Tuesday’s markets have witnessed a partial reversal of some of Monday’s key market movement, with the US Dollar firmer and US stock showing modest gains, albeit pared into the close (S&P finishing +0.2% higher having been more like +0.5% an hour beforehand). The VIX is back below 16 having had a look up at the 20 level at its highest on Monday.
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For anyone following my Platinum Service it made 50 points yesterday and is now ahead by 706 points for June, having made 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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The energy sector has led the US stock market higher thanks to a decent move up in oil prices (Brent +$1.68 and WTI crude +$2.47). This is on intensifying supply concerns amid still robust global demand, the proximate cause of the latest run up being demand made by the U.S. that Japan stop importing oil from Iran and a related US threat to apply ‘’zero tolerance’’ to those who flout US demands. The deadline for the re-imposition of sanctions on Iran by the U.S. is not until November but is seems some countries who currently rely on Iranian imports and who are fearful of retaliatory actions from the U.S. should they continue to do so, are acting pre-emptively. Indeed, according to one oil industry report I have seen this morning, Iranian production in June has fallen to around 2.2 million barrels per day from 2.7 million barrels in May.
Alongside reduced Iranian output and hence exports, supply problems in Nigeria and Libya continue to be noted, alongside which a power failure is reportedly impacting on the export of Alberta oil sands in Canada. And as for last weekend’s OPEC/Russia agreement to increase supply by a notional one million barrels a day, this could in practise be as little as 270,000 barrels a day according to a report from the respected Bank Credit Analyst issued last night.
A slump in global trade would doubtless take care of any excess demand in global oil market, but here the recent news is slightly positive. After Monday’s mini-market meltdown was seen to result from the various source reports that President Trump was going to imminently announce restrictions on Chinese investment in US technology related entities, the latest reports are that Trump is siding with his Treasury Secretary Steve Mnuchin over trade adviser and resident China hawk Pete Navarro, in wanting to use the Committee on Foreign Investment in the United States (CFIUS) to determine whether any (not just Chinese) investments in US firms should be allowed to proceed.
Also on the positive side of the trade tensions ledger has been an invitation extended by Trump for European Commissioner Jean Claude Juncker to visit the White House. This is as Trump insists he is close to a being able to pronounce on a request made to the Commerce Department to determine whether car imports have the potential to threaten national security (and therefore provide the pretext for 20% tariffs – albeit down from 25% mentioned earlier). Let us see if the US can be persuaded to pull back from the brink here, since we shouldn’t underestimate the impact bringing the brewing trade tariff war to the auto sector would have on a large sector of the industrial economy, such is the labyrinthine nature of global auto supply chains.
One other thing to note on trade tariffs is that Canada is reportedly preparing steel quotas and tariffs on China and other countries, designed to prevent a potential flood of steel imports from global producers looking to avoid US tariffs.
The across the board US dollar strength over the past 24 hours (DXY +0.4%) is a reminder that when trade tension rise, USD tends to suffer alongside the AUD. The Aussie has though failed to hold above 0.7400, partly because the USD is up, but also because of the concerns raised this week that China is now allowing its currency to weaken beyond levels consistent with volatility in the USD. Daily USD/CNY fixings have now taken on added significance.
This morning on the Economic Front we have Euro-Zone Money Supply at 9.00 am. This is followed at 11.00 am by UK CBI Trends and US MBA Mortgage Applications at 12.00 pm. Next we have Durable Goods Orders and Wholesale Inventories at 1.30 pm. Finally at 3.00 pm we have Pending Home Sales.
September S&P 500
Unfortunately the S&P just missed my 2713 buy level with a 2714.50 low print before having a nice 20 Handle rally and I am still flat. However the S&P had a small sell-off into the close and this move lower has continued overnight. The 50 Day Moving Average is currently at 2723 which is where the market is currently trading. The 100 Day MA is at 2703 from where we bounced hard on Monday and the key 200 Day MA is well below the market at 2669. Today I will lower my buy level slightly to 2697/2705 with a 2692 stop. The S&P has key resistance from 2740/2748 and today I will be a seller on any rally to this area with a 2755 stop.
EUR/USD
No change as I am still a small buyer on any dip lower to 1.1580/1.1620 with a 1.1545 stop. Again if I am taken long and subsequently stopped out of this position I will still be an aggressive buyer on any further dip lower to 1.1420/1.1470 with the same 1.1375 stop. The Euro has strong resistance from 1.1760/1.1800 and I will still be a seller in this area with a 1.1835 stop.
September Dollar Index
Late yesterday evening the Dollar finally traded higher to my 94.45 sell level. As I wanted to be flat last night I emailed my Platinum Members to exit and short position at my revised 94.33 T/P level and I am still flat. Today I will again look to sell the Dollar on any rally higher to 94.70/95.05 with a 95.40 tight stop. Meanwhile I will leave my buy level unchanged from 93.10/93.50 with a 92.70 stop.
September DAX
My DAX plan worked well with the market trading the whole of yesterday’s buy range for an average long position at 12200. Subsequently the DAX rallied 100 points and I used this rally higher to cover my long position at my revised 12230 T/P level and I am now flat. Damiler Shares have been hit hard over the past two weeks and it was the sell-off in their shares yesterday that led the DAX lower. The DAX is severely oversold after its recent 1000 point sell-off. The DAX has formed a large Head & Shoulders Pattern over the past two years. The neckline comes in at 11600 and a break and close below here for a few days will be extremely bearish. Today the DAX has support at its 100 Week Moving Average which comes in at 12115 and below here we have the 500 Day MA at 12055. Today I will again look to buy the market on any dip lower to 12050/12120 with a 11995 stop. Given how oversold the DAX is trading I do not want to be short the market at this time.
September FTSE
The FTSE is trying to recover from Monday’s 2% sell-off. I am still flat having been stopped out of my long position near the low of the day at 7435 which is frustrating when you see the FTSE rallied 100 points yesterday off that low. Today I will now raise my buy level to 7400/7440 with a 7370 stop. Given the huge discount to the Cash FTSE I still do not want to be short the September Contract at this time.
Dow Rolling Contract
The Dow is really struggling to gain any upside momentum with the market now trading over 200 points lower off yesterday’s rebound high. As I go to press the Dow is trading 100 points below its 200 Day Moving Average which is a worry for the bulls. However as we have seen over the past few months any tests and break of the 200 Day MA have been quickly reversed especially when we have an oversold market like we have today. I am still flat the Dow and I will now lower my buy level to 23900/24050 with a wider 23760 stop. Given how oversold the Dow is trading I do not want to be short the market at this time.
September NASDAQ
I am still flat the market and today I will also lower my buy level in this market to 6940/6990 with a 6895 stop. For me to turn bearish of the NASDAQ I need to see a break and close below 6850. Remember it was only last Wednesday that the NASDAQ made its 5th consecutive all-time high.
September BUND
I am still flat the Bund which just missed my buy level before rallying. Given the insanely low yield I am reluctant to chase this market higher and today I will only raise my buy level to 161.45/161.85 with a 161.15 stop.
Gold Rolling Contract
I am still flat Gold which as mentioned yesterday is overdue a strong rally especially when you consider that the Managed Money Accounts for Gold Futures is at its lowest level since January 18, 2016 with a net-long 23,514 Contracts. However everyone I talk to is long Gold and we may have one more washout before we finally put in a tradeable bottom. Gold has strong support at 1236 and today I will now lower my buy level slightly to 1240/1249 with a 1232 stop.
Silver Rolling Contract
Yesterday after I posted Silver traded lower to my 16.20 buy level before having a small rally. As I wanted to bank some points for yesterday’s session I emailed my Platinum Members to exit any long position at 16.28 and I am now flat. On the positive side for Silver the market is so far holding its May low at 16.05 while of course Gold broke its equivalent low at 1281. This is positive divergence in an extremely oversold market. Today I will again look to buy Silver on any dip lower to 15.80/16.10 with a 15.45 stop.
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