Risk assets took another pounding yesterday as the UK decision to leave the EU continues to rock financial markets. Equity markets on both sides of the Atlantic ended the day sharply lower, the British Pound fell another 3.6% and demand for safe haven boosted Gold and dragged Global Yields lower. US markets have continued to drive global sentiment. The prospects of weaker growth, regulatory and political uncertainty along with low interest rates have been noted as the major reasons for the selling of financial shares across Europe and Wall Street. Airlines and Home Builders have also taken a beating while Utilities, Healthcare and Telcos had mixed results.
To mark my 1100th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 45 points yesterday having made 645 points on Friday and 610 points last Thursday and is now ahead by 2360 points for June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this service over 12 months ago it has averaged a monthly gain of over 2200 points.
Adding salt to the wound, England were beaten by Iceland last night and are now out of Europe for the second time in less than a week. In addition S&P stripped the UK from its AAA rating, cutting the Countries debt by two notches with negative outlook. The rating agency noted that the UK decision to leave the EU threatens the Country’s constitutional and economic integrity and it said that leaving the Union would ‘lead to a less predictable, stable and effective policy framework in the UK’. S&P was the last of the three big rating agencies to strip the UK from its triple A rating. Moody’s rating for the UK is Aa1 with negative outlook and Fitch Ratings has the UK at an equivalent double-A-plus.
The lack of UK political leadership at a time of market disarray is doing little to resolve markets. On this point, there was little market reaction to news that the UK Conservative Party has brought the date forward to elect a new leader by almost a month to 2 September. Instead as yet another blow to the UK, German French and Italian leaders have confirmed that they will not hold informal talks with the UK until it triggers Article 50 to leave.
Looking at currencies, while the US Dollar and Yen have retained their safe haven status, the lack of clarity on the future relationship between the UK and Europe suggests that the GBP adjustment still has more to go but probably not until we get a decent correction first to correct this deeply over sold GBP/USD market. Speculation of potential currency intervention by the Bank of Japan has probably played a factor on the subdued performance of the Yen relative to the US Dollar.
Amid the turmoil in risk assets core global yields were well supported yesterday. 10 Year Gilts moved to sub the 1.0% mark for the first time in history, after dropping 15bps to end the the day at 0.93%. Both German and Japan 10-year rates fell further into negative territory, closing at -0.12% and -0.21% respectively.
As for data releases, the US Trade Deficit rose in May to $60.6bn from $57.6bn, marginally worse than the $59.6bn expected.
This morning Equity markets are rebounding helped by a strong Sterling and weaker Yen.
On the economic front we have UK CBI Retailing Reported Sales at 11.00 am. This is followed at 1.30 pm by US GDP. Finally at 3.00 pm we have Consumer Confidence Index and Richmond Fed Manufacturing Index.
September S&P 500
My S&P plan worked really well with the market trading lower to my average buy level at 1989 with a 1981.25 low print before finally having a nice rally overnight which enabled me to cover this position at my 2004 T/P level and I am now flat. It is incredible to think that at 10.00 pm last Thursday the S&P was trading at 2119 for it only to fall 138 Handles in two trading days. This sell-off sees the market extremely oversold and trading outside the bottom of its Daily Bollinger Band and at the bottom of the Williams Index. However the McClellan Oscillator only closed with a negative reading of -165 so potentially we could have one more nasty fall before this indicator gives a strong buy signal. However having T/P at 2004 overnight I emailed my Platinum Members to buy the market again at 2001 especially with the the two large ‘Open Gap’s above the market. The first gap from last Friday’s close at 2018 to yesterday afternoon’s Chicago high at 2010 should at least get tested to partially filled. If I manage to T/P on this position I will again look to buy the market on any dip lower to 1978/1988 with a 1973 stop. I will leave my sell level unchanged at 2028/2038 with a 2045 stop.
EUR/USD
I am still flat the Euro and today I will raise my sell level slightly to 1.1140/1.1170 with a 1.1210 stop. My only interest in buying the Euro is if the market tests the key 1.0800/1.0850 major support over the coming days with a 1.0750 stop.
September Dollar Index
I am still flat the Dollar and I will now use any rally higher to 96.80/97.20 to go short with a 97.55 stop.
September DAX
I had the correct view with the DAX yesterday but unfortunately I was stopped out. Initially the market traded lower to my 9345 buy level before having a nice rally before getting slammed into the close which stopped me out of this position at 9260 and I am now flat. This is very frustrating when you see the DAX trading at 9470 this morning. Today I will again look to buy the DAX on any dip lower to 9320/9370 with a 9265 stop.
September FTSE
Just like the DAX above after the FTSE traded lower to my average buy level at 5960 I was stopped out of this position at my too tight 5925 stop and I am now flat which is even more frustrating when you see the FTSE trading at 6060 this morning. I am bullish the FTSE against the other European markets as you can see on the following link of an interview that I did with IG yesterday morning.
Today I will again look to buy the FTSE on any dip lower to 5970/6015 with a 5940 stop.
Dow Rolling Contract
My Dow plan did not work out as shortly after the Dow traded lower to my average buy level at 17225 I was stopped out of this trade at 17150 and I am now flat. Given how oversold the Dow is trading I will again look to buy the market on any dip lower to 17100/17180 with a 17040 stop. I still do not want to be short the Dow at this time.
September BUND
The BUND traded higher to my 166.65 average sell level. I am still short and I will now lower my stop to 167.10 on this position.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1289/1297 with a 1283 stop.
Silver Rolling Contract
Today I will lower my buy level slightly to 16.90/17.35 with a 16.45 stop.
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