Looking at yesterday’s, on paper, ECB President Draghi Dutch Parliament appearance had the potential of being the big event, but with Draghi sticking to his dovish bias the big move came from oil following an EIA report that showed the biggest draw in nationwide crude inventory since December while gasoline stockpiles fell by 150k bbl to 241.1m bbl against expectations of a 300k rise. US equities had a mixed day, with the Dow closing 0.16% lower while both the S&P 500 and NASDAQ rose 0.11% and 0.14% respectively. The rise in the NASDAQ saw this Index close at another new all-time high.
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For anyone following my Platinum Service it made 20 points yesterday and is now ahead by 458 points for May, having made 1276 points in April, 1335 in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
The EIA news triggered a rally in oil prices helping WTI oil climb over $1 to 47.34 while Brent moved above the $50 mark (both up over 3%). Unsurprisingly, in G10 oil linked currencies have been the biggest winners with NOK up 0.74% and CAD up 0.40%.The AUD was also another outperformer, up 0.15% over the past 24hrs and although the move in oil gave the Australian Dollar a small uplift.
The RBNZ made its policy rate announcement after the New York close and while the OCR was left unchanged at 1.75% as expected, the Bank failed to deliver a tightening bias. Not only has the OCR tracker been left unchanged, the Bank also sees the recent spike in inflation as transitory and indeed it has lowered its year ahead inflation forecast. A big call from the Bank, considering inflation has been higher than its forecast for each of the past 3 quarters (and the Q1 miss along being 0.7%. . Meanwhile the market has clearly been disappointed by the Bank’s outlook. Overnight NZD made decent gains against all major crosses reflecting a bit of short covering action, trading to 0.6941 against the USD just before the announcement. Now NZD/USD is almost one big figure lower, trading at 0.6847.
US Treasury Yields have climbed a few bps since I marked prices 24 hours ago. The move higher in oil was an initial catalyst, but a softer 10y bond auction was the biggest factor. The $23bn 10y refunding auction cleared with a 2bp tail and the lowest indirect bidding interest since December. The move in oil pushed 10y UST from 2.37% to 2.385% and the auction boosted yields to 2.41%. Higher USDT yields and an unchanged gold has seen USD/JPY make a decisive move above ¥114. USD/JPY traded to a low of ¥112.41 on Monday and now it trades at ¥114.33.
ECB President Draghi presented to Dutch Parliament and he gave a cautious tone regarding the inflation and policy outlook. Draghi said that changes to the ECB’s policy guidance and rates will only come when inflation is solid enough to continue without the support of monetary stimulus. “Is it time to exit or time to think about exit or not?’ This time hasn’t come yet”.
This morning on the Economic front we already had the release of German Wholesale Prices which rose 0.3% versus 0.00% last month. At 9.00 am the ECB will publish its latest Economic Bulletin and this is followed at 9.30 am by UK Industrial Production, Construction Output and the Trade Balance. At 12.00 pm we have the Bank of England Rate Announcement. While no policy rate surprises are expected by the BoE with market participants and economists unanimously expecting the Bank to stand pat, the market is likely to focus on the Bank’s new set of forecasts which are also due for release. The preliminary Q1 GDP reading revealed the economy grew at 0.3% well below the Bank’s expectations of 0.6%. As such it will be interesting to see if the Bank expects the economy to rebound or decelerate further over the coming quarters and the role consumption is likely to play given the decline in real wages in recent months. The inflation outlook will also be important, inflation is currently running a little bit above the Bank’s February forecast (2.3% vs 2.1%), driven by a faster than expected pass-through from the decline in the Pound. Finally the Minutes should also garner some attention particularly if there is still some appetite for a “withdrawal of monetary stimulus over the course of the forecast period”.
At 1.30 pm we have the US Weekly Jobless Claims and PPI. Finally at 2.45 pm we have the Bloomberg Consumer Comfort Index.
June S&P 500
The NASDAQ continues to make one new record high every day with the combined Market Cap of the NASDAQ’s five largest companies – Alphabet (Google’s parent) Amazon, Apple, Facebook and Microsoft – is more valuable than all but five other worldwide equity markets (US, China, Japan, Hong Kong and the UK). This statistic just shows the level of the rally since the Global Financial Crisis but again even though I am as bearish as hell going forward I am still a ‘’buyer on dip’’ until we see a sell extreme that lasts for more than a few days. Yesterday the S&P missed my 2383 buy level before trading higher in what turned out to be one of the quietest trading session of the year with low volume. The current euphoria is the same as all other euphoria’s, just bigger. The S&P has now traded in daily ranges of less than 0.5% for 14 days. The previous record was six days. Today I will move my buy level higher to 2383/2388 with a 2378 stop. My only interest in selling the S&P is still on a rally higher to 2406/2412 with the same 2417 stop.
Yesterday was another trading session of small margins as the Euro just missed my 1.0850 buy level by 3 points before rallying and I am still flat. The 200 Day Moving Average comes in at 1.0830/20 and today I will continue to look to buy the Euro on any dip lower to 1.0800/1.0840 with a 1.0770 stop. The Euro needs to break and close above 1.0920 to extend this rally. However for the moment I do not want to have a sell range in the Euro.
June Dollar Index
No change as I am still a buyer on any dip lower to 18.104.22.168 with the same 98.50 stop. Given how oversold the Dollar is trading, I still do not want to be short the market at this time.
Yesterday was the third consecutive trading session where the Bulls have been unable to push the market higher in severely overbought conditions. The DAX traded in a very narrow 71 point range yesterday and for that reason I will leave my levels unchanged from yesterday. I am still a seller on any rally higher to 12820/12870 with the same 12910 tight stop. Meanwhile I will leave my buy level unchanged from 12600/12650 with a 12550 stop.
I am annoyed with myself that I did not hold on to my long FTSE position last week as I buying the dip which had been working well. I thought we would get one more dip on Monday but alas this did not happen with the market now trading 160 points higher off last Thursday’s low print. The FTSE is now only trading 60 points from its March all-time and given how overbought we are trading I will be a seller on any further rally to 7390/7430 with a 7460 tight stop. I will also move my buy level higher to 7275/7305 with a 7240 stop.
Dow Rolling Contract
My latest long 20900 Dow position finally worked out after lunch when the market rallied to my revised 20920 T/P level and I am now flat. Unfortunately my second buy level at 20865 just missed with a new 20883 low print for the day before the market rallied small into the close. The longer the Dow stays below its March 1 all-time high at 21169 when the equivalent S&P high at 2400 has been exceeded the larger the intra-market divergence that I have mentioned over the last few days. Although the McClellan Oscillator improved yesterday, it still closed with a negative -5 print. It just shows the narrowness of this rally as mentioned by the combined market value of the NASDAQ stocks in my S&P commentary above. Today I will leave my buy level unchanged from 20810/20865 with the same 20770 stop. Despite me concerns for the Dow I still do not want to be short the market at this time.
The BUND has now tested the 160.20 three times before rallying strongly. I would expect and further test should see the market trade lower and for this reason I will now lower my buy level to 159.60/159.95 with a 159.25 stop which is just below the 3.5 month trend line at 159.40.
Gold Rolling Contract
Gold just missed my 1213 buy level before rallying overnight and I am still flat. As I mentioned yesterday Gold has strong support from 1207/1213 where the 500 Day and 100 week Moving Average’s come in and I would be much more comfortable getting long in this area with a 1201 stop. I am reluctant to chase this market at a higher price as the Daily Sentiment Index is still relatively neutral closing at 38%.
Silver Rolling Contract
No change as I am still long at an average rate of 16.25 with the same 15.70 stop which is just below the 15.80/16.00 support level from which Silver rallied strongly at the end of December. With sentiment still not in single digits I do not think we will get a major rally as yet and for this reason I will now lower my T/P level to 16.40.