Yesterday’s trading session was one of more UK political uncertainty with still no government formed (and with the Queen’s speech to Parliament today that is going to be voted on), a dovish Mark Carney (hot on the heels of last week’s surprise three votes on the MPC to hike), overlaid with further pressure on the oil price that’s now down 20% so far this year. WTI now has a 43 handle having tested below 43 yesterday afternoon. With oil lower (as have base metals; iron ore rose 0.3%), both the Australian and Canadian Dollar have been on the back foot as has Sterling, with the three currencies closing 0.30% lower. The Kiwi has also lost a little ground, notwithstanding that the overnight Global Dairy Auction saw world dairy prices almost unchanged, down 0.8%.
To mark my 1350th 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. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my New Platinum Service it made 76 points yesterday and is now ahead by 612 points for June, having made 1071 points in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
In the upshot, almost out of default, the USD is higher in a night of virtually no key data, but not getting any clear support from a mixed set of Fed speak, Charles Evans (voter) sounding dovish and Kaplan too. Evans said that while he still expected to see inflationary pressures, he acknowledged that he was getting very nervous in the light of a multi-month run of low inflation readings. Even aside from the deflationary impact of oil prices, he said that big corporate deals (Amazon/Whole Foods) could exert downward pressure on inflation. Toward the other end of the policy spectrum, Eric Rosengren (nonvoter) spoke of his financial stability/search for yield dangers of low rates. Robert Kaplan (voter), spoke again this week, saying that he wants more evidence that recently low inflation are temporary before pushing on with more monetary tightening.
These more mixed comments from Evans and Kaplan who voted for a hike last week come after an almost hawkish sounding Fed Chair at her press conference last week and similar comments from the NY’s Bill Dudley earlier this week. Stanley Fischer, Deputy Chair at the Fed, and who is extremely influential, spoke last night but shied away from any comments on the US economy or monetary policy. Instead he spoke on the role of housing and related policy in financial crises at a macro prudential policy event at the Dutch central bank.
The decline in oil and continuing uncertainty on Fed policy has seen Bond Yields lower across the board and along the curve. The US OIS market is pricing in barely a 50% chance of a hike by Christmas and not even one is fully priced by the middle of next year.
Bank of England Governor Mark Carney gave a speech at the Mansion House and laid his cards on the table as far as his worrisome outlook for the economy is concerned. While there were three MPC voters at last week’s BoE meeting, he signalled he is in no hurry to raise rates, highlighting the weaknesses in the economy as Brexit negotiations get underway, also worrying also about the sustainability of the UK’s Current Account deficits. UK interest rate markets quickly unwound a lot of the more post-BoE aggressive near term rate expectations, the market now pricing in a 47% chance of a hike by the end of the year, down from a 77% chance before he spoke. Added into the mix, S&P Chief Ratings Office Moritz Kraemer said that they would not have to wait till Brexit negotiations are concluded should they wish to revise the UK’s rating (currently AA).
US Treasury Secretary Steve Mnuchin did an interview on CNBC, spoke of their continuing work to progress with the tax reform agenda to free capital and lift growth from 2 to their aspirational 3%, that they are working on it every week, and that they hope to get it done this year.
This morning on the Economic Front we have UK Public Sector Net Borrowing at 9.30 am. Yet again we have no data of note due from the Euro-Zone. At 11.30 am the Queen is due to address Parliament before a Government is voted on. Earlier this morning the Deputy PM Green said that talks were still ongoing with the DUP who naturally are looking for the best deal possible. Finally we have US Existing Home Sales at 3.00 pm.
September S&P 500
As you know at this stage all ‘’Open Gap’s in the S&P get filled with the market eventually selling off late to close almost all of the 2433/2439 gap left from Monday’s higher trading session. Yesterday my S&P plan worked well as after the market traded lower to my 2442 buy level I emailed my Platinum Members to cover this position at 2445 and to re-buy the market at 2436. After my second buy level was filled I again emailed them to cover this position at 2438 as I wanted to be flat overnight. With both the DAX and FTSE having significant Key Day Downside Reversals yesterday this could get ugly quickly. The key level to watch for the S&P is 2418 as a weekly close on Friday below this level with be a Key Week Reversal. Today I will now lower my sell level in the S&P to 2445/2451 with a 2456 stop. My only interest in buying the market is on a dip lower to 2416/2422 with a 2411 stop.
EUR/USD
Finally we are seeing some Dollar strength as indicated by the Daily Sentiment Index. As I mentioned yesterday the first sign of the Equity markets getting into trouble will see an acceleration of the Dollar and yesterday’s move lower for the stock market could be the start of this process. I am still flat the Euro and today I will leave my buy level unchanged from 1.1055/1.1085 with the same 1.1025 tight stop. The Euro needs to break and close over 1.1300 for a new buy signal. This market has traded in an extremely narrow range for most of the past five weeks and today I will now lower my sell level slightly to 1.1190/1.1225 with a 1.1255 stop.
September Dollar Index
Frustratingly the Dollar just missed my 97.10 buy level before spending the rest of yesterday’s trading session trading sideways/higher and I am still flat. Today I will now raise my buy level to 96.90/97.20 with a 96.60 stop.
September DAX
Incredibly on a day when the Euro traded lower the DAX has a Downside Key Day Reversal from new all-time highs made shortly after the market opened yesterday morning. As I was already long both the S&P and FTSE I waited to buy the DAX which I did at 12790 (low was 12775) before the market rallied back above 12820 into the 9.00 pm close on EUREX. Given the fact that we had this KDR I emailed my Platinum Members to exit any long position at 12802 or higher and I am still flat. This morning the DAX is getting hit again with the market trading at 12740 as I write this commentary. The next big support comes in at 12600/12660 and today I will be a buyer here with a 12565 tight stop. Despite yesterday’s huge KDR I am not going to chase the market lower from here.
September FTSE
Given the weakness in Sterling it was surprising to see the FTSE get hit so hard yesterday. Thankfully I had not raised my buy range from Monday and after the market traded the whole of my 7390/7420 buy range which put me long at an average rate of 7405, I emailed my Platinum Members to exit this position which I did at my revised 7419 T/P level and I am now flat. With the current discount to the Cash FTSE it is difficult to sell the FTSE at this time. We have strong support at 7340 and last week’s low print of 7316. As a result I will now look to buy the market on any dip lower to 7310/7345 with a 7275 stop.
Dow Rolling Contract
First of all I apologise for getting you out of any short position yesterday morning on what turned out to be the perfect level in hindsight to be short. However as we have seen over the past six months trying to pick a top in this market is extremely difficult and results in your capital getting depleted. Yesterday the US Stock market produced its fourth Hindenburg Omen in the past six weeks which is telling us the stock market is fragile and can accelerate to the downside at any time. The internal market has been very weak for most of the 20% rally that has occurred since Trump got elected with the McClellan Oscillator again closing in negative territory with a -44 print last night. Today the Dow has strong support from 21290/21350 and I will be a buyer in this area with a 21240 tight stop. I do not think this market will roll-over quickly and I will only lower my sell level slightly to 21520/21580 with a 21630 stop.
September BUND
The sell-off in the Equity Markets this morning sees the BUND trading higher. I am still flat and today I will now raise my sell level to 165.55/165.85 with a 166.15 stop which is just above the April high at 165.93.
Gold Rolling Contract
Unfortunately Gold just missed my 1239 buy level and I am still flat. I am surprised that Gold is not trading a lot higher given the back drop and I will leave my buy level unchanged from 1233/1240 with the same 1226 tight stop.
Silver Rolling Contract
No change as I am still long Silver at an average rate of 16.68 with the same 16.25 stop and 16.85 T/P level on this position. If I am stopped out of any long position I will be an aggressive buyer on any further dip lower to 15.80/16.10 with a 15.45 stop.
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