Even though yesterday was a narrow based trading session, it was a very busy one for me and my Platinum Members with little data of note. The most significant moves were contained to continued US Dollar weakness (DXY -0.4%) and ongoing strength in most base and industrial metals. One excuse for the listless session could be the attention many placed on catching the first solar eclipse on US soil since 1979 (though the more probable excuse is the lack of significant data flow which will likely last until the start of the Fed’s Jackson Hole Symposium on Thursday). As for the eclipse itself, it was estimated to have traversed the contiguous United States for a period of 1 hour, 33 mins and 16.8 seconds – though only visible for 2 minutes at anyone point. President Trump even got into the fever, though we hope watchers had more success with their eclipse glasses given the potential for eye damage.
To mark my 1400th 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 228 points yesterday and is now ahead by 949 points for August, having made 1096 points in July, 1023 in June, 1076 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 1700 points.
In FX, US Dollar weakness was across the board. One analyst that I was reading yesterday noted that the USD TWI was now around 8% undervalued according to most short-run models that is based on real interest rate differentials and risk appetite. This undervaluation likely reflects a Trump “discount” given the political chaos over recent weeks. With US Dollar weakness, other major currency pairs were subsequently higher: Euro (+0.4%), Yen (+0.3%) and Pound (+0.2%). The Aussie and the Kiwi were slightly more subdued, up just 0.1-0.2% respectively with no real reason for the underperformance.
Limited movements also happened in Bonds with US Treasury Yields down 1.4bps to 2.18% and German Bund yields were down a similar 1.4bps to 0.4%. As for Fed pricing, markets are only pricing a 30% chance of a rate hike by December and only 1.3 rate hikes are priced by the end of 2018. Comparing that to the Fed’s dotpoints of 4 leaves the market vulnerable to any restatement of the Fed’s commitment to lift rates as currently laid out in the Fed’s dotpoint projections.
As for the Fed’s debt ceiling, Treasury Secretary Mnuchin said he wants Congress to lift the ceiling by the end of September in a “clean” debt-ceiling increase. Senate Majority Leader gave support noting there is a “zero chance” the US government fails to raise the ceiling.
On Bunds, hitting the airways yesterday was an FT story that noted the ECB was getting close to breaking its own self-imposed limit of owning 33% of a country’s government debt. Analysts suggest that limit could be breached as early as February for Germany and Portugal and is another plank in the argument that the ECB should start to taper its bond-buying programme – perhaps such a taper may even need to be more selective in order to avoid these limits. I still expect the ECB to announce a taper of the Asset Purchase Programme in September, but I also acknowledge October is also a possible date.
The other main mover was in Oil with WTI -2.0% to $47.41 (Brent -2.0% to $51.66). The fall in oil likely reflects profit taking after Friday’s sharp rise on the back of a US oil refinery shut down. OPEC’s Joint Technical Committee also met yesterday with reports suggesting they found 94% compliance with OPEC’s production cuts, comparing to 98% in June – so some suggestions that not all of OPEC are meeting their pledges.
This morning on the Economic Front we have German and Euro-Zone ZEW Survey at 10.00 am. This is followed at 1.30 pm by Canadian Retail Sales. Finally we have US House Price Purchase Index and the Richmond Fed Manufacturing Index at 2.00 pm and 3.00 pm respectively.
Meanwhile at 1.00 pm the ECB’s Constancio is speaking in Lisbon at 1.00 pm at an Economist’s Congress. The market will be closely watching for any reference to yesterday’s renewed strength in the Euro.
September S&P 500
My S&P plan worked really well yesterday as after the S&P had dipped initially to my 2420 buy level the market rallied to my 2425 T/P level. Subsequently I emailed my Platinum Members to re-buy any dip in the markets especially after the improvement in the McClellan Oscillator between Thursday’s close and Friday. On the second dip lower three of my Indices got executed with the S&P trading lower to my second buy level at 2418 before rallying to my 2422.50 T/P level. Then after taking a nice gain in the Dow I again emailed my Platinum Members to buy the S&P for a third time and this was filled at 2423 with a 2421.75 low print before exiting this long position ahead of the close at 2427.50 and I am now flat. As I have been saying for the last few months once volatility returns then my Platinum Service really performs and so far in August we are seeing the real benefits of this increase in volatility. Yesterday’s 2415.75 low was just ahead of the 100 Day Moving Average at 2415 and even though I am bearish long term I still believe there is a chance of a decent rally first. Today I will again look to buy the S&P on any dip lower to 2420/2426 with a 2414 wider stop. I still do not want to be short the market at this time.
EUR/USD
After the second buy level in the Dollar was filled at 93.10 I emailed my Platinum Members to move any sell order in the Euro higher to 1.1840/1.1880 with a 1.1910 stop. Today I will leave this sell range unchanged. However I will raise my buy level to 1.1700/1.1740 with a 1.1670 tight stop.
September Dollar Index
As mentioned above the Dollar traded lower to my second buy level at 93.10. This now has me long at an average rate of 93.30. I will leave my T/P level unchanged at 93.45 while given the nice points gained yesterday I have now lowered my stop slightly to 92.85.
September DAX
Yesterday the DAX traded the whole of my 12010/12070 buy range which put me long at an average rate of 12040. As I was long both the S&P and Dow at the same time I emailed my Platinum Members to exit any long position at 12055 and I am now flat. The 200 Day Moving Average has now moved higher to 11975 and this key support should initially contain any sell-off and lead to a decent rally before the real sell-off in the market begins next month. For this reason I will use any dip lower to 11970/12030 to go long with an 11925 stop. Given how oversold the DAX is trading I do not want to be short the market at this time.
September FTSE
Unfortunately the FTSE just missed my 7280 buy level with a 7286 low print before rallying as expected on the back of the weaker Pound. I am still flat and today I will now raise my buy level higher to 7265/7295 with a 7230 stop. Given the weakness in Sterling I still do not want to be short the FTSE ahead of the UK Bank Holiday next Monday.
Dow Rolling Contract
After taking profit on my initial S&P long 2420 position yesterday morning I raised my buy level in the Dow for my Platinum Members to 21600/21660. Subsequently the whole of this range was filled which put me long at an average rate of 21630 with a 21675 T/P level that was subsequently filled and I am now flat. Today I will continue to look to buy dips in the Dow and my buy level for this report will be from 21610/21670 with a 21565 tight stop. With the McClellan Oscillator improving last night to close at negative -126 I do not want to be short the Dow at this time.
September BUND
Late in yesterday’s trading session the BUND traded higher to my 164.48 sell level. As I wanted to be flat overnight I covered this position at my revised 164.40 T/P level and I am now flat. With Dragi due to speak at Jackson Hole on Friday the Bund may well hold up ahead of his speech. The Bund has strong resistance from 164.75/165.10 and today I will be a seller in this area with a 165.40 tight stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold is on the verge of breaking the key 1300 resistance level and if we can break and close over this key pivot point it will be the highest close for Gold in 9 ½ months. I am still flat the market and today I will raise my buy level to 1272/1280 with a 1266 stop.
Silver Rolling Contract
My latest long 16.90 Silver position worked well with the market trading higher to my 17.10 T/P level and I am still flat. Silver continues to underperform Gold which is a worry and today I will again look to buy Silver on any dip lower to 16.55/16.85 with a 16.35 tight stop.
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