The big news yesterday was the 19% rise in Iron ore which closed up $10 at $63.74. Remember Iron ore was trading under $38 in early January. This move gave some credence by the fact that Dalian Iron ore Futures rose 5.88% yesterday , while Chinese Steel Rebar Futures rose 7.9%, all after the Weekend’s official growth announcements from China.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary 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 anybody following my Platinum Service it made 90 points yesterday and is now ahead by 690 points for March having made 2265 points in February and 3365 points in January. Since I started this service last June it has made over 20,500 points.
The Iron ore move was followed by big rises in BHP and RIO shares yesterday and unsurprisingly turbocharged the AUD/USD that had been trading quietly through the Asia session at 0.7400/0.7420 before taking off and headed up through the New York session to over 0.7480. However on the back of the weaker close to both the Nikkei and Shanghai Indices this morning the AUD is back trading at 0.7410 as I write this commentary. Yesterday the LME Base Metal complex was little changed, buy oil was up aggressively further with Brent closing at $40.80, up 50.6% from its January 20 low and higher by 5.35% yesterday, adding another layer of support to the commodity currencies.
In other news we had more focus on yet more comments from Bank of Japan Governor Kuroda, talking of the possibility of further monetary easing, even though he recognised the negative spill over to bank’s earnings. His retort to that was to beat deflation and thus ultimately lift earnings. Little change in the Yen yesterday although the yen has strengthened this morning on the back of the weaker Nikkei.
We had very little data yesterday with the Fed’s Composite Labour Conditions Index Change for February on the softer side, printing at -2.4 against a positive forecast of +1. The US Dollar has been on the defensive with commodity currencies on a hot streak. Fed Governor Lael Brainard and Vice Chair Stan Fischer have been speaking and from almost polar opposite perspectives, Brainard very cautious but Fischer speaking of re-emerging inflation. Brainard emphasised downside risks and urged Interest Rate policy caution. She said while there are reasons to expect continued gains in Employment, expectations of stabilising Foreign Economies and an eventual rise in inflation back to 2.0%, ‘However, there are risks around this baseline forecast, the most prominent of which lie to the downside,’ she said.
Fischer was mainly speaking about the history of economic thought but spoke of signs that the relationship between low unemployment and inflation might be re-awakening now. ‘The link has never been very strong, but it exists, and we may well at present be seeing the first signs of an increase in the inflation rate – something that we would like to happen’. US Bond markets edged higher on this news.
On another light day for economic data we already had the release of German Industrial Production for January which came in strong at 3.3% versus 0.5% expected. At 10.00 am we have Euro-Zone GDP and this is followed at 11.00 am by the US NFIB Small Business Optimism. Finally at 1.30 pm we have Canadian Housing Starts and Building Permits.
March S&P 500
My S&P plan worked very well yesterday for the market traded higher to my 2001 sell level with a 2004.25 high print before having a nice initial sell-off to 1988 which gave everyone who shorted the market a nice gain. Unfortunately as I was already short the Dow I stupidly raised my sell level to 2005 which was not filled and I am still flat. The McClellan Oscillator again closed strong at +326 but generally when we see little change in the MO, the market has a subsequent large move which given how overbought it is should be to the downside and this is what we are seeing this morning. As mentioned in yesterday’s commentary the S&P has strong resistance from 2007/2013 and strong support at the 1970/1975 area and I would expect the market to trade in this range ahead of the FOMC Meeting next week unless we get some dramatic news from Dragi and the ECB on Thursday. Today I will keep my buy level unchanged at 1971/1976 with a 1965 stop. I will still look to sell the S&P on any rally higher to 2003/2008 with a 2014 stop. Again if I am taken short and subsequently stopped out I will be a more aggressive seller in front of 2025 with the same wider 2042 stop.
EUR/USD
All the analysts that I listen to are saying that it is only a matter of time before the Euro gets crushed again but to me the price action is telling me the opposite especially since the Euro had its major upside Key Day/Week Reversal back on December 3 when yet again Dragi and the ECB disappointed. Just to recap heading into that announcement the Euro was trading at 1.0520 and the DAX at 11300 both a long way from where we are now. If the ECB disappoints on Thursday we could well see another explosion higher in the Euro and to me all the risk is on the upside. Yesterday the Euro missed my 1.0920 buy level with a 1.0939 low print before quickly trading back above 1.10. Today I will raise my buy level to 1.0960/1.1000 with a 1.0935 stop which is just below yesterday’s low print. I still do not want to be short the Euro at this time and remember a break and close over 1.1060 will be positive.
March Dollar Index
I am still flat the Dollar and today I will lower my sell level to 97.40/97.70 with a 98.10 stop.
March DAX
This morning the DAX has traded lower to my 9630 buy level and I have just cut this position here at 9650 and I am now flat. Today I will again look to buy the DAX on any further sip lower to 9520/9580 with a 9470 stop. I still do not want to be short the DAX ahead of Thursday’s ECB Meeting.
March FTSE
After a couple of failed attempts yesterday the FTSE finally hit my 6105 buy level this morning. I am still long and today I will raise my stop on this position to 6065 which is just below last Thursday’s 6075 low print. If I am stopped out of this position I will be a more aggressive buyer in front of 6040 with a 5995 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately I tried to sell the strongest of the US Indices yesterday by going short the Dow at 17040. Subsequently the Dow just missed my 17110 stop with a 17100 high print before finally selling off on Fed Vice Chair Fischer’s comments which enabled me to cover this position at 17010 and I am now flat. Hopefully you did better as just after I emailed all my Platinum Members the Dow spiked lower to 16980 before rallying into the close. In my opinion the weak US Dollar is helping the Dow and if I am correct in thinking that it is only a matter of time before we see the Euro rally which in turn will support the Dow. With the MO so strong the Dow is due a correction and I will use any sell-off in the Dow to buy the market. Today my buy level will come in at 16820/16880 with a 16750 stop. Despite the strong MO I do not want to be short the Dow at this time.
June BUND
My BUND plan worked well yesterday as just before the New York close the BUND traded lower to my 162.40 buy level before opening strongly this morning which enabled me to cover this position at my 162.80 T/P level and I am now flat. As I mentioned yesterday the Bund has strong support at 162.40 and today I will again look to buy the market on any dip lower to 162.35/162.65 with a 162.20 stop which is just below yesterday’s low print.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1245/1253 with a 1238 stop.
Silver Rolling Contract
Today I will move my buy level higher to 15.25/15.55 with a tight 14.95 stop.
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