The German economy is continuing to out-perform. The run of better than expected data continued, this time from the German IFO Survey for March. The survey was the strongest since 2011 and also not far off the pre-GFC highs of a decade ago when the German economy was growing at 3%-plus. The headline Business Climate Index printed at 112.3, up from an already high 111.1 (that was also the expectation), the Current Assessment and Expectations components all better than expected. The German economy notched up 1.9% growth last year that was stronger than the 1.6% US growth. German Bunds under-performed and there was apparent appetite for the Euro that tested 1.09 yesterday afternoon (before pulling back) keeping the USD DXY on the back foot that closed down 0.41%. US markets have been listless, Treasuries bid as the market resets after pulling of the health care bid, taking stock before entering any new Trump reflation trade positions.
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 175 points yesterday and is now ahead by 1089 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.
Not doing the Euro too much harm, ECB Chief Economist Peter Praet noted that deflation risk in Europe was gone. He did though say that it was premature to talk about a stimulus exit even though the ECB is this year starting to see light at the end of the tunnel. Bundesbank President Jens Weidmann wasn’t so coy. He would like less expansive policy, noting a danger QE will last too long. He also mentioned that some of the more indebted countries are using QE for more spending rather than paying down debt. European stocks were lower. Even so, it’s hard to deny that positive European growth sentiment was also helped by Chancellor Merkel’s party’s strong showing in last weekend’s regional Saarland elections, coming just weeks ahead now of the first round of the French Presidential election (April 23).
The Australian Dollar has continued to trade in a restricted range, despite a further sizeable clean out of iron ore prices overnight. The Qingdao 62% benchmark was down another $3.49 to $US81.57/t, back to early February levels, testing the faith of real money investors. With Cyclone Debbie now crossing the north Queensland coast, we’ll be watching for news in coming days on the coal front. Oil prices were also testing lower levels before support returned.
Chicago Fed President and 2017 voter Charles Evans was speaking at the same event in Madrid as Praet, Evans also doing an interview with Bloomberg TV. He thought that 2-3 rate hikes this year would probably be appropriate, noting that three would be likely appropriate “to the extent that he gains confidence” in his forecasts. He was also a little more illuminating on fiscal policy: “We probably got ahead of ourselves and thought that some of it would be showing up in 2017 in our first (December) forecast,” he said. “This last one in March, we moved much more of it to 2018.”
This morning on the economic front we have no data of note due from either the Euro-Zone or UK while at 1.30 pm we have US Wholesale Inventories and the Trade Balance. This is followed at 2.45 pm by Markit US Services/Composite PMI. Finally at 3.00 pm we have the Conference Board Consumer Confidence and the Richmond Fed Manufacturing Index.
Whether the market gets anything new from Fed President Kaplan might also be a stretch. He’s also a voter this year. He’s only just spoken at the end of last week and then spoke of raising rates in a gradual, predictable way, that three hikes is a reasonable baseline, and that further economic progress still needed before announcing balance sheet plans. The market will be much more interested – or hoping (vainly) for new insights from Fed Chair Yellen’s address at 5.50 pm.
June S&P 500
My S&P plan worked very well yesterday with the market hitting my 2318 buy level before spending the rest of the US Trading session moving higher before finally closing at 2340 and in the process closed most of the opening down gap from last Friday’s Chicago close. As so many of my positions got hit yesterday I covered this long position too early at 2323 and I am still flat. Yesterday again proved how difficult it is to be short the S&P as the market just slammed anyone who shorted the overnight weakness. The S&P has strong resistance from 2354/2360 and today I will be a seller in this area with a 2365 stop. The support for the S&P comes in at yesterday’s double bottom at 2317.75 and at the afternoon first rebound high at 2332. Today I will be a small buyer on any dip lower to 2328/2334 with a 2323 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2312/2318 with a 2307 stop.
EUR/USD
I am never comfortable in being short the Euro and for that reason I covered my short 1.0870 position at 1.0850 and I am now flat. The Euro traded to a 1.0906 high print just missing my second sell level at 1.0910 before trading lower overnight and that move lower has continued this morning. There is no doubt that the Euro is overbought and faces strong resistance at 1.0920. Today I will again look to sell the market on any rally higher to 1.0895/1.0925 with a 1.0955 stop. I will leave my buy level unchanged from 1.0760/1.0800 with a lower 1.0730 stop.
June Dollar Index
My long 98.95 Dollar position finally worked out overnight with the Dollar hitting my revised 99.10 T/P level and I am now flat. The Dollar has strong resistance from 100.00/100.50 and very strong support from 97.90/98.30. If we break and close below 98.00 over the coming days it opens up the possibility of a move lower to at least 92.00. Given how oversold the Dollar is trading I still reckon we will get a bounce first to correct this oversold condition before breaking this key 98.00 level. Today I will be a buyer on any dip lower to 98.50/98.90 with a 98.20 stop. My only interest in selling the Dollar is on a rally higher to 100.10/100.50 with a 100.80 stop.
June DAX
Unfortunately the DAX just missed my 11910 buy level by 25 points before rallying 175 points and I am still flat. There is no doubt that the pick up in growth and inflation in Germany is having a positive impact on the German equity market. At this point in time there are only three positions that you can have in the DAX namely bullish, mildly bullish or flat. You certainly cannot be short the DAX and thankfully we have had no sell levels in this market now for a few weeks and most of the past few months since the 10800 resistance level was broken in mid-December. Today I will move my buy level higher to 11970/12025 with a 11925 stop.
June FTSE
The FTSE rallied after I posted yesterday morning to an initial high at 7220. As I was anticipating getting filled in both the S&P and Dow yesterday afternoon (which happened) I emailed my Platinum Members to exit my long 7205 position for a small loss at 7200 and I am still flat. This morning the FTSE is finally following the other Indices higher and I will now look to buy the market again on any dip lower to 7175/7205 with a 7145 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any subsequent dip to 7095/7135 with a 7065 stop.
Dow Rolling Contract
After closing higher for 12 consecutive trading days from February 9 to February 27, a streak ending two days before the March 1 top, the Dow has now closed lower for 8 consecutive days, which is the longest down streak in nearly 6 years, since August 2, 2011. Back then the Dow was in the middle of a 17% decline from July 21 to August 9. If history repeats itself then this decline in the Dow is not over. Despite a lot of buying yesterday the Dow was unable to close in positive territory. However my Dow plan worked really well with the market hitting my revised 20420 buy level with a 20409 low print before quickly spiking to my 20475 T/P level and I am still flat. If the Dow continues to rally over the coming days its has strong resistance from 20750/20810 and I will be a seller in this area with a 20860 stop. Given the magnitude of yesterday’s bounce off the 20409 low print I will now look to buy the Dow on any dip lower to 20440/20500 with a 20380 stop.
June BUND
My Bund plan worked well as after the Bund hit my initial 160.45 buy level the market eventually traded back above 160.70. I used this rally to cover this position at my revised 160.60 T/P level and I am now flat. This morning the Bund is trading lower but I will still continue to buy the dip with my buy range today from 159.80/160.10 with a 159.45 stop. Despite the pick up in German growth and inflation I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold again found strong resistance at the 1260/1265 area. I am still flat and today I will lower my buy level slightly to 1233/1240 with a 1227 stop.
Silver Rolling Contract
After I posted yesterday morning Silver traded between 17.90/17.93 giving anyone who wanted to buy the market had plenty of opportunity to do so. Subsequently Silver rallied to a 18.15 high print and I used this rally to exit my long 17.88 position at 18.13 and I am now flat. Silver has now closed higher for the last seven consecutive days with yesterday’s rally the strongest of this sequence as Silver jumped nearly 2%. Trendline resistance for Silver crosses at 18.25 and a break and close over this level could well see Silver eventually test its July 3 high at 21.04 which is my ultimate near term target level. Today I will again look to buy Silver from 17.75/18.10 with a 17.40 stop.
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