It’s a nod to Bastille Day today and with the US President visiting France, declaring in a tweet his “unbreakable” relationship with the French President. Markets yesterday saw the Australian Dollar at the top of the FX leader board, pushing up through the London and New York trading sessions to close at 0.7730/35, having already tested 0.7740 earlier. The NZD has not had the same intra-day further support, but remains north of 0.73 where it reached later yesterday. The Canadian Dollar also continues to garner some support, not hurt by oil prices increasing somewhat higher yesterday. Following in the patter of Norway’s, Sweden’s CPI was higher than expectations, adding to the notion of a turning global rate cycle. NZ’s CPI next week (expected to be soft at 0.1%) and Australia’s the week after (expected at ~0.5%) will be important barometers.
To mark my 1375th 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 firstname.lastname@example.org for details.
For anyone following my Platinum Service it made 58 points yesterday and is now ahead by 556 points for July, having made 1023 points 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.
Global bond yields rose. One comment from Yellen’s reprise to the Senate Banking Panel that caught the market’s attention was to the effect that it is premature to say the underlying trend in US inflation is below 2%. She did though hedge that by recognising the two sided risks on inflation. Her comments on the labour market did not play so much to a dovish tilt, Yellen again noting that the labour market is quite tight and that there may be pressure on wages. She was also asked on the reduction in the balance sheet reduction and noted that she has no intention of returning it to “that small”, a reference to ~1tr levels prior to the GFC. Unfortunately when answering this question she was interrupted without possibly going on to specify of what reduction she had in mind. Bond traders might have been taking their cue from her comment that she expected some rise in yields during the run-off of the Fed’s balance sheet, even though that’s no revelation.
The seeds for the modest net sell off in bonds came earlier, from bunds, German/European yields higher on news that Draghi will be speaking at the Fed’s annual Jackson Hole, speaking on August 24. He last spoke there in 2014, then outlining QE and who doesn’t like a good conspiracy theory? Also, it’s close to what the market (including myself) is thinking in terms of timing when QE tapering might in any case be announced, at the September 7 ECB meeting.
Adding support to the rise in bond yields, I would also note that oil prices nudged higher. The IEA increased its 2017 global demand forecast and the US EIA reveal a larger-than-expected 7.561m weekly run down in inventories. The market chose to ignore comments from Qatar’s ex oil minister in Istanbul that deeper OPEC cuts would be self-defeating and only play into the hands of the US shale producers.
The US Congressional Budget Office’s (CBO) analysis of Trump Budget was mixed news for the Administration. As expected, there was no forecast nod to the Administration’s 3% aspirational growth, but they did see the deficit around one third lower than their own baseline projections, debt lower as a result.
In her testimony, Yellen supported the 3% growth aspiration (“it’s something that would be wonderful if you can accomplish it — I’d love to see it”), but also that “it would be quite challenging”, drawing out the task of lifting productivity from ~1% over the decade to 2% to get there. She said boosting productivity a few tenths would be “a good payoff”. US Budget Director Mick Mulvaney had written an op-ed piece in the WSJ highlighting the 3% goal for sustained growth. You’ll hear more about the coined term “MAGAnomics” (Make America Great Again), something this scribe hadn’t heard previously.
This morning on the Economic Front we have Euro-Zone Trade Balance at 10.00 am. This is followed at 1.30 pm by US CPI and Retail Sales, with Industrial Production next at 2.15 pm. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment and Business Inventories.
Meanwhile the Fed’s Kaplan is speaking in Mexico City at 2.30 pm.
Thankfully we covered any short position on Tuesday as the S&P presses new all-time highs helped by another record close in the Dow last night. With seven Hindenburg Omen’s on the clock this move higher could be a bull trap before the real sell-off happens over the coming weeks or later in 2017. As I have consistently said over the past few years this market continues to be a buy on dips until we get the major sell extreme needed to start this sell-off. From here the S&P needs to break and close below 2400 for the first sign that we have at least a temporary top in the market. The Central Banks continue to prop up these markets has explained in my article last month about how much the Swiss National Bank have invested in both the US and European Equity markets. I still maintain my position that this rally is unsustainable especially with Money Supply contracting after just four rate hikes, and this is even before we see the Federal Reserve Balance Sheet being reduced to the tune of $600 bn per year. Today I will continue to look to sell the S&P on any rally higher to 2458/2464 with a 2470 stop. I will now raise my buy level slightly to 2433/2439 with a 2428 stop.
The Euro again closed below its two year trend line at 1.1450 having tested this level after I posted early yesterday morning. Given the extreme DSI reading towards the Euro I will now lower my sell level in the Euro to 1.1470/1.1510 with a 1.1540 stop. I am not going to change my buy level which will remain unchanged at 1.1280/1.1320 with the same 1.1245 stop.
September Dollar Index
My Dollar plan worked well as shortly after the European Markets opened the Dollar was trading at my 95.30 buy level before rallying my 95.60 T/P level. Subsequently I emailed my Platinum Members to re-buy the Dollar at 95.45 which was filled before T/P on this second position at 95.57 and I am now flat. I still believe the Dollar to be a buy on dips given the single digit DSI reading and today my buy level will be from 94.95/95.35 with a 94.65 stop.
The DAX traded in a narrow range yesterday but still closed positive as this market continues to recover impressively off last Friday’s 12303 low print. Thankfully we have had no sell levels in the DAX over the past few months as the market just like the Dow absorbs any sell-off before regrouping and moving higher. Today I will again move my buy level higher to 12490/12550 with a 12440 stop.
Yet again the FTSE has underperformed the other major Indices. However the FTSE just missed my 7325 buy level before mounting a small rally into the close. I am still flat and today I will now lower my buy level slightly to 7280/7310 with a 7250 stop. Even though the FTSE is struggling to break the key 7380 resistance level I still do not want to be short the market at this time.
Dow Rolling Contract
The Dow closed at yet another new all-time high last night as one bear after another gets stopped out of any short position. Of course this bull market will end and probably badly but as long as we hold the double bottom of 21197 from last month and the March 1, previous all-time high at 21169 this market continues to be a buy on dips. Today I will now raise my buy level slightly to 21420/21490 with a 21370 stop. Naturally I still do not want to be short the Dow at this time.
It took a while buy finally the Bund traded lower to my 161.15 buy level before rallying 20 points and I used this rally to exit this long position at my revised 161.31 T/P level and I am now flat. Given how oversold the Bund is trading I am still a buyer on dips and today I will again look to buy the Bund on any dip lower to 160.60/160.95 with a 160.30 stop.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1198/1206 with the same 1192 stop tight stop.
Silver Rolling Contract
With Silver trading heavy for most of yesterday’s trading session I emailed my Platinum Members to reduce their buy level to 15.20/15.55 with a 14.90 stop. I will leave this new buy range unchanged.