European and US equity markets started the week in a positive tone boosted by a commodity led improvement in risk sentiment. Oil prices surged higher with Brent and WTI closing up 5.3% and 7.8% at $34.77 and $31.94 respectively following the IEA release of its Medium Term Oil Market Report. IEA expects the global oil market will begin rebalancing in 2017, thanks to an anticipated decline in US output over the coming year. The report also noted that ‘oil prices should start to rise gradually once the market begins rebalancing, however the availability of resources that can be easily and quickly tapped will limit the scope of rallies – at least in the near term’.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary which includes 1/4 updated emails throughout the trading day. This offer is open to both existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 130 points yesterday and is now ahead by 1815 points for February having made 3365 points in January. Since I started this service last June it has made over 20,000 points.
The surge in oil prices was also aided by comments from Russia’s Oil Minister saying that discussions on a deal to cap oil production levels must be completed by the end of this month. The CERA Week Conference (aka the Davos of the energy industry) is currently underway in Houston Texas, so the likelihood is that we are going to set similar headlines over the coming days. However, whether a meaningful deal gets done, is still anyone’s guess. Please note the Saudi Arabia’s Oil Minister will speak this afternoon.
Yesterday’s surge in commodity prices was not limited to Oil, with Metal prices having a good day as Copper and Iron Ore closing up 1.1% and 6.2% respectively. The FTSE 100 climbed 1.5% with Mining stocks leading the way while the US stock markets averaged a 1.4% gain with the Energy and Materials sectors the biggest winners.
The Commodity led risk on sentiment has propelled Commodity Currencies to the top of the G10 leader board. The AUD, followed by the NZD and CAD are the top performers against the US Dollar over the past 24 hours. After reaching a low of 0.7070 during the New York session last Friday the AUD is now trading at 0.7230 which is its highest level in over a month. A rise in commodity prices, an improvement in risk sentiment and still well anchored Fed hike expectations are the perfect combo for the Australian Dollar.
Fears of Brexit have relegated Sterling to the bottom of the leader board, closing down a hefty 2% against the US Dollar. Economic data was also not helpful with the UK CBI Survey showing continued weakness in the Manufacturing sector, printing on the low side of expectations at 12 versus 16 expected. The Euro was also an underperformer closing down 1% against the USD, suggesting the market is expressing some concerns for the Euro if the UK chooses to leave the European Union. Meanwhile Euro-Zone PMI’S came in on the soft side of expectations with German Manufacturing pulling back sharply to to 50.2 from 52.3, while France’s Services PMI dipped back below 50 from 50.3.
In other news, the Fed’s Williams noted in an LA Times interview that ‘the gradual pace approach’ is still right. Williams declined to say whether he would support a rate increase at the upcoming March 15-16 Meeting.
The European Equity markets are opening weaker this morning led by a 2% drop in WTI as both the Shanghai and Nikkei closed lower.
On the economic front we already had the release of German Final Q4 GDP which came in as expected at a very weak 0.3%. At 9.00 am we have the German IFO Business Climate/ Current Assessment. Finally at 3.00 pm we have US Consumer Confidence, the Richmond Fed Manufacturing Index and Existing Home Sales.
We also have a busy day of Central Bank speakers. BoE Governor Carney testifies to Lawmakers about the outlook for the UK Economy and Monetary Policy. Later, also in London, the ECB’s Nouy speaks at a Capital Conference. Finally in the US, Fed Vice Chair Fischer gives a speech on developments in Monetary Policy, followed by an audience Q&A.
March S&P 500
As expected the S&P ran into a brickwall at the now major resistance level at 1945 with a 1944 high print before having a late sell-off into the close. Yesterday’s Chicago’s low print at 1935 has left a huge and unsustainable ‘Open Gap’ from last Friday’s close at 1914 and this morning the market is doing its best to try and fill this gap. Yesterday my S&P plan worked well with the market trading higher to my 1942 sell level before having this huge sell-off overnight/this morning to 1924 but as so many of my calls again hit yesterday at near the same time I unfortunately covered this position at 1939 and I am now flat. For those of you who have not covered I would take my gain here and go flat. Today I will continue to look to buy the S&P on any further dip to 1912/1918 with a 1906 stop. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1895 with a 1888 stop. My only interest in selling the market is still on a rally higher to 1944/1950 with a 1956 stop.
EUR/USD
Soon after I posted yesterday morning the Euro got hit hard with the market hitting my average buy level at 1.1040. I am still long and I will leave my stop the same at 1.0995 which came close to being hit. If I am stopped out of this position I will be a more aggressive buyer in front of 1.0950 with a 1.0915 stop. Despite the negative price action I do not want to be short the Euro at this time especially ahead of the G20 Summit on Friday.
March Dollar Index
The Dollar traded higher to my average 97.55 sell level yesterday. As I was already long the Euro I emailed my Platinum Members to cut this position at 97.40 before subsequently the Dollar hit a low of 97.15 overnight and I am now flat. Today I will again look to go short again on any rally higher to 97.60/97.90 with a 98.20 stop.
March DAX
This morning the DAX hit my buy level at 9465 and I have just cut this position at 9485 as outlined to my Platinum Members and I am now flat. Today I will again look to buy the DAX on any dip lower to 9370/9430 with a 9335 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 9280 with a 9235 stop. Remember the DAX has strong support at the 9250/9300 level. I still do not want to be short the DAX at this time.
March FTSE
Just like the DAX above the FTSE has also hit my 5955 buy level this morning. I am still long as the price action in the FTSE over the past 10 days has been positive. Also the dramatic weakening of Sterling over the past few weeks should also help the Equity market. I will raise my stop on this position to 5920.
Dow Rolling Contract
The Dow has now rallied over 1200 points off its low two weeks ago and in the process has gone from the bottom of its Bollinger Band to the top of both its BB and Williams Index at yesterday’s 16664 high print. Yesterday’s move higher saw me email my Platinum Members that I was going short at 16660 and after a nice sell-off I covered this position at my 16610 T/P level and I am now flat. This morning the Dow is trading over 100 points lower again showing what an important technical signal both the BB and Williams Index are. Today I will leave my buy level unchanged at 16360/16420 with the same 16295 stop. I will again look to sell the Dow on any rally higher to 16650/16710 with a 16760 stop.
March BUND
No change as I am still a buyer on any dip lower to 164.55/164.85 with the same 164.35 tight stop. I will also look to sell the BUND on any mover higher to 165.95/166.25 with a 166.50 stop. The BUND has strong resistance at the 166.00/166.50 area.
Gold Rolling Contract
Gold just missed my 1195 buy level before trading higher this morning on the back of the weaker equity markets and I am still flat. Today I will leave my buy level unchanged at 1187/1195 with the same 1179 stop.
Silver Rolling Contract
My long 15.00 Silver position worked well as after the US markets opened Silver rallied which enabled me to cover this position at my 15.20 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 14.80/15.10 with a 14.45 stop.
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