When the IEA released its monthly report in January, it caused quite a flurry warning ‘the oil market could drown in over-supply’. Yesterday we had more of the same with estimates of continuing stockpile builds, higher OPEC output in both January and December which led to a trimming on oil demand estimates. In essence, the fundamentals continue to weigh on prices, and that is pretty much what happened in the markets yesterday with WTI and Brent closing down 6% at $28 and $31 a barrel. European Banks came in for more selling, with the E600 Banks Index closing down a cool 4% and the wider E600 Index off 1.6%, setting the tone for the US market where the S&P 500 Energy Stock Index closed 2.45% lower on another wild trading session for the US markets.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Service which includes all my Premium Daily Commentaries and 1/4 updated emails throughout the day. This offer is open to existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 325 points yesterday and is now ahead by 1025 points for February having made 3365 points in January. Since I started this service last June it has generated a return of over 18000 points.
The US Small Business Optimism eased further in January to its lowest level in two years, but the JOLTs Job Openings which is something that Fed Chair Yellen follows closely revealed more hirings and increased job quitters, a sign of confidence in the ability to get other work. However in Europe we had the German Industrial Production release which surprised on the low side in December. Any signs of industrial sector weakness will not be lost on the ECB with French Governing Council Member Villeroy on the wires yesterday implicitly talking prospects of more ECB action saying that it is too risky to give in to deflationary forces.
For Euro-Zone deflation risk, the further weakness in oil prices is being compounded right now by the rebound in the Euro in this ‘risk off’ environment, by trading over the key resistance level at 1.13 yesterday before trading lower to sit at 1.1280 this morning. Similarly USD/JPY is trading below 115 this morning in what has been a seven big figure range in the past 10 days. The Nikkei having lost 5.5% yesterday closed down 2.35 % this morning at 15700 as the key 16000 support level is now clearly broken. There was also buying of the Swiss Franc, notwithstanding the SNB’s Jordon saying the Central Bank is not yet at rock bottom on deposit rates and that the Franc is overvalued.
Yesterday was an interesting whipsaw session for Commodity Currencies that were initially sold lower as has been the case in like commodity/oil sell downs but recovered later in the session. The AUD traded below 0.70 but is sitting at 0.7080 as this goes to print.
Bloomberg headlines also cited seeing an EU/G20 planning document that among other things called for more use of Fiscal Policy, presumably also to reassure markets given Yellen’s speech this afternoon is not going to over blow downside risks.
Today is very light on the economic data front with UK Industrial Production due at 9.30 am with the only US data due been the Monthly Budget Statement at 7.00 pm
All eyes will be on Fed Chair Yellen’s appearance before the House Financial Services Committee at 3.00 pm, where I imagine she will be, as usual very careful with the words that she selects, noting that there are various uncertainties and risks around the outlook for the US and the Global economy that have been generally accumulating this year. Even so, I expect her to note that while the momentum of the US economy slowed late last year, she remains cautiously optimistic about prospects for US economic growth, of some further improvement in the labour market together with the likelihood that US consumer inflation will move towards 2%, which is the Fed’s target.
Finally the San Francisco Fed President Williams is speaking on the economy at 6.30 pm in LA.
March S&P 500
Following my bad trading day on Monday, yesterday was a much better trading session with the key been not to overtrade. I only had to send one email to my Platinum Members at 2.30 pm a copy of which I have included at the end of today’s commentary to give members an idea of how invaluable my Platinum Service is. Just after lunch the S&P traded lower to my average buy level at 1829 before reversing quickly to 1852 which enabled me to cover this position at my initial 1842 T/P level and I am now flat. With Yellen speaking this afternoon it is another excuse for me not to short the market especially as we are oversold using the Bollinger Band and Williams indicators. However the McClellan Oscillator is not as shown by last night’s close of a negative 89 reading. Interestingly the stock market generated another Hindenburg Omen which follows the only other HO on January 5th 35 days ago. The S&P had a 1821 low on Monday followed by a 1825 low yesterday while the low so far overnight was at 1838 which in theory is a succession of higher lows which should be positive if we do not break 1825 in today’s trading. Today I will look to buy the market on any dip lower to 1833/1840 with a 1828 stop. Again if I am taken long and subsequently stopped out of this position I will use my 5 Handle Rule to go long again with a stop below whatever new low is printed. After I covered my S&P position yesterday the market traded lower to 1836 before having a massive 30 Handle spike to 1866 before rolling over again to the downside. These moves are fast and furious but as a result of this spike the ‘Open Gap’ from Friday’s close has narrowed to 1866/1877. Today I will also look to short the market on any rally higher to 1880/1887 with a 1891 stop.
EUR/USD
So far the key 1.13 resistance level is holding the Euro and I would expect this to continue given how overbought the Euro is trading on the Daily Bollinger Band. Interestingly the Williams Index has turned lower which may help the Euro to eradicate this overbought condition. After I posted yesterday the Euro continued to trade higher with the market hitting my average sell level at 1.1270. As I was not comfortable in being short I covered this position at 1.1260 (please see below) and I am now flat. Today I will again look to sell the Euro on any spike higher to 1.1300/1.1330 with a 1.1360 stop. Given how overbought the Euro is trading I do not want to be long the market today.
March Dollar Index
I am still flat the Dollar and today I will lower my sell level to 96.90/97.30 with a 97.60 stop.
March DAX
My DAX plan worked well yesterday with the market trading lower to my 8850 buy level before having a strong rebound to 8960. Unfortunately I covered this long position too early at 8890 and I am still flat. The DAX is trying to rebound this morning after the pounding it has gotten nearly every day this year especially following the two huge 400 point Key Day Reversals off the 10100/10200 price level in mid-January. Today I will again look to buy the market on any dip lower to 8820/8870 with a 8760 stop. I will still be a small seller against the key 9200/9300 resistance level by looking to sell the market from 9190/9250 with a 9310 stop.
March FTSE
The FTSE plan also worked well with the market trading lower to my 5570 buy level before rebounding which enabled me to cover this position at my revised 5595 T/P level. This morning while the other markets are rebounding strongly the FTSE is struggling and given how oversold the FTSE is trading I have just bought the market here at 5600 with a 5550 stop which is just below the overnight low print.
Dow Rolling Contract
My long 15960 Dow position worked well yesterday as after the market traded lower after I posted the Dow rebounded which enabled me to cover this position at my 16040 T/P level and I am now flat. As I mentioned over the past few days the Dow is the one US market that I like best especially given how weak the US Dollar is trading and it is no coincidence that the DAX/DOW spread has widened hugely over the past few weeks. Today I will again look to buy the Dow on any dip lower to 15950/16010 with a 15895 stop.
March BUND
My short 165.00 BUND position worked well yesterday with the market having rallied after I posted before quickly selling off in a wild trading session which enabled me to cover this position at my 164.60 T/P level and I am now flat. The incredibly low yield in Germany is telling you how weak the main Euro-Zone economy is as there is no end in site to deflation. Today I will again look to sell the BUND on any rally higher to 164.75/165.05 with a 165.30 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1160/1170 with a 1153 stop as Gold is due a decent correction after its recent run higher.
Silver Rolling Contract
I am still flat Silver and today I am going to lower my buy level slightly to 14.60/14.95 with a 14.25 stop.
Please find enclosed a copy of the email I sent to my Platinum Members at 2.30 pm yesterday.
Hi Everyone
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