US equities enjoyed another day of positive returns (DJ 0.87%,S&P500 1.07% and NASDAQ1.74%) initially aided by better than expected earnings results by Netflix (reported after the bell on Monday) followed by beating outcomes from Johnson and Johnson and Goldman Sachs. IT (2.01%) and Consumer discretionary (1.87%) sectors were the big US winners on the day. European equities also closed in positive territory led by gains in IT and Materials sectors.
To mark my 1550th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day. To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total. This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 12 points yesterday and is now ahead by 1158 points for April, having made 1760 points in March, 2256 points in February, 879 points in January, 946 points in December, and 823 points in November Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Yesterday after I posted, China was the focus (GDP and activity data) and it remained the case during the European session. In the European morning, headlines hit the screen revealing China’s countermeasures against US trade tariffs with a 178% ‘’anti-dumping deposit’’ on US grain sorghum, but in a more conciliatory move China also announced plans to ease the limits on foreign investment in its auto and aircraft sectors, as previously foreshadowed by President Xi.
Sticking with Europe, UK labour market data were on the strong side (unemployment down 0.1% to 4.2%), but headline earnings did not rise as much as expected (unchanged at 2.8% 3M y/y vs 3% consensus). Meanwhile, the German ZEW (analyst) survey showed another drop in its Current and Expectations Indices. Although the ZEW survey tends to be more reactive to equity moves rather than give a good leading signal, the softer than expected headline numbers appears to have been a contributing factor for the decline in European bond yields (10y bunds -1.8bps to 0.507%), despite the improved risk appetite evident in the equity market. Reports of an increase of ECB bond buying also played into the move lower in yields. Later in the US session, longer dated UST yields continued to drift lower ( 10y UST down 1.30bps to 2.82% and 30y -2.6bps to 2.99%) while front end yields edged a little bit higher ( 2y +0.9bps to 2.388%), flattening the curve.
The flatter yield curve also caught the attention of Fed Member Williams, the soon to be New York Fed head, who noted that ‘’the flattening of the yield curve that we have seen so far is a normal part of the process, as the Fed is raising interest rates’’ I don’t see the signs yet of an inverted yield curve’’. He did caution though that an inverted curve ‘’is a powerful signal of recessions’’ (an inverted US yield curve has predicted almost every US recession since 1950, but I wonder whether QE is currently a distorting force). On inflation Williams noted that inflation will be held down by global factors, but sees US inflation at or above 2% for “another couple of years”. Also speaking yesterday, Fed Member Evans said that he did not ‘’foresee an out-sized risk of a breakout in inflation’’ adding that “I don’t think 2.25% is something to get our nose out of joint over”.
As for currencies, it has been yet another day of relatively subdued moves. The USD is stable in Index terms and CHF has been the big mover, probably reflecting an ease in safe haven demand amid positive European and US equities returns. Of some note, EUR briefly traded above the 1.24 mark for the first time since March 28, but then it fell down to 1.2336 on the back of softer German data (EUR now trades at 1.2370). Sterling rose to 1.4377 which is a post Brexit high, before the headline earnings miss saw a partial retreat. I continue to think Sterling has more in the tank bigger picture via a general re-pricing that should pressure EUR/GBP lower.
In other news, US Treasury Secretary Mnuchin tried to row back on Trump’s comments on Monday that China and Russia were ‘’playing the FX devaluation game’’ by saying it was merely a ‘’warning shot’’ not to engage in FX devaluation going forward. The IMF the left its 2018 and 2019 global forecast unchanged at 3.9%, but it painted a more subdued outlook in the outer years, projecting global growth will fade as central banks tighten monetary policy, the US fiscal stimulus subsides, and China’s gradual slowdown continues. The IMF also noted that ‘’Conflict could intensify if fiscal policies in the United States drive its trade deficit higher without action in Europe and Asia to reduce surpluses.’’
China cuts the RRR for qualified banks by 100bps in order to allow them to repay loans they took out from the PBoC via medium-term lending facilities. Around CNY900bn ($143bn) will be repaid with an additional CNY400bn unleashed. China said that the objective is to maintain liquidity at reasonable and stable levels and the RRR moves does not suggest any significant change in policy. China says it still needs to maintain relatively high RRR to fend off financial risks.
June S&P 500
The S&P finally traded higher to my 2700/2720 target level helped in no uncertain terms by the rally in the NASDAQ which exploded through its 6700 resistance level. After the S&P traded higher to my 2704 sell level the market unfortunately fell short of my second sell level at 2715 with a 2714 high print before having a small sell-off into the close. As I did not want to have an open short position overnight I emailed my Platinum Members to exit and short position at 2704 or better and I am now flat. Today I will again look to sell the market on any rally higher to 2720/2730 with a 2737 stop. I will also raise my buy level higher to 2678/2692 with a 2670 stop. The lower VIX and positive McClellan Oscillator continue to point to higher prices but valuations are stretched and gains from here may be limited as we also have strong resistance at the 2744 level which was the rebound high from the FOMC March Meeting. If I am taken short and subsequently stopped out of this position I will be a more aggressive seller from 2743/2753 with a tight 2760 stop.
EUR/USD
The Euro just missed my 1.2330 buy level with a 1.2336 low print before rallying into the New York close and I am still flat. Today I will raise my buy level slightly to 1.2300/1.2340 with a tight 1.2270 stop. I still do not want to be short the Euro at this time.
June Dollar Index
No change as my only interest in selling the Dollar is still on a rally higher to 89.70/90.10 with the same 90.45 stop.
June DAX
Thankfully we continued to have no sell levels in the DAX as yet again one short position after another gets stopped out. Even though I am long term bearish the DAX this has not the time to be short until we get a sell extreme that lasts for more than a few days. However the DAX has strong resistance at its 200 Day Moving Average at 12660/670 and then above here at 12720/12730 which is the 100 Day MA. Given the strength of these resistance levels I will be a small seller today from 12680/12750 with a 12795 stop. My only interest in buying the DAX is on a dip lower to 12320/12390 with a 12255 stop.
June FTSE
The FTSE continues to lag the other main Indices and I am still flat. Today I will raise my buy level to 7090/7130 with a 7055 stop. Despite the FTSE trading heavy I still do not want to be short the market at this time.
Dow Rolling Contract
Unfortunately the Dow twice missed my 24900 sell level with a 24860 high print before having a nice 120 points sell-off into the close and I am still flat. I have to respect the fact that the Dow broke and closed over the key 24675 resistance level and this area should now provide strong support. Today I will still be a small buyer on any dip lower to 24500/24700 with a 24420 stop. My only interest in selling the Dow is on a further rally higher to 25050/25200 with a 25280 stop.
June NASDAQ
In hindsight we should have just bought the NASDAQ on the break of Monday’s 6700 resistance level especially after Netflix reported such strong earnings. The 6700 area should now act as strong support and today I will now raise my buy level to 6695/6745 with a 6660 tight stop.
June BUND
The sideways boring action for the Bund continues as yet again we closed with a 159 handle and I am still flat. Today I will raise my buy level slightly to 158.20/158.65 with a 157.85 tight stop.
Gold Rolling Contract
I am still flat Gold which also continues to trade sideways below the key 1366/1376 resistance level. Today I will now raise my buy level to 1324/1332 with a 1317 stop.
Silver Rolling Contract
Silver traded lower to my 16.65 buy level before bouncing back above 16.80. As I wanted to bank some points for yesterday’s trading session I covered this position at my revised 16.77 T/P level and I am now flat. I am still bullish of Silver believing that it is only a matter of time before we break and close over the key 17.00/17.20 resistance level. Today I will again look to buy the market on any dip lower to 16.30/16.70 with a 15.95 stop. If I am taken long I will have a T/P level at 16.98.
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