Whether it is near to end-Quarter rebalancing or just some short-term perceived value after the knee-jerk post-Brexit sell-off, risk appetite had something of a positive trading session which has continued overnight and early this morning with equities and top-tier Bond Yields higher. The Eurostoxx 600 Index rose 2.57%, the FTSE by 2.64% and the S&P 500 BY 1.78%. Oil and base metals rose, while Gold eased. As for currencies, Sterling and the Euro had a more stable-to-sideways session after more jitters given the the still wide open expanse of uncertainty that lies ahead after last Thursday’s Referendum.
To mark my 1100th 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 made 110 points yesterday and is now ahead by 2470 points for June. The previous three months saw gains of 1532, 2175 and 2265 points respectively. Since I started this service over 12 months ago it has averaged a monthly gain of over 2200 points.
The ascent of the US Dollar and the Japanese Yen has been cut short with the Bloomberg Spot DXY Index moving sideways and trading within its range established earlier in the week, but still 2% higher than its pre-Brexit levels. Treasury Yields rose yesterday while the German Bund and UK Gilt also closed higher by 0.4bps and 2.6bps respectively. Meanwhile peripheral European Bond Yields actually lurched lower, a sign perhaps of further economic uncertainty for the wider Euro-Zone.
Also, potentially dampening the mood, very late in the US session, there were two explosions at Istanbul’s main airport, reportedly with 36 killed and 140 injured.
Meanwhile, UK Prime Minister David Cameron fronted to the EU leaders Summit in Brussels having only renegotiated four months ago what he thought was a better deal that would set up the UK’s relationship nicely for the period ahead, but now with the unexpected shock results of the Referendum in his back pocket. From the reports there was an understandable mix of emotions, some leaders pressuring the UK to ‘get on with it’ and get the ball rolling. And to add a little more to the sombre atmosphere, ECB President Dragi reportedly told the leaders that the Euro-Zone’s growth would be lower by a cumulative 0.5%.
But of course, the UK will not invoke Article 50 before a new head of the Conservative Party is installed in early September. Thus there will be at least another two months on this timetable before the UK takes the next step before negotiations start with the EU. There are still so many uncertainties with the political leadership vacuum within the UK itself and not just the UK’s relationship with Europe. The uncertainty window remains wide open.
Data released yesterday was likely to have only at most only a passing effect on market pricing at the most. US Q1 GDP was revised up a little to 1.1% from 0.8% while the Consumer Conference Survey for June was more upbeat coming in at 98 from 92.4 last month with the jobs plentiful index little changed.
Today we have no economic data of note on either side of the Atlantic leaving the stock market to focus on Quarter End rebalancing.
September S&P 500
My long 2001 S&P position worked well yesterday but given all the uncertainties prevailing at this time I cut this position way too early at 2008.50 and I am now flat. As expected the S&P closed Monday’s ‘Open Gap’ at 2018 before having a nice sell-off to 2006. Subsequently the market traded sideways until the last hour before exploding to the upside proving yet again my theory of how difficult it is to be short this market for any period of time. I have no doubt the Fed are trying to engineer a rally that gets the S&P back above 2040 to prevent having a key month reversal following last week’s major key week reversal. This rally has continued overnight and this morning and with the market hitting my sell range at 2028/2038. The S&P has very strong resistance from 2034/2039 and I have now gone short in small size at an average rate of 2034. Given the fact that we are having a good month I will leave my stop unchanged at 2045. If I am stopped out of this trade I will be a more aggressive seller on any rally higher to 2052/2058 with a 2064 stop. I do not want to be long the S&P at this time.
EUR/USD
No change as I am still flat the Euro and will still use any rally to 1.1160/1.1190 to go short with a 1.1220 stop. As mentioned in yesterday’s commentary I will be a very aggressive buyer on any dip lower to 1.0800/1.0850 with the same 1.0750 stop.
September Dollar Index
I will now lower my sell level to 96.50/96.90 with a 97.30 stop.
September DAX
I am still flat the DAX which continues as expected to underperform the FTSE and I expect this theme to continue for the foreseeable future. The DAX has very strong resistance from 9610/9660 and I will be a very small seller in this area with a 9700 stop. I still do not want to be long the DAX at this time.
September FTSE
As mentioned in my interview with IG last Monday I expect the UK to outperform all the other major Indices as the 10% weakening of Sterling now gives the UK a more competitive advantage. It will take time but I certainly would not look to short the FTSE under any circumstances at this time. Despite the huge sell-off in bank shares the FTSE is holding together very well. The GBP/USD chart is very interesting following the huge 18 cent cell-off from 1.50 to the 1.3150 low on Monday. There is a 15 year trendline from 1.3300/1.3350 and if Cable can hold this level by the end of the week it could set up a nice rally higher. Personally I have bought some Cable yesterday at 1.3340 and I will leave a 1.3240 stop on this position. Meanwhile I will use any dip lower in the FTSE to 6080/6130 to buy the market with a 6040 stop.
Dow Rolling Contract
Having got stopped out of my long Dow position on Monday at 17150 it is frustrating to see the market trading over 300 points higher this morning. However at least we are not short preferring instead to sell the S&P rather than the Dow. Today I will move my buy level slightly higher to 17250/17320 with a 17190 stop.
September BUND
My short 166.65 Bund position worked well yesterday with the market having a nice dip to 166.26 which enabled me to cover this position at my 166.30 T/P level as outlined to my Platinum Members. In the same email I told them to go short on any rally back above 166.80 and I have now gone short again at 166.85 with a 167.20 stop.
Gold Rolling Contract
No change as I am still flat looking to buy Gold on any dip lower to 1290/1297 with a 1283 stop.
Silver Rolling Contract
The open interest in Silver is at an all-time high which is preventing me from raising my buy level at this time despite the market making a new high for the year. So today I will leave my buy level unchanged at 16.90/17.50 with a 16.45 stop and take another look tomorrow.
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