The US Equity market had its worst trading day in nearly five months with both the Dow and S&P registering substantial Downside Key Day Reversals yesterday by closing down 1.14% and 1.25% respectively. Stocks closed lower and while it hasn’t been any key economy reports nor especially enlightening Fed news, it’s perhaps the lack of news out of Washington that’s seeing some risk money come out of the market again. Some further unwinding of the Trump reflation trade is afoot. Health care legislation looks gridlocked in Congress, delaying news on tax plans, infrastructure, and deregulation. The VIX is still low in absolute terms at 12.34, but up 1.1 index points in the session. Meanwhile in Europe the DAX also got hit and it too had a Downside Key Day Reversal while this morning this sell-off hit Asia with the Nikkei closing down over 400 points or 2%. Iron ore was down a meatier $US3.90 to $87.59/t, coal prices steadier, if down smalls. LME copper was down 1.77%, while gold was up $11.60 to $1245.50/oz.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 5 points yesterday but is still ahead by 726 points for March having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Yesterday was a trading session where a further push down in oil prices seems to have taken its toll together with lower US bank stocks, the KBW bank index down 3.94%. WTI is down another $US0.88/bbl to $47.34, not on news but the knowledge that US rig count numbers have continued rising, as has production, up to 6.1mbpd by last week, up from 8.5mbpd in May last year. That’s added a continued bid tone to US Treasuries, with the curve down around 3bps through varying tenors. The big mover was the US 5y forward inflation swap that’s rallied 14bps for the session, now testing among postTrump lows.
While the AUD has lost 0.52% for the session, after having out-performed the previous day, the NZD has fared better, AUD/NZD somewhat lower this morning. The overnight Global Dairy Auction saw prices actually up 1.7%, against expectation of a fall of that quantum or somewhat larger. Also announced this morning, Fonterra’s half-year results have reaffirmed their expectations for a $NZ6 milk price with the Kiwi little changed as a result.
UK data surprised on the stronger side, and this time it was the February CPI report along with a better than expected CBI Trends industry report for February. CPI inflation pushed up through the BoE’s target of 2% from 1.8% in January to 2.3% (the market was expecting 2.1%) with core CPI up from 1.6% to 2.0% (again stronger, much stronger, than the steady expectation). Sterling was already rallying into the report, which gave it a further lift, the GBP/USD up from 1.2340 on Monday afternoon, trading this morning a lot higher at 1.2490. The CBI Trends survey for March came in at +8 (market +5).
The Euro also seems to have benefited somewhat by a strong showing from Macron in Monday’s French televised Presidential aspirant debate with the market now approaching key resistance at 1.0850.
Ahead of their Budget this afternoon, Canadian retail sales bounced back with a vengeance, up 2.1% in January after December’s -0.4 disappointment. While more auto sales was certainly a contributing factor, ex-auto sales were still up a strong 1.7% after December’s 0.5% dip. The strength in this report did support the loonie midsession, but weakness in oil prices has kept USD/CAD bid.
This morning on the economic front we have the ECB Current Account at 9.00 am and this is followed at 11.00 am by US MBA Mortgage Applications. Finally we have the FHFA House Price Index and Existing Home Sales at 1.00 pm and 2.00 pm respectively.
June S&P 500
Initially my S&P plan did not work as after the market dipped to my average buy level at 2368 I was very quickly stopped out of this trade at 2360. Over the past few weeks I have deliberately kept my ”stops” tight as this market was overbought and due a correction but I have to confess I did not see the magnitude of yesterday’s sell-off coming especially as we had no major news out. However I did say to be an aggressive buyer on any further dip lower to 2345/2351 and after the S&P traded below 2344, this put me long at an average rate of 2348. Subsequently the market rallied quickly to a 2356 high and given that I had a large position I emailed my Platinum Members to exit this position at 2355.50 and I am now flat. The fact that the S&P had this significant Downside Key Day Reversal is worrying for the bulls and this signal will remain valid until we break and close over yesterday’s high at 2379. Against this the S&P is now trading at the bottom of its Daily Bollinger Band and Williams Index but the McClellan Oscillator only closed with a -112 print so there is plenty of room for the S&P to fall further before we get a sustainable low. The S&P has very strong support from 2297/2305 and I will be a very aggressive buyer on any initial test of this area over the coming days. Today I will look to sell the S&P on any rally higher to 2350/2357 with a 2362 stop. I will also be a buyer on any further dip lower to 2317/2323 with a 2312 stop. Although yesterday was a tough trading session the change in direction for the US and European stock markets opens up the possibility of more volatility and two way trading which has been largely absent since Trump’s election victory last November.
EUR/USD
The Euro traded in a very narrow range yesterday and I am still flat. Short term the Euro is overbought and today I will still look to sell the market on any rally higher to 1.0850/1.0890 with the same 1.0920 stop. I will also leave my buy level unchanged at 1.0700/1.0735 with the same 1.0670 tight stop.
June Dollar Index
While the Euro traded in a narrow range the Dollar continued to sell-off with the market now approaching key support at 99.05 which is the low from early February following January’s Downside Key Month Reversal. Given how oversold the Dollar is trading I will be a small buyer on any further dip lower to 98.80/99.15 with a 98.50 stop. I do not want to be short the Dollar at this time.
June DAX
As mentioned in my economic commentary above the DAX also registered a significant Downside Key Day Reversal yesterday after trading in a narrow range for most of 2017. There is no doubt that the strength of the Euro is finally weighing on the DAX and it will take a lot of work for the DAX to repair yesterday’s loss and try to break the key resistance from 12100/12200. Yesterday after the DASX hit my 11985 buy level I emailed my Platinum Members to exit this position for a small gain at 12000 especially as I had too many open positions on board at the same time. Most Members would have no more than two equity positions on board at the same time especially if they are in the same direction. This morning the DAX has strong support from 11740/11800 and today I will be a buyer in this area with a 11690 stop. Given the volatility I do not want to be short the DAX at this time.
June FTSE
My FTSE plan did not work out yesterday as after the market hit my 7305 buy level I was stopped out of this position overnight at 7270 and I am now flat. With the June contract trading at such a huge discount to the cash FTSE it is very hard to be short the market. The Cash FTSE has very strong support from 7235/7265 which means I will again look to buy the June FTSE on any further dip lower to 7160/7195 with a 7130 stop.
Dow Rolling Contract
The beauty of my Platinum Service is that if we get off to a bad start I will email my members with new ideas and this is exactly what happened yesterday as we ended up trading the Dow on three occasions after I was stopped out of my initial 20800 long position at 20745. Subsequently I bought the Dow again at 20680 before the market rallied 60 points and I used this rally to exit my long position at 20703. Finally the Dow hit my third buy level overnight at 20620 and as I wanted to get everyone on the same page I cut this position earlier this morning at 20645 and I am now flat. With the Dow having a Downside Key Day Reversal the market will remain bearish as long as we stay below yesterday’s high at 20980 and if the Dow rallies back to near this area over the coming days I will look to put on a short position. However just like the S&P above the Dow is also oversold, trading at the bottom of its Daily Bollinger Band and Williams Index. The Dow also has very strong support from 20510/20570 and today I will be a buyer in this area with a 20460 stop.
June BUND
My Bund plan worked well with the market trading lower to my 159.15 buy level shortly after I posted before rallying strongly on the equity market sell-off. Unfortunately as I did not anticipate this equity move lower I covered my long Bund position too early at 159.34 and I am now flat. Today I will look to buy the Bund on any dip lower to 159.35/159.75 with a 159.05 stop. As mentioned yesterday the extreme negative sentiment towards the US Bond market opens up the possibility of a large move higher. With the US stock market selling off we saw that start of this rally late yesterday.
Gold Rolling Contract
This morning Gold is testing the key 1250/1265 resistance area. I am still flat Gold and given the significance of this resistance area I will be a small seller on any further rally to 1261/1268 with a 1274 tight stop.
Silver Rolling Contract
Silver finally followed Gold higher yesterday with the market hitting my revised 17.56 T/P level on my 17.48 latest long position and I am now flat. Today I will again look to buy Silver on any dip lower to 17.10/17.40 with a 16.80 stop.
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