Risk sentiment was given a further leg up yesterday with the news that the US and Mexico had agreed on a trade deal to replace NAFTA. Sticking points over the automotive sector have been resolved while duty free access for the agriculture sector. The President sealed the deal in an Oval Office conference call with Mexican President Enrique Pena Nieto, President Trump then calling on the Canadians to also re-negotiate. Not losing an opportunity, Canadian Foreign Minister Freeland is cutting short her current trip to Europe and flying to Washington Tuesday. These agreements still need to be ratified by Congress.
To mark my 1650th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it was made 40 points yesterday and is now ahead by 388 points for August, having made 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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While Mexican President Nieto said he was ‘’quite hopeful’’ that Canada would join the agreement and that negotiations could be concluded this week, Trump said ‘’we will see’’ in reference to Canada joining the deal. If a deal cannot be negotiated between the three sides, Trump did not rule out a separate, bilateral deal with Canada. President Trump said that the deal(s) would no longer be known as NAFTA but as Free Trade Agreement(s).
News of the trade deal provided more positive background news for investor sentiment, stocks also getting a boost from the tailwinds of Fed Chair Powell’s comments last Friday that he sees no sign of the economy overheating, continuing in essence the goldilocks US economy.
Recall that on the US-China trade front, September 5 is looming. That is the date when the consultation ends on the threatened 25% tariff on an additional $200bn of Chinese imports. That is next Friday. Last week’s mid-level US-China officials talks in Washington did not resolve the issue.
Currencies
With risk sentiment back on in size, Powell’s sentiment-soothing comments and emerging market stresses into the background for now, the USD has been further on the defensive, the USD down by around 0.4%, the DXY back below 95 as all major crosses made some gains against the USD. Top of the pops over the past 24 hours was initially the Mexican Peso, though it has given back some of its intra-day gains. The Canadian dollar is also higher, by 0.5%.
The AUD has been grinding only a little higher, still consolidating the in the 73s, with no new local AUD-specifics to give it new direction and the CNY relatively steady. Following the announcement that the People’s Bank of China was re-introducing a Counter-Cyclical Factor for the Chinese Renminbi (rather than automatically mirror the USD), a weaker USD has seen little net change in the USD/CNY.
Bonds and Commodities
Global bond yields inched higher with equities rallying, the German and US 10 year yields up by 3-4 bps, the US 10 year Treasury yield up 3.6bps to 2.8459%. On the commodity front, the UK was out for a bank holiday and so no LME trading. There was little new direction among the Aussie bulks. Oil and gold benefited from the weaker USD.
Economics
The Euro has been near the front of the move higher against the USD, aided by a solid reading from the German IFO Business Survey for August revealing better than expected readings. The headline Business Climate index rose from 101.7 to 103.8, pointing to a measure of growth stability in the German economy after some choppier industrial data of late. Last week’s Composite German PMI in August rose from 55.0 to 55.7, also stronger than expected.
There was little data to trouble the economic scorers in the US, the Dallas Fed Manufacturing Survey in August remaining buoyant at 30.9 (it is centred on zero, not the PMIs 50 growth breakeven level), buoyed by higher oil/shale oil activity and sentiment.
This morning on the Economic Front we have Euro-Zone M3 Money Supply at 9.00 am. This is followed at 1.30 pm by US Wholesale Inventories. Finally we have the Richmond Fed Manufacturing Index and the Conference Board Consumer Confidence at 3.00 pm
September S&P 500
Despite the increasing wall of worry the S&P surged again yesterday helped by the new US/Mexico Trade Agreement with the S&P finally breaking the 2900 round number resistance area. This move higher saw the market hit my 2896 sell level before we had a small sell-off and this move lower enabled me to cover my short position at my revised 2892 T/P level as emailed earlier to my Platinum Members and I am now flat. The S&P is now trading in the middle of my 2890/2910 resistance area as mentioned over the past week. The market is now extremely overbought as shown by the 50 Day Moving Average which is a lofty 100 Handles below here at 2803. According to SentimentTrader.com, 25% of the S&P 500 Index Members rose to a new high when the Index pushed to its January 26 high at 2872.87. Last Friday just 8% of the S&P 500 Index Members rose to a new high along with the Index. This is a striking divergence. I am now on watch for a reversal in this market especially given how overbought we are currently. Today I will again look to sell the S&P on any further rally to 2909/2918 with a 2926 stop. Having said all of the above I have to respect the positive trading action. Yesterday the market left a large ‘’Open Gap’’ from Friday’s 2875 close and today I will be a small buyer on any dip lower to 2872/2880 with a 2865 tight stop.
EUR/USD
I am still flat the Euro which rose to a new recovery high at 1.1700. Today I will leave my sell level unchanged from 1.1740/1.1780 with a 1.1820 stop. Unfortunately the Euro missed my 1.1550 buy level after I posted yesterday morning with a 1.1594 low print and today I will now raise my buy level to 1.1570/1.1610 with a 1.1530 stop.
September Dollar Index
When the Daily Sentiment Index for the Dollar hit 96% the Dollar Index was trading at 97.00. As I keep saying the DSI is one of the best trading signals in the market as yet again this key indicator has worked. I am still flat the Dollar and today I will again lower my sell level to 95.20/95.60 with a 96.05 stop. The next real support for the Dollar is still well below current prices at 93.20/93.60 and I will look to buy the market on any dip to this area with a 92.80 stop.
September DAX
The DAX had another impressive day of gains as more and more short positions get stopped out. I am still flat as thankfully we had no sell levels in this market. Unlike the US Indices the DAX is not overbought and has room to trade higher despite the stronger Euro. Today I will now raise my buy level to 12380/12445 with a 12320 stop.
September FTSE
With the FTSE closed yesterday the market is opening higher this morning as it plays catch up with the other Indices. I am still flat and today I will be a buyer on any dip lower to 7545/7585 with a 7510 tight stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Wow what a move higher in the Dow with the market now trading over 2000 points higher over the past few weeks. This move higher sees the Dow trading well above its Daily Bollinger Band and at the top of its Williams Index while the 50 Day Moving Average is a sizeable 1000 points lower at 25088. Yesterday the Dow traded high to my 26000 sell level. I am now short in small size and today I will only add to this position on a further move higher to 26200 with a tight 26280 higher stop. Given the volatility I am trading in much smaller size for the Dow with a wider stop. So far the Dow is trading well below its January 26 high while both the S&P and NASDAQ have broken above their previous highs from that day. This is negative divergence. I will now raise my T/P level on my 26000 short position to 25980. If my second sell level is filled I will then raise my T/P level to 26060. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September NASDAQ
Overnight the NASDAQ finally traded higher to my second sell level at 7575 for a now average short position of 7550.I am still short and I will leave my stop unchanged at 7610. Just like both the S&P and Dow the NASDAQ is also trading above the top of its Daily Bollinger Band and is severely overbought. One contra indicator that I look at is the status of the small investor. According to Bank of America Merrill Lynch the small investor is more invested in the market and has less cash on the sidelines than he had at the 2000 dot com top. As I am still short the Dow I will now raise my T/P level on this position to 7535. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September BUND
Finally the Bund broke out of its 163 trading range with a sizeable move lower yesterday. As I have consistently said over the past year the yields on the Bund are insanely low but it has been difficult to be short the market especially on days when equity markets get sold. Today I will now lower my sell level to 163.10/163.50 with a 163.85 stop.
Gold Rolling Contract
I am still flat Gold which again juts missed my buy level before having a late rally. One concern is the fact that Silver is finding it hard to follow Gold prices higher. Today I will raise my buy level slightly to 1192/1200 with a 1185 stop.
Silver Rolling Contract
No change as I am still long Silver at 14.80 with the same 14.40 stop. I will now lower my T/P level to 14.95 and if either of these levels are hit I will be back with a new update for my Platinum Members.
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