Lack of US data releases has kept North Korea- US tensions as the overriding theme in markets. After the negative lead from Asia, European and US equities have ended the day with sharp losses, safe haven assets such as gold and yen have outperformed and the VIX has jumped over 40% moving above the 16 mark for the first time in just under three months. US equities opened lower following the moves from Europe and Asia. Oil prices were rising during European hours, but news that Russian oil producer Gazprom was considering “economically feasible” to resume production in matured fields triggered a sell-off in oil and weighed on energy shares. Disappointing earnings results didn’t help the cause with US retailers coming under pressure after both Macy’s and Kohl’s noted sales continued to decline in the second quarter. Later in the session President Trump added more fuel to the fire noting that if North Korea “does anything” to the US or its allies, “things will happen to them like they never thought possible”.
To mark my 1400th 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 email me on firstname.lastname@example.org for details.
For anyone following my Platinum Service it made 93 points yesterday and is now ahead by 428 points for August, having made 1096 points in July, 1023 in June, 1071 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 1700 points.
So geopolitical tensions, US disappointing retail results and sharp drop in oil prices weighed on risk assets, pushed volatility higher and triggered a bid for safe haven assets. One analyst that I follow has been telling me to watch the Russell Index (-1.7%) and high yield corporate debt (-0.6%) for a guide in risk sentiment and after three consecutive days in negative territory, both now look to be rolling over. Geopolitical tensions are not going away in a hurry and with the VIX back above 16, the lack of risk appetite deserve closer attention.
The Dollar Index has been relatively stable in the past few days, but it has been trading lower in the last couple of hours. Unsurprisingly, JPY has been the top G10 performer (up 0.80%) and now that USD/JPY has traded below the ¥109.50 mark a move sub ¥109 looks achievable. Other G10 currencies have been relatively stable with Trump’s comment last night weakening the USD across the board. AUD is currently trading at 0.7875, essentially unchanged relative to where I marked prices 24 hours ago. Sterling is -0.16% and trading at 1.2977. UK Industrial Production came in stronger than expected at 0.5% mom vs 0.1% expected, but the Trade Deficit unexpectedly widened and weighed on GBP sentiment.
Meanwhile NZD is the G10 underperformer over the past 24 hrs, but it is little changed in the overnight session with most of the losses were recorded yesterday morning following Governor Wheeler and Assistant Governor McDermott upping the rhetoric on the NZD. Wheeler indicated a lower NZD is “needed” compared to “would help” more balanced growth and after the local close, Assistant Governor McDermott reiterated the point, suggesting that the subtle change in language was a first step towards possible intervention.
At a press briefing, US Fed Dudley said that “it’s going to take some time” for inflation to rise to the central bank’s 2 % target even as he offered a generally positive outlook for the US economy, job market and price pressures. The July US PPI disappointed (- 0.1% vs +0.1% exp. and core also fell 0.1% vs +0.2% consensus). In addition to the risk off sentiment, Dudley’s comment and US PPI supported a bid in US Bond Yields with 10y UST yields drifting from 2.2445% to 2.1975% currently.
This morning on the Economic Front we have German CPI at 7.00 am. We have no UK data and at 1.30 pm we have US CPI and Real Average Earnings.
Finally the Fed’s Kaplan and Kashkari are both speaking this afternoon at 2.40 pm and 4.30 pm respectively.
September S&P 500
The S&P finally broke and closed below the key support level at 2450 as the geopolitical worries continue. I cannot emphasise enough the importance of my Platinum Service especially with the updated emails as it gives me the chance to change parameters during the day. This was the case yesterday as shortly after 12.00 pm I emailed my Platinum Members to reduce their S&P buy level to 2449/2555 and when the whole of this buy level was subsequently thus putting me long at an average rate of 2452 I emailed them again to cover this position at 2456 and I am now flat. I am sorry for the premium members but you should really think of upgrading to the Platinum Service especially as the increase in volatility is going to see more updates from me as volatility increases. The S&P has now fallen over 50 Handles since Wednesday’s 2488.50 high print which resulted in the Key Day Reversal recorded that day. This is a huge move and as mentioned earlier in the week the S&P has an ‘’Open Gap’’ at 2425 which should be filled sooner rather than later. Normally when these gaps get filled initially we have a snap back rally. Given how weak the McClellan Oscillator closed (-247) I will now look to buy the S&P on any dip lower to 2420/2426 with a 2415 stop. Given the importance of the 2450 pivot point I will now look to sell the S&P on any rally higher to 2448/2454 with a 2459 stop.
Frustratingly the Euro again just missed my 1.1695 buy level with a 1.1703 low print before rallying 80 points and I am still flat. Today I will now raise my buy level to 1.1670/1.1710 with a 1.1640 tight stop. I will also raise my sell level to 1.1820/1.1860 with a 1.1890 stop.
September Dollar Index
My long 93.40 Dollar position worked well with the market rallying to a 93.70 high print and this rally enabled me to cover this long position at my 93.65 T/P level. Subsequently I emailed my Platinum Members to re-buy the Dollar again at 93.40. I will only add to this position on any further move lower to 93.00 with a tight 92.80 stop. My T/P level will now be lowered to 93.60.
The DAX got hit hard yesterday with the market now trading at the bottom of its Daily Bollinger Band and Williams Index. Yesterday after the DAX hit my 12060 buy level with an initial 12041 low print I emailed my Platinum Members to cover this position at 12080 and I am still flat. The DAX has now fallen over 800 points in a few weeks as one support after another gets taken out. The next main support for the DAX is at 11750 and today I will again look to buy the market on any further dip lower to 11750/11810 with an 11690 stop. Given how oversold the DAX is trading I do not want to be short the market at this time.
When I woke up at 6.45 am in the US it was 11.45 am in Dublin, I was surprised to see how weak the FTSE was trading especially with EUR/GBP trading over 0.9050. Shortly after this the FTSE traded lower to my 7390 buy level with an initial 7382 low print and I immediately emailed my Platinum Members to exit any long position which I had done at 7398 and I am still flat. The fact that the FTSE closed below 7440 is bearish. The next major support for the FTSE is at 7250 and today I will be a buyer on any further dip lower to 7225/7265 with a 7195 stop. I will also look to sell the market on any rally higher to 7380/7420 with a 7445 tight stop.
Dow Rolling Contract
Having watched my short 21885 Dow position trading offside for the past 8 trading sessions I used today’s aggressive sell-off to cover this position for a small loss at 21895 and I am now flat. I was hoping the market would rally higher giving me a better entry level but instead the Dow got hit again into the close after President Trump’s press conference. The Dow has now lost over 350 points since Wednesday’s new all-time high at 22179 and has strong support at 22750. Today I will be a small buyer on any further dip lower to 21710/21770 with a 21660 stop. With the MO closing at -247 I am now on the look out for a tradeable bottom. Remember it is very rare the MO falls below -300 without a subsequent large rally in the market.
The sell-off in the equity markets drove the Bund higher to even more insane low yields. This move higher saw the market hit my 164.20 sell level and as there is no point in being short at this time I emailed my Platinum Members to exit this position at 164.10 and I am now flat. I am going to stay flat today and observe as even though the price action is bullish I cannot buy the Bund here and will stand aside until Monday’s commentary.
Gold Rolling Contract
The Geopolitical tensions lifted Gold higher yesterday with the market now trading well above key support at 1265/1275. I am still flat and today I will now raise my buy level higher to 1263/1270 with a 1256 stop.
Silver Rolling Contract
Silver did break and close over important resistance at 16.99. This is a key break and today I will now raise my buy level to 16.75/17.05 with a 16.45 stop.