Yesterday was one of the quietest trading sessions of the year to date with the market closing more or less unchanged from where it closed on Friday with the US Dollar and Treasury yields in retreat. It has been something of a variation on a theme with the US Dollar listless but not really losing further ground overall – the Pound and the Euro have both retreated – while US Treasury yields have eased lower. Equities have been flat in Europe and in the US, the S&P 500 and the Nasdaq down smalls, the Dow closing up just 8 points. Meanwhile in France we had a debate between the two leading candidates – Macron and Le Pen with the former adjudged to have won and this sees the Euro trading higher at 1.0780 as I write this commentary.
To mark my 1300th 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 7 points and is now ahead by 731 points for March, having made 1481 points in February, 1734 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.
Traded industrial commodity prices are mostly lower, oil lower and most base metals down on the LME, the LMEX composite by 0.55% (aluminium was the exception), as have been iron ore, met and steaming coal. This hasn’t seemingly dented appetite for a little more Aussie and Kiwi in a sideways pattern for the USD, the AUD/USD sitting this morning at around 0.7715.
The big news, though not really “news” in the sense of a surprise, was the announcement from UK PM May that a letter will be sent to the EC next Wednesday, 29 May, triggering the two years of talks in the lead up to Brexit. EC President Juncker has been talking tough, saying in an interview with German newspaper Bild am Sonntag that half memberships and cherry picking aren’t possible and that in Europe you eat what’s at the table or don’t sit at the table, comments treated with not unexpected derision in the UK press.
Notwithstanding that this Article 50 trigger was always coming by the end of next week, the Pound still underperformed yesterday, down 0.5%, GBP/USD sitting this morning at 1.2365/70, having been above 1.24 before the trigger news. And so the clock will start ticking next week. BoE Chief Andy Haldane has been speaking yesterday and sticking to the much less sensitive issue for markets of low productivity and the need for less reliance on monetary policy, more reliance on structural policy.
There have been two Fed speakers out last evening, Charles Evans and Patrick Harker. Evans said he supports two or three rate hikes this year and that inflation at 2.5% for a period of time is consistent the Fed’s inflation goal. Patrick Harker appeared on CNBC saying that the inflation target is not a ceiling and that neither has he factored fiscal policy into his calculations. Evans noted that it would be a challenging time for the economy to get a fiscal boost now given the economy is close to full employment. Both spoke of normalising the Fed’s balance sheet, not suggesting a start is imminent but as a topic for consideration. Harker suggested normalisation once Fed funds is “well north” of 1%.
This morning on the economic front we have UK CPI, PPI, Public Finances and House Price Index at 9.30 am. This is followed at 11.00 am by the latest UK CBI Trends/Total Orders. Finally at 12.30 pm we have US Current Account and Canadian Retail Sales.
Finally, there are two more Fed speeches due, both from monetary policy hawks, Loretta Mester and Esther George, neither voters this year on the FOMC.
June S&P 500
Yesterday was a very frustrating trading session for me with the S&P missing my 2365 buy level with a 2365.50 low print before going on to have a nice rally and I am still flat. Despite the McClellan Oscillator again closing in negative territory I still believe the recent sell-off is just a correction before the market tests the March 1st highs at 2400. I am looking for a failing test of this all-time high and this will give us a better risk/reward chance to get short. Today I will move my buy level higher to 2365/2371 with a 2360 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2345/2351 with a 2339 stop. Given the continued weakness of the US Dollar I will also raise my sell level in the S&P to 2390/2396 with a 2402 stop.
EUR/USD
Late last evening the Euro traded to a 1.0719 low print and in the process just missed my 1.0710 buy level before rallying strongly overnight on the French Election Debate. As I have said countless times this year, it is only a matter of time before the Euro takes out the key resistance at 1.0840/1.0880 before hitting my next target at 1.10. Today, given how strong and significant that this resistance level is I will be a seller from 1.0850/1.0890 with a higher 1.0920 stop. I will also raise my buy level to 1.0700/1.0735 with a 1.0670 tight stop.
June Dollar Index
No change as I am still a seller on any rally higher to 100.40/100.80 with the same 101.15 stop. Despite the Dollar being oversold I still do not want to be long the Dollar at this time.
June DAX
Despite the continued Euro strength the DAX is holding in well with the market refusing to sell-off even with Deutsche Bank shares getting hit yesterday on their latest ”Rights Issue”. The DAX fell short of my 12020 buy level before rallying this morning and today I will now raise my buy level to 11980/12035 with a 11935 stop. I still do not want to be short the DAX at this time especially with the price action continuing to suggest higher prices.
June FTSE
The FTSE rallied on UK PM finally setting a date to trigger ”Article 50”. With EUR/GBP back trading above 0.8720 it is difficult to be short FTSE and today I will now raise my buy level to 7300/7330 with a 7270 stop.
Dow Rolling Contract
I am still flat the Dow which traded one of its narrowest ranges in many months. It is now over 108 days since we have had a 1% sell-off in the S&P which is a new multi-year record. Just like the S&P above, I still believe that the Dow will retest its highs from March 1st before we see some real selling emerge. One interesting statistic that I read yesterday, in the 13 Interest Rate Cycles that the Fed have raised rates since World War 11, 10 of these cycles have resulted in a recession and I certainly believe that this cycle will end in one hard recession also especially with average earnings so weak. Today I will raise my buy level in the Dow to 20800/20865 with a 20745 stop. I will leave my sell level unchanged from 21070/21130 with a 21180 stop.
June BUND
In the last few minutes the Bund hit my 159.30 buy level before rallying small. As I wanted to bank some points for yesterday’s trading session I have now cut this position at 159.37 and I am now flat. Today with the Bund now selling off I will again look to buy the market on any dip lower to 158.80/159.15 with a 158.50 stop. Despite the negative price action I still do not want to be short the Bund at this time especially with sentiment indicators at extreme levels for the US Bond Market, suggesting a major rally in Global Bond Markets over the coming weeks.
Gold Rolling Contract
With the US Dollar so weak it is surprising to see Gold under pressure this morning. Today I will leave my buy level unchanged at 1214/1221 with the same 1207 stop. I still expect Gold to take out it’s key resistance from 1250/1265 over the coming weeks.
Silver Rolling Contract
No change as I am still long Silver from last week at 17.48. I will still look to add to this position on any dip lower to 17.15 with the same 16.95 stop. I will leave my T/P level unchanged at 17.65.
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