Renewed concerns over China’s economic outlook following yesterday’s softer than expected Trade numbers halted a five day equity rally and triggered a bid for safe haven assets. China’s February trade data disappointed with both exports and imports printing below expectations at -25.4% yoy and -13.6% yoy respectively. China’s figures at this time of the year are highly affected by seasonality factors. China’s Lunar New Year was one week later this year and given that the numbers are expressed in year on year terms, the base effect from the large export figures last year was always going to weigh on the year’s February print.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary 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 anybody following my Platinum Service it made 110 points yesterday and is now ahead by 800 points for March having made 2265 points in February and 3365 points in January.
All that being said, market reactions to the numbers suggests investors remain concerned over the apparent soft demand for China’s exports. In that regard, I would note that soft export demand is more a global than a China story, for instance yesterday Japan’s Trade figures also showed a big drop in exports. For now, seasonality distortions suggests that it is probably too early to draw any big conclusions. Watch this space, however, March Trade figures will be very important.
Looking at equity markets yesterday, all main European main Indices ended the day in negative territory. Euro Stoxx closed -0.63%, FTSE 100 -0.92% and the DAX -0.88%. The negative tone from Asia and Europe set the tone at the start of the US session with materials and energy sectors leading the move lower. In the last 30 minutes of trading US equity markets recovered earlier losses and that trend is continuing this morning despite the Shanghai and Nikkei closing down 1.3% and -0.8% respectively.
In currencies, the Yen is the only G10 currency that has outperformed the US Dollar, confirming once again its safe haven status. The AUD is the best performing commodity currency, just down 0.15% and still comfortably trading with a 0.74 handle. As I mentioned in yesterday’s commentary the AUD appears to have been supported by the resilience in the Iron ore price. After yesterdays’ spectacular 18.6% jump, today the bulk metal is only down 0.2%. In contrast, the CAD is the worst performing currency closing down 1% and the NOK at -0.68%. Both currencies got little help from the drop in oil prices with Brent and WTI closing down 2.5% and 3.1% respectively.
The risk aversion to yesterday’s trading session boosted demand for core global Bond Yields. This demand was aided by a very strong 30y Japanese Bond Auction which helped push 30y JGBs to an all time low yield of -0.1%. In Europe, 10y Bunds fell 4.2bps to 0.18% and UK Gilts dropped 10bps to 1.38%.
Data releases yesterday had little impact on price action. German Industrial Production jumped 3.3% in January which is its biggest monthly jump since May 2009. In the US, the NFIB Small Business Optimism Index fell to 92.9 in February from 93.9 in January and below the 94.0 consensus.
March S&P 500
It took a while but very late in the US trading session the S&P finally hit my 1976 buy level before having a nice rally shortly after the US Futures Markets re-opened which enabled me to cover this position at my revised 1982 T/P level and I am now flat. As I mentioned yesterday I see the trading range at 1970/2013 ahead of next week’s FOMC Meeting and so far this is proving to be the case. Today I will again look to buy the S&P on any dip lower to 1972/1978 with a 1967 stop. My only interest in selling the market is still on a rally higher to 2002/2007 with a 2013 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2025 with a 2042 stop.
EUR/USD
Initially and frustratingly the Euro missed my 1.1000 buy level with a 1.1001 low print before rallying as expected to the now key 1.1060 resistance level before selling off again with the Euro eventually hitting my 1.0995 buy level. As I was already long Silver I emailed my Platinum Members to cut this long Euro position at 1.1010 and I am now flat. The Euro will probably drift lower ahead of Dragi and the ECB again but as I mentioned at length yesterday if the ECB disappoint’s again tomorrow then we could have a similar move to what we witnessed at the December 3 Meeting when the Euro rose from 1.0520 to over 1.09. Today I will again look to buy the Euro on any dip lower to 1.0900/1.0940 with a 1.0870 stop.
March Dollar Index
Overnight the Dollar traded higher to my 97.45 sell level. I am still short and today I will lower my stop on this position to 97.80.
March DAX
I am still flat the DAX having cut my long position way too early yesterday morning before the market rallied over 130 points after I posted and I am still flat. I still believe the downside is limited ahead of tomorrow’s announcement but I will certainly be going flat into this decision at 12.00 pm. Today I will again look to buy the DAX on any further dip lower to 9620/9670 with a 9580 stop. I still do not want to be short the DAX at this time.
March FTSE
My long 6105 FTSE position worked well with the market trading higher to 6162 before lunch which enabled me to cover this position at my 6140 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 6060/6090 with a tight 6040 stop.
Dow Rolling Contract
Unfortunately the Dow just missed my 16880 buy level before as expected rallying back above the key 17000 level again and I am still flat. Interestingly without a huge fall in the Dow the McClellan Oscillator had a big fall from the +326 reading on Monday to close at +193 yesterday thus leaving room for the market to move higher. With the FOMC meeting next week and the huge ‘Open Gap’ above in the S&P at 2012/2035 I still believe we will at least trade partially into this major Gap/resistance before heading lower and is one of the reasons why I have been so stubborn in not shorting the market over the past few weeks. Today I will move my buy level higher to 16870/16930 with a 16820 tight stop.
June BUND
This morning the BUND has traded lower to my 162.50 buy level. I am still long and today I will raise my stop on this position to 162.20.
Gold Rolling Contract
As I was already long Silver I reduced my buy level in Gold last night in an email to my Platinum Members to 1245/1250. Unfortunately Gold only hit 1251.50 before rallying this morning. If you managed to buy Gold overnight I would look to cut your position here at 1259 and go flat. Today as I am still long Silver and short the Dollar Index I will lower my Gold buy level to 1240/1247 with a 1233 stop.
Silver Rolling Contract
Silver traded lower to my 15.40 buy level yesterday afternoon. I am still long and I will leave my stop the same at 14.95.
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