The biggest news stories since I posted yesterday morning are the 6-2 Bank of England MPC vote for no change in Interest Rates together with downgraded growth forecasts, which has knocked the British Pound off its recent lofty perch, and a significant downside surprises from the US Non-Manufacturing ISM survey which suggests some downside risk to this afternoon’s US payroll numbers. Just before the New York close, the Wall Street Journal has reported that US special prosecutor Robert Mueller has impanelled a grand jury to investigate the allegations of Russia’s interference in the 2016 elections. No great surprise perhaps, but the US dollar and US Treasury yields both fell back a touch on these headlines.
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 38 points yesterday and is now ahead by 171 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.
Ahead of the Bank of England’s latest decision, there was speculation that Chief Economist Andy Haldane might, in light of recent remarks, shift his vote on the Bank Rate decision in favour of an immediate rate rise. As it transpired, the vote was 6-2 versus 5-3 last time. So two of the three June dissenters (McCafferty and Saunders) held their ground, the third (Kristen Forbes) has now left and the new kid on the MPC block, LSE economic professor Silvana Tenreyo, voted with the majority.
Bank of England Governor Mark Carney gave a pretty downbeat assessment in his post-meeting press conference, largely due to Brexit uncertainties. The Bank also downgraded its growth forecast – now 1.7% from 1.9% for 2017 and 1.6% from 1.7% in 2018 – while retaining its forecast for inflation to hit a peak of 3% and remaining above the 2% target throughout the forecast period (2.2% at the end). Lower real incomes are a big part of the pessimistic growth story here. Against the Euro, the pound fell to its lowest levels in nine months, EUR/GBP now back above 0.90 for the first time since early November 2016.
The US data saw the Non-Manufacturing ISM index fall to 53.9 from 57.4 against an expected much smaller fall (56.5). This places the July Index below its 2016 average. And since services represent some 88% of the U.S. economy, it suggests that underlying growth is currently no higher than about 2%. Elsewhere US Weekly JCbless claimes remained low at 243k while Factory Goods Orders in July rose by 3% in line with expectations.
Earlier in the morning the final Euro Zone composite PMI printed at 55.7, close enough to the 55.8 preliminary reading. Lower US Treasury Yields, with 10s down to around 2.22% from 2.26% when I posted yesterday, has seen the Japanese Yen fare best among the major currencies, with Sterling firmly at the bottom of the pack. AUD/USD has recovered about a quarter of a cent of yesterday’s local session losses, to around 0.7950. This amid mixed commodity prices (oil off around 50 cents, gold up $2 and iron ore 63 cents higher at $72.93).
This morning on the Economic Front we have German Factory Orders at 7.00 am. This is followed by German and Euro-Zone Retail PMI at 9.00 am and 9.30 am respectively. Next we have US NFP data. On US payrolls, the relatively weak Employment Sub-Index in yesterday’s Non-Manufacturing ISM (55.9 from 60.8) suggests some downside risk to pre-existing expectations for a 180k rise in Non-Farm Payrolls. The Unemployment Rate is seen falling to 4.3% from 4.4%. As, if not more, market interest will be centred on average hourly earnings growth, seen +0.3% on the month but which would depress annual growth to 2.4% from 2.5% and meaning hopes for a pick-up in earnings growth to nearer 3% remain elusive. The US Trade Balance will also be released at 1.30 pm.
September S&P 500
Yesterday was one of the quietest trading sessions for the S&P all year as the market goes on hold ahead of the Key Employment data from the US which will be released at 1.30 pm. Shortly before the Chicago close the S&P traded lower to my 2467 buy level with a 2466 low print before having a small rally. As I wanted to be flat ahead of the NFP data I covered this position at my revised 2468 T/P level and I am now flat. There is not a lot more that can said about the S&P that I have not mentioned over the last week but yet again we still have negative divergence vis-a-v the Dow and this will continue as long as we do not break last Thursday’s 2480.50 all-time high print. Today I will stay flat until the NFP is released and if the market sells off subsequently, I will again be a buyer from 2459/2465 with a 2454 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2450 with a 2444 stop. As I am already short the Dow I do not want to be short the S&P at this time as I want to see how the market reacts if it tests the key 2500/2510 major resistance level.
The Euro just missed my 1.1900 sell level with a 1.1893 high print before having a small sell-off and I am still flat. Despite the Euro trading severely overbought the bulls are still in control as shown by the Euro again closing over its 500 Week Moving Average at 1.1800. As usual with the NFP data due this afternoon I will stay flat and if the Euro trades higher following the Employment release I will now look to sell the market from 1.1930/1.1980 with a 1.2020 stop. Given the significance of the 1.1800 support level I will also be a small buyer on any dip lower to 1.1770/1.1810 with a 1.1740 tight stop.
September Dollar Index
My long 92.55 average long Dollar position worked well with the Dollar eventually trading to a rebound high at 92.90. This rally enabled me to cover my long position at my revised 92.83 T/P level. Subsequently I emailed my Platinum Members to re-buy the Dollar again on any dip lower to 92.65. I am still long and in keeping with my theme of banking points when available I will now look to exit this trade at 92.80. If I manage to take profit at this level I will be back with a new update for my Platinum Members.
I did not have much luck yesterday as the DAX just missed my 12080 buy level with a 12088 low print before having a decent 60 point rally and I am still flat. As I have mentioned over the past number of days I expect the DAX to put in a tradeable bottom between 12000/12070 and today I will again look to buy the market here with an 11950 stop. Despite the strong Euro I still do not want to be short the Dax at this time.
As mentioned in my Economic Commentary above, the Bank of England left Interest rates unchanged. Carney in his press conference was more dovish than normal which sent Sterling tumbling, resulting in EUR/GBP now trading at 0.9040. This is a massive move and once I heard Carney’s speech I emailed my Platinum Members to raise their sell level in the FTSE to 7435/7460 with a 7490 stop. The fact that the FTSE initially missed my 7410 sell level by a few points before selling off was another reason to move my sell level higher. For Premium Members who are short I will use any sell-off to try and get flat ahead of the NFP data. Given the weakness of Sterling I will also raise my buy level slightly to 7315/7350 with a 7285 tight stop.
Dow Rolling Contract
I am still short the Dow in tiny size at 21885. Today I will only add to this position on any move higher to 22090 with the same 21140 stop. If I am taken short a second time I will then move my T/P level higher to 21990. There is no change to my overall view that this market is topping and the comparisons with 1987 are uncanny as mentioned in my commentaries all week. One other factor in comparing 1987 to now is the weakness of the US Dollar. However I am only trading in small size as I patiently wait for a sell extreme that lasts for more than a few days.
Just before the close the Bund traded higher to my average sell level at 163.35. I am still short and I will now raise my T/P level on this position to 163.20 as I want where possible to be flat ahead of the NFP release. My stop will remain unchanged at 163.75. If either of these levels get hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Yet again Gold traded in a narrow range and I am still flat as I do not trust this market at all especially as we have traded sideways for the whole of 2017. Today I will leave my buy level unchanged from 1244/1251 with a 1236 stop.
Silver Rolling Contract
Yet again Silver just missed my buy level before spending the rest of yesterday’s trading session trading sideways to higher and I am still flat. Today I will leave my buy level unchanged from 16.10/16.35 with a 15.90 tight stop.