After the S&P 500 had, as of Tuesday, recovered all of the losses suffered during the first half of February – a rally of some 7.5% – risk markets have turned turtle in the past 24 hours despite some reassuring words on Monetary Policy from both the Fed and the Bank of England. The US markets lost an average of 1.25% with US Treasury Yields slightly lower across the curve. In Currencies, the ‘safe haven’ Yen and Swiss Franc top the G10 leader board, while Sterling again sits firmly at the bottom as ‘Brexit’ concerns continue to dominate sentiment. Not too far behind sit the commodity currency triumvirate that is the AUD,NZD and CAD, all of which have suffered on the sight of a 5% drop in oil prices as earlier optimism about OPEC production freezes has all but evaporated.
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 existing and new members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 130 points yesterday and is now ahead by 1945 points for February having made 3365 points in January. Since I started this service last June it has made over 20,000 points.
One other notable feature of the currency landscape is that the Euro is no longer providing to be a beneficiary of safe haven flows/unwinding of EUR – funded ‘carry trades’, with the prospect of a UK ‘Brexit’ seen to be an almost equally bad news story for the EU. A relatively poor German IFO Survey also did not help the Euro’s cause, with the Business Climate reading down to 105.7 from 107.3 and 106.8 expected., while the Expectations portion dropped to 98.8 from 102.3 and 101.6 expected.
The first opinion polls since the referendum was called for June 23rd and after London Mayor Borris Johnson declared for the ‘leave’ side are keenly awaited and should arrive by the weekend. Sterling will either snap back quite sharply, or suffer another lurch lower, depending on what they reveal.
Behind the renewed drop in oil prices are comments from Saudi Oil Minister Ali Al – Naimi – in Houston attending the big energy conference as mentioned in yesterday’s Daily Commentary – that the country would not cut oil production as other countries would be likely to assist in restraining output, albeit he mentioned the proposed ‘freeze’ at current production levels is the ‘beginning of the process’. Earlier, Iran’s Oil Minister said it was ‘ridiculous’ for Saudi Arabia to propose a a production freeze when that country had already increased output. With the exception of tin and iron ore, industrial metals are all weaker by at least 1%.
Significant Fed speak yesterday came form the recently installed Dallas Fed President Robert Kaplan, who told the Financial Times that ‘in order to reach our inflation objective we may need to be more patient than we previously might have thought’, he said ‘if that means we take an extended period of time where we stop and don’t move, that may also be necessary. Meanwhile overnight Fed Vice Chair Stanley Fischer was speaking in Houston where he said that inflation would have hit their 2% target if were not for the rise in the US Dollar and the fall in oil prices. Not helping matters was the release of the February Conference Board Consumer Confidence which came in at a very weak 92.2 from 97.8 and well below the expected 97.2 print.
Bank of England Governor Mark Carney, together with new MPC recruit Jan Vlieghe, testified to a Treasury Select Committee yesterday and implied the Bank had plenty of ammunition left in its arsenal should the UK economic outlook worsen. ‘We could cut interest rates towards zero. We could engage in additional asset purchases, including a variety of assets’, Mr Carney said, while also saying that negative interest rates were not under consideration.
Overnight the Nikkei closed down 1% and is now back below 16,000 while on the economic front we already had the release of French Consumer Confidence which came in very weak at 95 versus 97 expected and is not helping European Stock Markets which are all opening lower.
The UK will report its latest RBA Loans for House Purchase and the CBI Reported Sales at 9.30 am and 11.00 am respectively. At 2.45 pm we have US Markit Services/Composite PMI. Finally at 3.00 pm we have New Home Sales.
March S&P 500
All ‘Open Gap’s get filled in the S&P with the large 1914/1936 Gap from Monday’s low to last Friday’s Chicago close finally getting filled yesterday. This move lower has seen me buy the S&P at 1915. Given the price action in the other markets I have just cut this position here for a breakeven and I am now flat. I will now look to buy the S&P on any dip lower to 1901/1907 with a 1896 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 1891 with a 1885 stop. Remember we still have two massive ‘Open Gap’s from the start of 2016 above the market at 1994/2010 and 2012/2035 which will get filled at some stage. My only interest in selling the S&P is still on a rally higher to 1942/1950 with a 1955 stop.
EUR/USD
Unfortunately soon after I posted I was stopped out of my long 1.1040 position at 1.0995 as the IFO data came in weaker than expected. I am still flat and with the G20 Summit starting on Friday I still do not want to be short the Euro at this time. There is no doubt the US is concerned about the stronger Dollar as shown by Fischer’s comments overnight. Today I will again look to buy the Euro on any dip lower to 1.0930/1.0960 with a 1.0895 stop.
March Dollar Index
My Dollar plan worked well as the Dollar traded higher to my 97.60 sell level before having a nice sell-off which enabled me to cover this position at my 97.30 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 97.90/98.30 with a 98.60 stop.
March DAX
As I got hit at the same time on a lot of my positions at the same time I emailed all my Platinum Member that I was exiting my recently long 9420 DAX position at 9440 and I am still flat. As I have mentioned over the past few days the 9200/9300 area is key support for the DAX and a break and close back below this level will be bearish. Today I will look to buy the DAX on any further sell-off to 9200/9250 with a 9165 stop. Despite the negative price action I do not want to be short the market at this time.
March FTSE
My long 5955 FTSE position worked well as just after I posted the FTSE was trading at my 5995 T/P level. Subsequently I emailed my Platinum Members that I was buying the FTSE again at 5940. I am still long with the same 5895 stop.
Dow Rolling Contract
The Dow traded lower to my average 16395 buy level and after a nice rally shortly after the European markets opened this morning I cut this position at my 16450 T/P level as I was already long both the S&P and the FTSE and I am now flat. Today I will again look to buy the Dow on any dip lower to 16270/16340 with a 16220 stop. The move lower since the 16664 high print on late Monday and shows what a fantastic trading signal both the Daily Bollinger Band and Williams Index are as the Dow was trading at the top of both these on Monday when I went short the market.
March BUND
My BUND plan worked well yesterday with the BUND trading lower to my 164.85 buy level with a 164.75 low print before having a huge 100 point rally off this low. This rally enabled me to cover my position too early at my 165.15 T/P level and I am now flat. Today I will look to sell the BUND on any rally higher to 166.10/166.40 with a 166.70 stop. I do not want to be long the BUND at this time.
Gold Rolling Contract
No change as I still do not have a decent edge in Gold at this time and my only interest in buying the market is still on a dip lower to 1187/1195 with the same 1179 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 14.70/15.00 with the same 14.45 stop.
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