Monday’s and late last week’s warm and fuzzy feeling toward risk markets that began with the ECB’s latest efforts to shield the financial sector from more policy induced pain has not survived Tuesday following a downbeat Bank of Japan as I was posting my Daily Commentary yesterday morning. This was evident in a weaker Nikkei and stronger Yen with the Nikkei again closing lower this morning by 0.83% at 16974, despite the PBoC cutting its Minimum Lending Facility (MLF) by 25 basis points. Markets were not helped yesterday by some underwhelming US economic data which saw big downward revisions to January Retail Sales in particular and a renewed lurch lower in oil prices.
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 bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 150 points yesterday and is now ahead by 1395 points for March having made 2265 points in February and a record 3365 points in January. Since I started this service last June it has made over 21,000 points.
Iran’s objections to an OPEC production freeze to first raising its output to the maximum, continues to weigh on sentiment. A near 50% drop in the share price of the beleaguered Valaent Pharmaceuticals has not helped things either, with healthcare stocks closing down by more than the oil price sensitive materials and energy sectors in the S&P. However despite all of the above the Dow still closed 0.13% higher while the S&P closed 0.2% lower after another nice rally in the last hour of trading.
Treasury Bonds have traded quietly in front of this evenings FOMC outcome with Yields a touch higher despite the more risk-off market tone. In currencies the Yen was again the top performer as it spent much of yesterday trading below 1.13 before rallying overnight to 1.1370. The NZD was the worse performer following the latest Global Dairy Trade Auction which produced a 2.9% fall against the previous whisper numbers of +5.7%.
Sterling was again weak as the latest ‘Brexit’ poll showed the ‘Leave Camp’ back in the lead and apparently more motivated to vote than the ‘Remain Camp’ which took cable (GBP/USD) down from 1.43 to below 1.41 this morning. This is in front of this afternoon’s UK Budget and where the projected Public Sector Borrowing Requirement is likely to be greater than assumed at the time of the December Autumn Statement, reflecting lower wages, lower inflation and lower economic growth than earlier assumed. Should the Chancellor George Osborne, decide to wield the spending axe even further in order to bring Government finances towards balance, then projections on the timing of the first UK Interest Rate hike may be pushed out even further. Tight Fiscal Policy means lower rates for longer.
As for the US data, Retail Sales was the highlight (or rather the lowlight). Though both headline sales and sales of ex-autos both came 0.1% better than expected at -0.1%, it was the sharp downward revisions to January, both to -0.4% from 0.2% and 0.1% respectively that resonated. The NAHB Housing Index also underwhelmed at 58 versus 59 expected, while the one highlight was the Empire Manufacturing Survey but this is a highly volatile indicator.
This morning on the economic front we have UK Employment and Average Weekly Earnings at 9.30 am. At 12.30 pm we have US CPI, Building Permits and Housing Starts. This is followed at 1.15 pm by US Industrial Production and the UK Budget this afternoon. Finally at the earlier time of 6.00 pm we have the FOMC announcement and then the very important press conference with Fed Chair Janet Yellen at 6.30 pm.
June S&P 500
I have now rolled to the June Contract as the March Contract expires at 1.35 pm on Friday. Currently the June Contract trades at a full 10 Handle discount to the S&P cash market. Yesterday my March S&P plan worked very well with the S&P trading lower to my 2005 buy level before having the expected rally ahead of the FOMC this evening which enabled me to cover this position at my T/P level at 2012 and I am now flat. As most members know at this stage I will stay flat until we get the announcement which promises a tonne of volatility especially with the press conference to follow. The recent increase in inflation could add to the volatility and strengthen the US Dollar as yet again the devil will be in the detail. I still believe the market will have great difficulty in breaking the key 2035/2045 resistance level for the cash S&P and today I will look to sell the June Contract on any further rise to 2025/2035 with a 2042 stop. My only interest in buying the market is still on a dip lower to 1993/1999 with a 1987 stop.
EUR/USD
My Euro plan also worked well yesterday with the Euro trading lower to my 1.1075 buy level before having a nice rally to 1.1125 which enabled me to cover this position at my revised 1.1102 T/P level as outlined to my Platinum Members and I am now flat. Just like the S&P above I will stay flat the Euro until we get the FOMC out of the way and I will then look to buy the market on any subsequent dip lower to 1.0990/1.1030 with a 1.0955 stop. I still do not want to be short the Euro following last Thursday’s huge upside Key Day Reversal.
June Dollar Index
The June Dollar traded higher to my 96.85 sell level shortly after I posted before having a nice sell-off to 96.45 which enabled me to cover this position at my 96.55 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 97.50/97.80 with a 98.20 stop.
March DAX
Earlier this morning the DAX traded higher to my 10010 sell level. As I still expect the markets to remain quiet to firmer ahead of the FOMC this evening I have just cut this position here at 9985 and I am now flat. The DAX is again trying to rally but as I have mentioned over the past few days the DAX needs to break and close over its key resistance at 10150/10200 before I will turn bullish. I am now flat the DAX and today I will look to sell the market on any rally higher to 10130/10180 with a 10235 stop. My only interest in buying the DAX is from 9860/9920 with a tight 9820 stop.
March FTSE
The FTSE has traded in a very narrow range ahead of this afternoon’s UK Budget. I am still flat the market and today I will raise my buy level to 6085/6115 with a 6055 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my 17090 buy level by 25 points yesterday before having a nice rally in the last hour of trading and that theme has continued this morning with the Dow now trading at 17270. Interestingly despite the comeback in the Dow late yesterday the McClellan Oscillator did not perform with the MO closing at just +56 from Monday’s +166 close so we are now beginning to see some negative divergences after this huge 220 Handle rally off the Mid-February low print. Just like the S&P above I will stay flat the Dow until we get the FOMC announcement and if the market rallies on this release I will look to sell the Dow from 17350/17420 with a 17470 stop. Given the weakening MO I do not want to be long the Dow at this time.
June BUND
No change as I am still a seller on any rally higher to 161.80/162.10 with a 162.35 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1215/1223 with the same 1208 stop.
Silver Rolling Contract
No change as I am still long at 15.28 with the same 14.85 stop.
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