Getting toward the end of the month and the end of the Quarter, and given the torpor of risk assets markets of late, the return of some buying could easily have occurred. And that could well be part of the explanation for yesterday’s moves. Stocks were higher in Europe and in the US, as they were for much of Asia yesterday. In FX markets, the US Dollar has steadied, the Bloomberg DXY Spot Index up 0.47%, the Euro, Sterling, Swiss Franc, and the Japanese Yen were all lower. Hard commodities rose (base metals and oil), gold eased, US Treasury yields were higher for the day, with the AUD more than holding its ground at 0.7633 this morning, if off its overnight highs. But there’s no doubt that a super-charged report on the state of US Consumer Confidence certainly had a material lifting effect on risk markets.
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 made 63 points yesterday and is now ahead by 1152 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.
Both the main measures of Consumer Confidence had already lifted since the US elections, but the yesterday’s Conference Board measure shot the lights out, the index up from 116.1 to 125.6. Consumer Confidence was the highest since 2000, with the Jobs Plentiful Index also at the best level since 2001. The monthly rise in the Jobs Plentiful Index was the most since April 1974.
While this report is “soft” data as opposed to hard data reports (e.g. consumer spending and payrolls), it’s undoubtedly a strong reading on consumer spirits. They may well have been bolstered by hopes for tax cuts and other promised/expected changes, but also as well as what consumers are seeing in the job market. US S&P/CoreLogic house prices also continued rising in February. The 20 cities index was up 5.73% y/y after 5.47% to January. Adding a little more to the strong US data theme, the Goods Trade Balance was notched up a smaller than expected deficit, while the Richmond Fed Manufacturing Index was also strong.
Fed Chair Yellen was speaking and there was nothing for market pricing. She was speaking on Community Development Financial Institutions with no Q&A. Fed President George and Kaplan were both speaking, as was Fischer. While tilted a little more toward the hawkish end of the monetary policy spectrum, George said that the Fed is “about there” in meeting its inflation goal, but that she is not seeking tight monetary policy but hike in a gradual and deliberate fashion. Kaplan was also speaking of gradual removal of monetary accommodation.
In an interview with CNBC, Fed Vice Chair Stanley Fischer said that two more rate hikes seems “about right” for this year. “That’s my forecast as well”, also mentioning how the Fed is “watching and waiting” to see how fiscal policy plays out. Again, nothing to upset market pricing, the market seeing the next likely move from the Fed at the 14 June meeting (13.6bps priced) with just over 1½ priced by year end. As you were largely from a market pricing standpoint and the market has not entered into a major new reflation trade.
On the commodities front, iron ore had an up day yesterday, up $0.44 to $82.01. Met coal was a tad higher with post Cyclone Debbie assessments of coal (and other infrastructure and production) still to come. Most Australian met coal is produced in Queensland.
This morning on the economic front we already had the release of German February Import index which came in stronger than expected with a rise of +0.7%. At 9.30 am we have UK Mortgage Approvals. Finally at 3.00 pm we have US Pending Home Sales.
And of course today is D-day for UK PM Theresa May who will be triggering Article 50 notifying the EC of the UK’s intention to withdraw from the EU, starting the period of two years of negotiations before exiting.
Chicago Fed President Charles Evans continues on his European tour, speaking this afternoon in Frankfurt (again, the ECB’s Peter Praet is on the same speaking card). In the US, Boston Fed President Eric Rosengren is speaking to the Economic Club (in Boston at 4.30 pm), while San Franciso Fed President Williams is speaking to the Forecaster’s Club in New York (6.15 pm), so the potential there to get something meatier on the outlook for the economy.
June S&P 500
Some days you can get really lucky with your calls and other days not and yesterday was certainly one of those as a number of my calls missed by small margins before moving aggressively. The S&P just missed my revised 2331 buy level with a 2333.50 low print before rallying all the way to a high at 2360. This rally occurred late in the day with the S&P hitting my 2357 sell level. As I wanted to be flat overnight I covered this position too early at 2356 before the market sold off into the close and I am still flat. As I have said countless times over the past few years it is extremely difficult to be short the market for than a few days as buyers return with a bang with the S&P rallying 42 Handles off yesterday afternoon’s 2317.75 low in just over 24 hours as yet again short positions got slammed. With Month and Quarter end on Friday it is another excuse not to be short the S&P. My own view is the market will give us a better level to get short next week ahead of a more meaningful decline before the market subsequently rallies to new all-time highs before the real sell-off starts towards the end of this year. Today I will look to buy the S&P on any dip lower to 2340/2346 with a 2333 wider stop which is just below yesterday’s low print. My only interest in selling the S&P is on a further rally higher to 2364/2369 with a 2374 stop.
EUR/USD
My Euro plan worked well with the Euro trading lower late in the New York session to my 1.0800 buy level before trading to an overnight high at 1.0827. Again as I wanted to be flat overnight I emailed my Platinum Members to exit this position for a small gain at 1.0811 and I am now flat. This sell-off was flagged by me since Monday given how oversold the Dollar was trading and today my only interest in buying the Euro is on a further dip lower to 1.0735/1.0765 with a 1.0705 tight stop. I will still be a seller on any rally higher to 1.0890/1.0920 with a 1.0955 stop.
June Dollar Index
My Dollar plan worked well with the market eventually hitting my 98.90 buy level before rallying to my 99.20 T/P level and I am now flat. This morning the Dollar has continued to rally on the back of the stronger equity market and today I will again look to buy the market on any dip lower to 99.05/99.35 with a 98.70 stop which is just below yesterday’s low print. The Dollar needed to rally yesterday and has done so otherwise we were looking at breaking and closing below some seriously strong technical support.
June DAX
There is no stopping the DAX at this time as yet again the market just missed my buy level before rallying strongly. Thankfully we had no sell levels in the DAX which is now trading above its 5.5 year trendline at 12200. This morning the DAX is trading outside the top of its Daily Bollinger Band and at the top of its Williams Index. However the next resistance level is not until 12300 and today I will be a small seller on any further rally to 12305/12365 with a 12405 stop. Given how overbought the DAX is trading my only interest in buying this market is on a dip lower to 12070/12130 with a 12015 stop.
June FTSE
Speaking of small margins, the FTSE missed my 7205 buy level with a 7209 low print before rallying nearly 100 points and I am still flat. I know some of my members buy in front of my buy range and anyone who did this across a number of my calls yesterday were very fortunate. Today I will move my buy level higher to 7235/7265 with a 7205 stop. Given the fact that it is month and Quarter end on Friday I do not want to be short the FTSE at this time.
Dow Rolling Contract
While I was very lucky with my Dow fills on both Monday and last Friday, yesterday was extremely frustrating as the Dow missed my 20500 buy level with a 20512 low print before rallying 222 points to a 20734 high print and in the process just missed my 20750 sell level before the market had a late sell-off. The Dow finally broke its six consecutive days of losses with yesterday’s aggressive move higher as the market now focuses on Trump’s tax cuts which as I mentioned last week he should have started with rather than the extremely complicated Health Bill. Today I will move my sell level higher to 20800/20860 with a 20910 stop but only in small size. Given the extent of yesterday’s move higher which has to be respected especially with the McClellan Oscillator again closing in positive territory with a +45 print, I will now look to buy the Dow on any dip lower to 20590/20650 with a 20540 stop.
June BUND
I am still flat the Bund which just missed my 160.10 buy level earlier this morning. Today I will now raise my buy level slightly to 159.85/160.15 with a 159.60 tight stop. Despite the pick up in German growth and inflation I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold is still struggling to break the key 1260/1265 resistance level. I am still flat and today I will leave my buy level unchanged from 1232/1239 with the same 1227 stop.
Silver Rolling Contract
After I posted yesterday morning Silver was trading at my 18.05 buy level where it remained for an hour before finally rallying to a high at 18.25. I used this rally to cover this position at my revised 18.17 T/P level as I continue with my strategy of banking points when available. Subsequently Silver sold off and I bought the market again at 18.10. I will only add into this position on any move lower to 17.80 with a 17.55 stop.
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