US equity markets closed 1% lower yesterday while the US Treasury Curve flattened to its lowest level since 2007 after solid US economic data and hawkish Fed talk which increased the market’s expectations of more US Interest Rate hikes. The US headline CPI reading rose to 0.4% versus 0.3% expected while Core CPI came in with a 0.2% print which was in line with consensus. On an annual basis, core CPI dipped to 2.1% from 2.2% in March and this would suggest there is downside risk to the core PCE deflator which is the Fed’s preferred inflation measure and is due for release on May 31.
To mark my 1075th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 30 points yesterday but is still ahead by 694 points for May having made 2175 points in April. The previous two months saw the same gain of 2265 points in both February and March after a record 3365 point gain in January. Since I started this service last June it has made over 24,500 points.
US April Industrial Production rose 0.7%, well above the 0.3% expected and notably Manufacturing Output rose 0.3%, reversing the decline seen in March. Meanwhile US Housing Starts jumped by 6.6% coming in at 1172K versus the 1125K expected, but Housing Permits were weaker printing at 1116K just below the 1135K expected.
Reaction to the data helped short dated US Treasury Yields drift higher, but later in the trading session comments from two Fed speakers spooked the equity market and boosted the move higher in Yields in the front end of the US Treasury curve. The Fed’s Lockhart and Williams said two to three rate increases this year may be warranted while Dallas Fed President Kaplan said a hike may come soon.
Yesterday’s trading session for the US Dollar was a story of two half’s. In the early session the US Dollar was on the back foot against most G10 currencies with US economic data only providing mild support. Later in the session, however, hawkish comments from the Fed speakers mentioned above boosted the US Dollar and the Dollar strength has continued overnight with the EUR/USD back below 1.13 at 1.1275.
The AUD was the strongest G10 performer yesterday on the back of the RBA Minutes which revealed no evident easing bias. However the stronger Dollar sees the AUD trading back below 0.7280 this morning. Sterling is also very strong boosted by the latest ‘Brexit’ Polls showing a majority for the ‘remain’ vote while both the CAD and NOK are lower even though oil prices again closed higher.
This morning on the economic front we have UK Unemployment and the very important Average Earnings at 9.30 am. This is followed at 10.00 am by Euro-Zone CPI. Finally at 7.00 pm we have the latest Minutes from the last FOMC Meeting on April 26/27.
June S&P 500
There is no doubt when markets are trying to put in what I think could be a top of some significance the two way volatility can be cruel and can be very difficult to trade as we have experienced over the past two trading sessions. There is no doubt that everyone is scared and just when it looks like we are going to break a decent support the Central Banks will engineer another rally before the next sell-off and this sequence continues until eventually the weight of traders exiting their long positions becomes so big that we eventually have this acceleration lower. The tipping point for me is 2030 as a break and close below here will certainly see the start of a move lower to the 200 Day Moving Average at 2010 and if we break and close below this key support then I think we will see the 1970/1980 area very quickly. Yesterday I was very unlucky as soon after the S&P traded lower to my 2055.50 average buy level I emailed my Platinum Members to exit this position at 2061 but unfortunately the market only made a 2060.75 high print before falling over 22 handles which saw me stopped out of this trade for a small loss at 2049 and I am now flat. Given the significance of the 2030 support level I will again tray to buy the market on any dip lower to 2028/2033 with a 2024 tight stop. If I am taken long and either I can make a profit or I am stopped out of this trade I will be a very aggressive buyer on any further dip lower to 2009/2014 with a 2003 stop. My only interest in selling the S&P today is on a rally higher to 2051/2056 with a 2062 stop which is just yesterday afternoon’s rebound high print before we saw the market accelerate lower.
EUR/USD
The Euro is trying to break key support at 1.1250 as the Dollar regains its composure after the comments from the three Fed Members in yesterday’s trading session. This move lower has seen the Euro trade lower to my 1.1270 buy level. I am still long and I will leave my stop on this position unchanged at 1.1225.
June Dollar Index
As I am already long the Euro I will now raise my sell level in the Dollar to 95.20/95.50 with a 95.80 stop.
June DAX
Unfortunately comments from the Bundesbank about the slowing German economy hit just as I posted yesterday morning which saw a huge 250 point sell-off in the DAX. Soon after I posted the DAX hit my 9940 buy level before stopping me out of this trade just after lunch at 9875 and I am now flat. So far this morning the DAX is bouncing off the key 9800 support level and just like the S&P above to me it is only a matter of time before we take out this level. Today I will use any further rally higher to 9940/9990 to go short in small size with a 10040 stop. I do not want to be long the DAX at this time.
June FTSE
My FTSE plan worked well as shortly after the market traded lower to my 6120 buy level we had a nice rally back above 6150 which enabled me to cover this position at my revised 6145 T/P level and I am now flat. Today I will again try to buy the market on any further dip lower to 6040/6070 with a 5995 stop. My only interest in selling the FTSE is still on a rally back to 6200 with a 6240 stop.
Dow Rolling Contract
Wow what a move in the Dow yesterday which just reversed all of Monday’s rally despite Apple shares staying basically unchanged after its own 3.5% rally on the Buffet news the previous day. Yesterday’s Dow plan worked well as after the Dow traded lower to my 17620 buy level the market twice had a nice rally over 17680 which enabled me to cover this position at my T.P level at 17670 as outlined earlier to my Platinum Members and I am now flat. The next support level for the Dow is at 17400 and today I will be a small buyer on any dip lower to 17370/17430 with a 17320 stop. Despite the negative price action I do not want to sell the Dow here preferring to sell the S&P on any rally as outlined above.
June BUND
The Bund fell short of my buy range after I posted yesterday morning before having a nice rally again above 164. I am still flat and today I will leave my buy level unchanged at 163.00/163.30 with a 162.75 tight stop as I do not want to chase the market higher from here.
Gold Rolling Contract
I am still flat Gold and as I am back long Silver again this morning I will now lower my Gold buy level to 1251/1258 with a 1245 stop.
Silver Rolling Contract
My long 17.10 Silver position worked well yesterday as Silver had a nice rally after the US markets opened which enabled me to cover this position at my 17.35 T/P level. This morning Silver is selling off on the back of the stronger Dollar and I have again bought the market here at 17.00 with the same 16.60 stop.
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