It was another quiet session yesterday with an ever so slight risk-off tone (Yen, Gold, VIX higher and Treasury yields lower) ahead of Thursday’s key risk events – ECB, UK Election and the Testimony by former FBI chief Comey. As for Comey’s testimony, this may not be as controversial as first thought with US media noting Comey will not say President Trump interfered with the Flynn probe. With little on the radar internationally until then, the main focus over the past couple of days has been on the likelihood that Australian Q1 GDP could print a flat to a slightly negative outcome later this morning.
To mark my 1350th 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. 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 65 points yesterday and is now ahead by 42 points for June, having made 1071 points in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
US Treasury Yields fell 3.8bps since I marked prices 24 hours ago to 2.14%, around the levels seen in mid-November and the lowest YTD. UK Gilts lead the outperformance with yields down 5.7bps to 0.98% ahead of Thursday’s UK election. While the polls indicate the Tories are likely to be re-elected, after being wrong-footed by Brexit and Trump, markets are still being cautious and assuming some defensive positions.
The moves in Treasuries were also likely supported by a Bloomberg article noting that China was prepared to increase holdings of US Treasuries. Indeed, according to the latest TIC data this is already happening with China increasing its holdings of US Bonds in March by $27.9bn to $1.09 trillion, the largest increase since March 2015. The TIC data also noted Japanese investors had increased their holdings by $2.4bn. Together, this plays into the view that as the Fed unwinds its balance sheet, there will be willing buyers to take up the slack.
Of the data released yesterday, most was ignored by the market. The only significant piece was US JOLTS where Job Openings rose 259k to 6.0m in April, the highest in the history of the series which dates back to 2000. Job hiring’s however decreased 253k to 5.1. While the gap between openings and hirings is suggestive of a skills mismatch, importantly for the Fed it is also likely to support future wages growth as firms compete for skilled labour and train existing staff.
The US dollar (DXY) closed 0.2% lower last night in New York. The Yen was the clear outperformer, up 0.9% with JPY ¥109.40 and at its lowest levels since late April. The Kiwi was also strong, up 0.6% to $0.7183, having earlier breached the 72 mark. One analyst that I read, noted the moves possibly reflected traders closing out short positions with the Dairy Auction broadly in line with expectations (average winning price up 0.6%, the sixth consecutive positive result).
The Australian dollar hit a wall of confusion yesterday after I posted. It initially fell 0.4% on the weak net exports and government spending figures, which also gave fuel to the notion of a weak GDP number today, but then fully reversed the moves on a more neutral than expected RBA Statement. The RBA indicated it would ignore the likely weakness in Q1 GDP and will continue to hold faith in growth picking up to a 3% pace. The Aussie currently trades at $0.7508 and the GDP data will hold the key to whether it can be sustained at these levels.
In commodities the Brent oil price rose 0.7% to $49.83, while WTI was up by a slightly stronger 1.0% to $47.88. Supporting oil prices were soundings from Qatar that it would stick to the OPEC oil production ceiling despite sanctions from neighbouring countries. Also providing support was the prospect of strike action with Norwegian oil worker holding wage talks on Friday.
This morning on the Economic Front we have Australian GDP which will be released shortly after I post my Daily Commentary. This is followed by German Factory Orders and Construction PMI at 7.00 am and 8.30 am respectively. At 9.30 am we have UK Halifax House Price Index and at 10.00 we have Euro-Zone GDP and the OECD Economic Outlook. Finally at 8.00 pm we have US Consumer Credit.
June S&P 500
My S&P plan worked well with the market trading lower to my 2427.50 buy level before eventually spiking to a 2435 rebound high on what turned out to be another small range trading session. A lot of my Members who only trade the S&P would have held on to this position and made nice gains, however as I had a lower buy level in both the Dow and FTSE, I covered my long S&P position at 2429 and I am now flat. Today I will again look to buy the S&P on any dip lower to 2419/2425 with a 2412 stop. My only interest in selling the S&P is still on a rally higher to 2460/72 with the same 2480 stop. I know my sell level is a long way from here but I do not see an edge in going short below here especially in front of tomorrow’s Testimony, UK Election and ECB Rate Announcement.
EUR/USD
I am still flat the Euro which continues to trade above my key 1.12 pivot point. Today I will now go ahead and raise my buy level to 1.1200/1.1230 with a 1.1170 stop. I do not want to be short the Euro at this time as a break and close over 1.13 is a bullish breakout.
June Dollar Index
The Dollar came close to my 96.45 buy level before having a small rally into the close and I am still flat. Today I will now lower my buy level slightly to 96.05/96.35 with a 95.70 stop especially as the Daily Sentiment Index Reading on Monday closed at 12% bulls. This implies we may see one more move lower before finally getting a meaningful rally.
June DAX
My DAX plan worked well with the market trading lower to my 12690 buy level before bouncing a couple of times to 12720. I used this rally to email my Platinum Members to exit any long position at 12714 and I am now flat. The price action since we made new highs last Friday has been weak especially with the market closing of the defensive last night. Today my only interest in buying the DAX is on a further dip lower to 12570/12620 with a 12525 tight stop. The 12580/12600 should initially contain any sell-off given its strong support at this range.
June FTSE
Unfortunately the FTSE again just missed my buy level before rallying into the close and I am still flat. Today I will again lower my buy level slightly to 7435/7470 with a 7400 wider stop. It is incredible that since the sell-off after the Brexit vote last June the FTSE has now rallied from a post Brexit low of 5675 to 7589 which is a 33% gain.
Dow Rolling Contract
Unfortunately the Dow missed my 21110 buy level by 6 points before going on to rally strongly ahead of a late sell-off and I am still flat. The market will probably get more nervous ahead of Comey’s Testimony to the Senate tomorrow afternoon. For this reason I will now lower my buy level slightly to 21035/21095 with a 20985 tight stop. Despite the severe overbought condition of the Dow I still do not want to be short the market at this time.
September BUND
My Bund plan also worked well yesterday with the Bund trading higher to my 164.90 sell level before selling off small. I used this move lower to email my Platinum Members to exit any short position at my revised 164.75 T/P level and I am now flat. Today the Bund has strong resistance from 165.30/165.65 and I will be a seller in this area with a 165.90 tight stop.
Gold Rolling Contract
I mentioned how surprised I was by Gold’s lack of follow through to the upside in yesterday’s commentary, well this all changed with Gold rallying $18 to close at 1295 and is now well above the key 4.5 year mega trend line at 1275/1279. I am still flat Gold and today I will now raise my buy level to 1275/1282 with a 1269 tight stop.
Silver Rolling Contract
Silver continues to underperform Gold with the market struggling to follow Gold’s move higher. As a result I again emailed my Platinum Members to exit any long position at 17.69 and I am now flat. Remember Silver has now rallied strongly off last month’s 16.09 low print and is probably due to at least consolidate this move before moving higher. Silver has strong resistance from 18.10/18.30 and I would expect Silver will have difficulty in breaking above here in the short-term. Today I will be a small seller from 18.10/18.40 with a tight 18.60 stop. My only interest in buying Silver today is on a dip lower to 17.10/17.40 with a 16.80 stop.
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