It has been something of a risk off session to open the week. There’s been a focus on the upcoming French Presidential elections, ECB President Draghi has been batting back criticism from across the Atlantic on currency manipulation (regretting nothing), US markets fretting about the extent of timing of Trump reflation, not to mention ongoing tweets. Among major currencies, the Yen has been the strongest performer with commodity currencies faring less well, AUD back to around the 76½ level, also after yesterday’s softer retail sales for December. Meanwhile the Euro is trading lower at 1.0685 this morning after Germany reported much weaker than expected Industrial Production. Among commodity prices in yesterday’s trading session, base metals have fared well, though seemingly from supply concerns affecting copper (Chile strike talk) and nickel (Philippines mine shutdowns). Gold is up another $13/oz to $1233.80, WTI is off $0.80 (US rig count numbers have continued rising), the VIX is higher as are Treasury and Bund yields. In contrast,French and periphery yields have risen across durations. Iron ore opened the week in China down $1.59.
To mark my 1250th 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 25 points yesterday and is now ahead by 273 points for February having made 1734 points 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.
In a speech, French far right candidate Marine Le Pen vowed to take France out of the Euro if she won and rebuild France’s industry. Among the candidates for the French Presidency, Republican Party candidate Francois Fillon fought back under pressure from “Penelopegate” saying that yes, he had employed his wife for 15 years, that it was legal, but acknowledged it was not acceptable to voters, saying he would fight on.
ECB President Draghi must have felt besieged on all fronts, telling the European Parliament that the Euro is irrevocable, that the ECB had not intervened in currency markets since 2011, while assuring markets that the Central Bank will continue with its Bond Purchase Programme to support growth. He downplayed any sensitivity to last week’s inflation read noting that it was primarily energy and not European wages and fundamentals. He said that if the outlook were to worsen then they could step up bond purchases again.
Meanwhile, German Factory orders in December ended the year strongly, up 5.2% m/m, in some part payback after -3.6% in November, but still up 8.1% on year. Both domestic and foreign orders made good gain in the month and in annual terms, domestic growth somewhat stronger.
The Fed Senior Loan Officers’ Survey was released yesterday evening and reported little change in credit standards and demand for business loans, but some weakening in the demand for home purchase loans in Q4.
This morning on the economic front we already had the release of German Industrial Production and it was a shocker coming in at -3% versus +0.3% expected. At 8.30 am we have UK Halifax House Prices and this is followed at 1.30 pm by US Trade Balance. Finally we have the US JOLTS Job Opening and Consumer Credit at 3.00 pm and 8.00 pm respectively.
March S&P 500
Yesterday was another frustrating trading session with a some more of my calls missing my initial buy level by the smallest of margins before accelerating higher. This included the S&P which traded partially into last Friday’s ‘Open Gap’ with a 2283 low print. The ”Gap” still runs to last Thursday’s Chicago close at 2275. Despite the McClellan Oscillator weakening closing with just a positive reading of +4 last night, it is very difficult to fight this continuing Bull Market. However as I have mentioned over the past number of weeks, risk is rising with margin debt now running at $500bn compared to $380bn when the market peaked in 2007 ahead of the Global Financial Crisis. This is not sustainable but we have to wait for the charts to tell us when it is time to go short and not just for a few hours but more long-term. Today I will leave my buy level unchanged at 2275/2281 with the same 2270 stop. Again as mentioned yesterday, if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 2259/2265 with a 2254 stop. My only interest in selling the S&P is still on a rally higher to 2299/2305 with the same 2310 stop, but only in small size.
EUR/USD
My Euro plan worked well with the Euro trading lower to my 1.0715 buy level with a 1.0705 low before rallying to a 1.0755 high print. I do not like the price action in the Euro so I emailed my Platinum Members to exit this position at 1.0725 and I am now flat. My fears were vindicated with the Euro now trading at 1.0685 this morning on weaker German Industrial Production, French Elections and the weakening economic situation in Greece. Yet again the Daily Bollinger Band and Williams Index proved what valuable trading signals they are with the Euro topping at the 1.0830 resistance level last week. Today the Euro has good support at the 1.0610/1.0645 area and today I will be a buyer in this region with a 1.0585 tight stop. I am afraid to go short as I still anticipate that President Trump or is Trade adviser Navarro are going to continue to try and talk the US Dollar down. Remember later this week Trump is due to meet Japanese PM Abe and I have no doubt that the USD/JPY rate will be discussed.
March Dollar Index
Unfortunately the Dollar has just missed my buy level before rallying as expected given how oversold the Dollar was trading after January’s 5% fall resulting in a Downside Key Month Reversal. This morning the Dollar is trading back over 100 at 100.50 and today I will now move my buy level higher to 99.75/100.15 with a 99.40 stop. I still do not want to be short the Dollar at this time.
March DAX
Initially the DAX missed my 11510 buy level with a 11512 low print before rallying over 50 points. Subsequently the DAX did trade lower to my buy level and after a brief rally I emailed my Platinum Members to exit this position at 11525 and I am now flat. This morning on the back of the weaker Euro the DAX is trying to rally but nervousness still persists as mentioned in my EUR/USD commentary above. The DAX needs to break and close below 11400 for me to turn bearish and today I will again look to buy the market on any dip lower to 11430/11480 with a 11380 stop. I still do not want to be short the DAX at this time especially as a lower Euro should give the DAX some underlying support.
March FTSE
The FTSE also missed my 7085 buy level with a 7096 low print before rallying this morning on the back of the continuing weakening in Sterling. Today I will raise my buy level to 7070/7100 with a 7045 tight stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 6980/7020 with a 6955 stop.
Dow Rolling Contract
Frustratingly the Dow missed my 20000 buy level with a 20003 low print before rallying to a subsequent high at 20080 and I am still flat. I was reading some research yesterday by economist David Rosenberg. He pointed out that if the eight companies who all left the Dow since 2004 had remained in in Index, we would be reading about Dow 12886 and not 20050. A lot of money has gone into the US stock market on the expectation that Trump is going to cut taxes and reflate the economy. However there is so much good news priced into this market. You only have to look at US GDP which came in at 1.6% for 2016 and this is the eleventh consecutive year that GDP has failed to break 3%. Incidentally last year was the lowest growth since 2011. Despite all this negative news the market continues to rally and as mentioned in my S&P commentary above until we get a sell extreme that lasts, the trend is still up. Today I will move my buy level higher to 19960/20015 with a 19900 stop. I will still look to sell the Dow on any rally higher to 20150/20210 with the same 20260 stop.
March BUND
The Bund traded higher yesterday after Dragi said the ECB will continue to buy more bonds if needed. The Bund has strong resistance just above current prices at 163.80/164.20 and I will be a seller in this area with a 164.50 stop. Given the extent of the move higher over the past few weeks I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold closed over its previous key resistance level at 1220/1227 last evening in New York which is bullish. However with the US Dollar strengthening again I will only move my buy level higher to 1209/1216 with a 1203 tight stop.
Silver Rolling Contract
No change as I am still a buyer of Silver on any dip lower to 17.10/17.40 with the same 16.80 tight stop.
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