election is causing the Euro to trade lower and for this reason I will now look to sell the Euro on any rally higher to 1.0670/1.0705 with a 1.0735 stop.
March Dollar Index
This morning the Dollar is trading higher and I am still flat. As I am now long the Euro I will raise my sell level in the Dollar to 101.65/101.95 with a 102.30 stop. Unfortunately the Dollar missed my 100.35 buy level with a 100.50 low print after I posted yesterday morning and today I will now raise my buy level to 100.35/100.75 with a 99.95 stop. For the Dollar to regain a more solid footing it needs to break and close over 102.45.
March DAX
No change as I am still a buyer on any dip lower to 11710/11760 with the same 11665 stop. As we are again testing the 11800/11850 major resistance level I still do not want to be short the DAX at this time as a break and close over 11850 targets 11940 and then 12030 over the coming days.
March FTSE
I am surprised how weak the FTSE is trading especially when you see how weak Sterling is again. Today I will now look to buy the market on any further dip lower to 7185/7220 with a 7155 stop. I will now lower my sell level slightly to 7275/7305 with a 7330 tight stop. Remember a break and close over 7300 is bullish.
Dow Rolling Contract
I am still flat the Dow as the market traded in a very narrow range as expected yesterday with the US Markets closed for the Presidents’ Day Holiday. Today I will now lower my sell level slightly to 20705/20750 with a 20805 stop. Given how overbought the Dow is trading I still do not want to buy the market at this time, especially as I already have a lower buy level in the S&P above if for some reason the market sells off later.
March BUND
I am still flat the Bund and given the ongoing situation with regards the French Bond market I will now raise my sell level in the Bund to 164.95/165.25 with a 165.55 stop. The Bund should have good resistance in this area as the January high is 164.94. I will also raise my buy level to 163.80/164.10 with a 163.50 tight stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1217/1224 with the same 1210 stop. We need to keep an eye on 1245 as a break and close over this level is a new buy signal with an initial target level of 1270.
Silver Rolling Contract
Silver traded in a very narrow range yesterday. Although Silver is not racing higher from here the market is holding in despite the Dollar regaining some of its mojo. I have now just bought Silver again here at 17.96 with a 17.65 tight stop. If I am stopped out of this position I will be a more aggressive buyer on any further dip lower to 17.25/17.60 with a 16.95 stop.
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