US and European Equity Indices had a solid trading day yesterday with gains in Financial and Technology shares leading the moves higher, with the DAX, FTSE and S&P ending yesterday’s trading session with upside Key Day Reversals. The US Dollar was stronger against most currencies although Sterling was again the outperformer. Meanwhile US Treasury Yields ended the day higher along the curve.
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 170 points yesterday on what is proving to be the most difficult trading month for me in the past 18 months but is still ahead by 975 points for May having made 2175 points in April. The previous two months saw the same gain of 2265 points for both February and March after a record 3365 point gain in January. Since I started this service last June it has made over 25,000 points.
Strong US New Home Sales data and a seemingly growing perception that the economy can cope with a gradual rise in US Interest Rates were seen as the catalyst for the increase in risk appetite. The bullish market mood was also helped by the positive tone from Europe. European markets reacted positively to news that the ‘Brexit’ camp is in disarray along with another poll showing the ‘Remain’ camp comfortably ahead. So although the US Dollar had a solid trading session outperforming 9 of the G10 currencies, Sterling was by far the outperformer, gaining 1% against the US Dollar. Evidence of bounded rationality appears to be emerging among voters with the latest poll showing that older voters, who are more likely to vote and who previously backed leaving the EU, are switching sides to the ‘Remain’ camp. Comments from BoE Governor Carney also helped Sterling noting that if Britons voted to remain in the EU, the next move in the key policy rate would probably be up, while a ‘Leave’ outcome would not automatically bring about an easing.
The Australian Dollar closed near the bottom of the G10 leader board as it traded to a low of 0.7145 yesterday morning before rallying to close at 0.7180 in New York. This rally has continued overnight despite Gold getting hammered with the AUD currently trading at 0.7210.
Although Australian Central Bank Governor Stephens did not make any attempt to jawbone the currency, noting that the currency was ‘doing what you would expect it to do at the moment’ it seems that the FX market treated the Governor’s comments on inflation that it is ‘probably a little bit too low at the moment’ as an opportunity to sell the currency.
Gold closed down 2% with the US Cash Rate repricing expectations weighing on the yellow metal, while Iron ore took a breather after Monday’s near 7% fall.
This morning on the economic front we already had the release of German GIK Consumer Confidence which printed better than expected at 9.8 versus the consensus for a 9.7 outcome. At 9.00 am we have the German IFO Business Climate and Current Assessment/Expectations. This is followed at 1.30 pm by the US Trade Balance and at 2.00 pm by the House Price Index. Finally at 2.45 pm we have the Markit US Services/Composite PMI and the Bank of Canada Rate decision at 3.00 pm.
Later at 7.00 pm the Fed’s Kaplan will speak on the US Economy in Texas.
June S&P 500
The incredible near 10% rally in Apple shares since it was announced that Warren Buffet had bought $1bn of the shares has certainly help to put a floor in the US stock market just when it looked like it was going to fall off a cliff. It is incredible that was has prevailed for almost eight years is the theme that you can only be short these markets for a few hours before the market turns around and trades higher. Unfortunately after the S&P traded higher to my 2059 sell level we did not go back and close the now still ‘Open Gap’ from Tuesday’s close at 2045.50 to yesterday’s Chicago low print at 2056 before stopping me out of this position for a small loss at 2065 and I am still flat. Yesterday was a great example of how important it is to have stop’s in the market because if you did not respect this vital rule you were hit hard in the pocket especially with the S&P trading to a high of 2084 earlier this morning. The S&P has its next resistance from 2092/2097 and then the 2016 high at 2105 so the market still has a lot of work to do first before we can stay we are back in a bullish mode. Today I will again look to sell the S&P on any further move higher to 2089/2094 with a 2098 tight stop. I have to respect the price action from yesterday especially with the S&P having a large upside Key Day Reversal and today I will look to buy the market on any dip lower to 2067/2073 with a 2062 stop.
EUR/USD
The Euro traded lower to my 1.1140 buy level I am still long and I will leave my stopped unchanged at 1.1095 especially as the Euro is now trading at the bottom of both its Daily Bollinger Band and Williams Index. I still do not want to be short the Euro at this time.
June Dollar Index
No change as I am still short in small size at 95.30 with the same tight 95.70 stop.
June DAX
It is incredible to think that when I was writing my commentary 24 hours ago the DAX was trading at 9770 especially when you see the market trading 400 points higher on little or no news as every short position just got slammed. Yesterday’s 300 point rally also produced a huge upside Key Day Reversal. The rally yesterday saw me go short again in small size at 10010 before quickly stopping me out of this position at 10060 and I am now flat. The move higher again this morning emphasises how important it is to have stops in the market. I must say I am very surprised how easily the DAX took out the key 10100 resistance level and a break and close over 10200 will be very constructive. Given the viciousness of yesterday’s move higher I will now move my buy level higher to 10030/10080 with a 9980 stop. Again I only trade the DAX in small size given its volatility.
June FTSE
As mentioned yesterday a break of 6200 in the FTSE will see the market rally hard and this is what we have seen so far this morning with the market hitting a high at 6265 before trying to sell off as I write this commentary. The FTSE also had an upside Key Day Reversal which I have to respect and today I will now look to buy the market on any dip lower to 6185/6215 with a tight 6160 stop.
Dow Rolling Contract
Unfortunately the Dow has just missed my buy levels over the past few trading sessions by a few points before having this dramatic move higher yesterday. Thankfully we had no sell level in the Dow as just like the other Indices all short positions were killed. I am still flat the Dow and today I will now raise my buy level higher to 17580/17640 with a 17530 stop. My only interest in selling the Dow is on a rally higher over the coming days to 17990/18050 with a 18100 stop.
June BUND
This morning the Bund traded lower to my 163.15 buy level shortly after the open. I am still long and I will leave my stop unchanged at 162.80 which is just below its 100 Day Moving Average.
Gold Rolling Contract
Gold which traded lower to my 1229 buy level has stopped me out of this position overnight at 1223 and I am now flat. I am very tempted to buy Gold here especially as the market is trading nearly $90 lower from its recent high plus the fact that Gold is trading below its Daily Bollinger Band and at the bottom of its Williams Index. For these reasons I will again look to buy Gold from 1215/1223 with a 1209 stop.
Silver Rolling Contract
Overnight Silver traded lower to my 16.15 buy level. I am still long and today I will raise my stop on this position to 15.65.
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