The US Dollar remains in the ascendancy from a triple whammy of more Emerging Markets, this time from South African Rand weakness, a new cycle high in the US ISM Manufacturing Index for August and the uncertainty looming over the possible 25% tariffs on an additional $200bn of Chinese imports into the US. Yesterday’s steady hand from the RBA in leaving rates steady and not scaling back their outlook added some support, but only for a time. It looks like that we are seeing some front-running of USD strength ahead of Trump moving ahead with additional tariffs on $200b of Chinese imports, possibly as soon as tomorrow evening, or into next week. Until the decision is made, the market will remain nervous about commodity and EM currencies. Despite AUD and NZD discounts ahead of any announcement, there is still a good chance of further AUD and NZD weakness if Trump goes ahead with the plan as proposed.
To mark my 1650th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it made 107 points yesterday and is now ahead by 122 points for September, having made 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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In the EM space, it was the Rand that was in the firing line, the USD up 3.4% against the rand in the aftermath of South Africa notching up a second quarter of negative growth of -0.7% for Q2, a big surprise against an expectation of a 0.6% rise, first quarter GDP revised down also from -2.2% to -2.6%. Annual growth faded further to 0.4% from 0.8%.
Holding its ground against the USD in the past 24 hours has been a more stable Sterling, for once. Bank of England Governor Mark Carney and his senior team have been testifying before a Parliamentary select committee, Carney indicating that he is prepared to stay on in his role to see through and support smooth Brexit transition. He was due to step down in June 2019, but presumably now to 2020-21 if given the official nod. A spokesman for PM May said that Carney has been doing a ‘’very good job’’ and that there would be an announcement soon.
Economics
The first of the cornerstone monthly releases out of the US this week was a blockbuster in several respects. The ISM Manufacturing in August printed at a stellar 61.3, the highest since May 2004 and clearly well above market expectations of 57.6. On the back of this release, the Atlanta Fed increased their running estimate for US GDPNow from an already solid 4.1% to 4.7%. The result came with solid component readings on New Orders (65.1), Employment (58.5) and Prices Paid (72.1), all signs of the cycle extending.
Respondents to the survey are understandably worried about the tariff issue with costs already under pressure, but appear to be taking these pressures in their stride with the demand side of US manufacturing still performing strongly. While the USD is now acting to tighten US financial conditions somewhat, consumer inflation remains moderate and the Fed has not deviated from its gradual removal of policy accommodation approach and not braking the economic expansion. So far, so good.
There has been some better news out of Italy, the Italian government seeking to hose down expectations of a budget blow out and not testing the fiscal patience of the EU. Italian bonds rallied, 10 year yields down 14 bps to 3.017% with German 10 year bund yields up 2bps to 0.357%.
Commodities, Bonds, and Equities
With the USD in the ascendancy, highly-traded commodities have been softer, including base metals, oil and gold, though iron ore, coal and steel rebar traded on the Chinese Dalian exchange have been supported, though again, currency movements might be the factor there too. Met coal futures did push higher, up 2.5%.
US Treasury yields have risen, 10 years up 3.8bps to 2.8985% and still within recent ranges. There is now two way risk, with strong US data but enough EM risk around with the tariff issue looming that could easily support a move back to risk-off. Equity markets have been softer although again the US Indices rallied into the close.
This morning on the Economic Front we have German. Euro-Zone and UK Composite/Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Retail Sales. Next we have US MBA Mortgage Applications at 12.00 pm and the Trade Balance at 1.30 pm. Finally we have the ISM New York at 2.45 pm and the Bank of Canada Rate decision at 3.00 pm.
Later this evening, Fed Members. Williams, Kashkari and Bostic are speaking at 8.00 pm. 9.00 pm and 10.00 pm respectively.
September S&P 500
Yet again traders buy every dip in the US markets as the S&P which sold off to an initial low of 2886 shortly after the Chicago Open before rallying to close all of Friday’s ‘’Open Gap’’ with a rebound high of 2901. Subsequently we had a second test of the earlier low before the market again saw buyers into the close. My S&P plan worked well with the market trading the whole of my 2891/2899 buy range for an average long position at 2895 before rallying to my revised 2899 T/P level and I am still flat. There is no doubt the S&P is stretched at this time but as long as we can hold the key 2850/2860 initial support level I will continue to be a buyer on dips. I am still looking for an initial high near 2940 before we run into trouble. Today I will again look to buy the S&P on any dip lower to 2873/2881 with a 2867 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 2853/2861 with a 2845 stop. I no longer want to be a seller of the S&P at this time.
EUR/USD
Shortly after I posted the Euro traded lower to my second buy level at 1.1560 for a an average long position at 1.1587. Overnight the Euro made a rebound high of 1.1608 and I used this rally to exit any long position at my revised 1.1592 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1480/1.1525 with a 1.1445 stop. The Euro has strong resistance from 1.1645/1.1685 and today I will be a seller on any rally to this area with a 1.1725 stop.
September Dollar Index
My Dollar plan also worked well with the Dollar trading higher to my 95.60 sell level before we sold off to an overnight low of 95.23. As I was already long the Euro I did not want to have a short Dollar position on board as well overnight and I covered this position at my revised 95.48 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 95.80/96.25 with a 96.55 stop.
September DAX
There is no doubt the DAX is one of the hardest markets to trade given the lack of liquidity which in turn is increasing volatility. In my opinion this market needs to be traded in small size with wider stops. Unfortunately my DAX plan did not work well with the market trading the whole of my buy range for an average long position of 12240 before stopping me out of this trade near the low of the day at 12175. Subsequently the DAX turned around which made it even more frustrating. This morning the DAX is selling off as I post my Commentary and we must hold the key 11990/12050 support level or else we could see this market accelerate further to the downside. Today I will be a buyer on any dip to this area with a 11940 stop.
September FTSE
The FTSE traded lower to my 7445 buy level. I am still long and today I will only add to this position on any further move lower to 7395 with a now lower 7365 stop. Meanwhile I will now lower my T/P level on this position to 7460. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Dow Rolling Contract
We certainly saw nice two-way volatility in the Dow over the past 24 hours. When I posted yesterday morning the Dow was trading over 26000 before the market fell to an intra-day low of 25800, then subsequently rallying to a rebound high again over 26000. As I was already long the S&P, NASDAQ and FTSE, I waited to buy the Dow which I did at 25840 before exiting this long position at my revised 25920 T/P level and I am now flat. The good part of yesterday was that no matter where you bought the Dow you should have made a nice gain. I am still bullish of the Dow as long as we can hold the now key 25200/25400 major support level. I know this is well below current prices but this is where we have good long-term support. The 50 Day Moving Average comes in at 25225. So as long as we can hold this area on any test over the coming days I still expect the Dow to break its Jan 26 high above 26700. Today my only interest in buying the market is on a dip lower to 25580/25740 with a 25495 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 25200/25380 with a 25080 stop.
September NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 7600 buy level before rallying to my revised 7635 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7500/7540 with a 7455 tight stop. The NASDAQ has strong resistance from 7695/7745 and today I will be a seller on any rally to this area with a 7785 stop.
September BUND
Despite the weaker Equity markets the Bund struggled to rally which may be a warning to sign to lower prices. I am still flat and today I will lower my buy level slightly to 161.95/162.45 with a 161.55 tight stop. I am reluctant to chase the Bund lower as I would like to see the Bund break and close below 163 for a couple of days before looking to set up a short position.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1176/1184 with a 1169 stop.
Silver Rolling Contract
Despite all indicators that I follow pointing to an imminent low in Silver the market keeps making new lows. Yesterday Silver traded lower to my second buy level at 14.00 for a now average long position of 14.20. I will leave my stop the same at 13.70 while lowering my T/P level to 14.25 which the market just missed overnight. If any of the above levels are triggered I will be back with a new update for my Platinum Members.
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