The continuing theme of buying the dip in the stock market prevailed again yesterday with both the Dow and S&P which opened lower yesterday reversed course immediately to close 0.5% higher, as yet another start of a week gets off to a positive start. However European equities opened the week in negative territory but they have now reversed course too this morning with a higher open. In a quiet trading day for currencies, the US Dollar also had a mixed performance gaining ground against the EUR, JPY and GBP, while loosing ground against the AUD and NZD. Meanwhile and perhaps more interestingly, US Treasury Yields have rallied reversing most of the sell-off post Yellen speech and Vice Chair Fischer remarks on Friday.
To mark my 1150th 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 made 115 points yesterday and is now ahead by 1615 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
Comments from Fed Chair Yellen that the case for raising interest rates ”has strengthened in recent months” along with Vice Chair Fischer’s observation that the Ms Yellen’s remarks implied the Fed could raise rates twice this year triggered a repricing in Fed hike expectations with the probability of a September hike jumping from 33% to 42% on Friday and December’s probability climbing to 76% from 68%. Now, in yesterday’s trading session, we have seen a reversal in expectation with September’s probability back down to 35% and December to 72%. So, while a September hike and another in December remain a strong possibility, ultimately it will all come down to the data with Friday’s Non-Farm Payrolls looming large.
US Income and Spending figures for July were released yesterday and printed in line with expectation at 0.4% and 0.3% respectively. It confirmed that the strong consumption seen in Q2 has carried over into Q3 which suggests also that we should see a solid Q3 GDP number. Meanwhile the PCE Deflator for the month was unchanged with the core figure up 0.1%. The core Deflator has now been unchanged at 1.6%yoy for five months, however the consensus is still for a small pick up towards 1.9% by the end of the year. This would be one argument for a hike in December and no hike in September.
Looking at currencies in more detail, it is interesting to note the US Dollar’s resilience despite the fact that we have seen a partial reversal on Friday’s jump in US Treasury Yields. Meanwhile the improvement in risk appetite appears to have benefited the NZD and AUD with both currencies rising yesterday by 0.25% and 0.15% respectively.
This morning on the economic front we have UK Mortgage Approvals at 9.30 am and this is followed at 10.00 am by Euro-Zone Business Climate Indicator. Next we have German CPI at 1.00 pm. Finally at 3.00 pm we have US Consumer Confidence Index.
September S&P 500
My idea of continuing to buy the dip in the S&P worked well yesterday with the market hitting my 2165 buy level with a 2164.25 low print shortly after I posted before having a 15 Handle rally to over 2180. This rally enabled me to cover my long position too early at 2170 and I am still flat. Since the S&P made its 2157.50 low print at 8.30 pm last Friday we have seen the market rally 25 Handles again emphasising my point how difficult it is to be short the market for more than a few hours, before strong buying returns. However yesterday’s rally occurred on very light volume and I would expect more of the same ahead of Friday’s NFP data. As I mentioned yesterday as long as the S&P can hold the key support at 2153/2158 it is difficult to be short and to me it is only a matter of time before we take out the next resistance from 2200/2220. Today I will again look to buy the S&P on any dip lower to 2170/2175 with a 2164 stop which is just below yesterday’s low print. I still do not want to be short the market at this time.
EUR/USD
No change as I am still a buyer on any further dip lower to 1.1100/1.1135 with the same 1.1060 stop. I have to respect last Friday’s downside Key Day Reversal plus the fact we closed below the key 1.1240 pivot point and support and for these reasons I will again look to sell the Euro on any rally higher to 1.1230/1.1260 with a 1.1290 stop.
September Dollar Index
Unfortunately I was stopped out of my short 95.25 position from late Friday at my 95.80 stop level yesterday and I am now flat. Just like the Euro above I have to respect the upside Key Day Reversal in the US Dollar and as a result I will look to buy the Dollar on any dip lower to 95.25/95.60 with a 94.80 stop. I do not want to be short the Dollar at this time as I have to respect the price action which has now turned bullish.
September DAX
My DAX call worked really well yesterday as the market started to sell off after I posted which enabled me to buy the DAX at my 10455 buy level with a 10435 low print. Subsequently the DAX reversed course and this rally enabled me to cover this position at my 10520 T/P level and I am now flat. The move lower in the Euro makes it difficult to be short the DAX and today I will again look to buy the market on any dip lower to 10480/10540 with a 10430 stop which is just below yesterday’s low print. I still do not want to be short the DAX at this time.
September FTSE
The FTSE is opening higher this morning after been closed yesterday for the last UK Bank Holiday until Christmas. I am still flat and today I will again look to buy the market on any dip lower to 6770/6800 with a 6735 stop. Since the FTSE rose 16% following its post-Brexit low print the market has just traded sideways over the past three weeks. With Sterling continuing to weaken it is very difficult to be short the FTSE as a weak currency makes the UK more competitive.
Dow Rolling Contract
Unfortunately the Dow just missed my 18340 buy level with a 18372 low print and I am still flat. Today I will now raise my buy level to 18385/18445 with a 18335 tight stop. Just like the other major Indices I do not want to be short the Dow ahead of this Friday’s NFP Report.
September BUND
My long 166.95 Bund position from last Friday worked well yesterday as the market had a nice rally off its early morning 166.63 low print. This rally enabled me to cover this position at my 167.25 T/P level and I am now flat. The Bund has huge support at the 166.60 level and as long as we can hold this key pivot point then the buy the dip will continue to pay dividends. Today I will again look to buy the Bund on any dip lower to 166.80/167.10 with a tight 166.40 stop. The price action continues to tell me not to be short the market at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1304/1311 with the same 1298 stop.
Silver Rolling Contract
My long 18.65 Silver position again worked well yesterday with the market trading higher to a 19.00 high print. This rally enabled me to cover this position at my 18.85 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 18.30/18.60 with the same 17.95 stop.
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