The UK parliament has voted by just four votes – to support the so-called Speldman amendment which rejects a ‘’no deal’’ Brexit in clearer terms than the Prime Minister’s own motion. Yet the Prime Minister’s own motion rejecting leaving without a deal has also passed (by 321 to 278). While in reality the passage of neither of these bills can definitely eliminate the risk of a so-called ‘’hard Brexit’’ (after all, any alternative will still require EU approval) it has further reduced the chances of it. Hence Sterling, which recouped its Tuesday losses in anticipation of the Prime Minister’s motion not to leave the EU without a deal, has rallied further on the passage of these motions.
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For anyone following my Platinum Service it was flat yesterday as none of my calls were hit and is still ahead by 425 points for March, having made 1013 points in February, 1671 points in January, 2803 points in December, 1541 points in November and 2094 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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The bigger test for Sterling comes not with yesterday’s votes in parliament but today and thereafter, in particular once we see what type of extension to Article 50 parliament opts to support and which will then require sanction from the EU Council who hold a Summit next week. So Sterling is set to stay stuck in the washing machine for a while longer. Indeed, it is still not possible to rule out the risk that we end up with a snap General Election, an event risk which were it to transpire has the potential to hurt Sterling by even more than the prospect of an imminent UK exit from the EU without any transition arrangement.
It is also not inconceivable that in the wake of the EU Summit, Theresa May decides to come back to parliament for a third time with her Withdrawal Agreement, given the increased prospect of a ‘’No Brexit’’ following a possible 2nd referendum might at least galvanise the whole of the ERG band of Tory Brexiters and also some other ‘’leavers’’, to back her deal. GBP-positive were that to be the case – albeit pretty unlikely (e.g. it is still hard to see the DUP supporting this without further concession on the Irish backstop from the EU and where it was the UK Attorney General’s advice on the changes announced by Theresa May on Monday night that scuppered the second attempt to get her Withdrawal Agreement approved).
This risk-positive backdrop has meant that the US dollar has been under downward pressure even beyond the direct influence on USD Indices from the big gains for Sterling and which has in characteristic fashion also lent some support to the Euro. The AUD ended the day higher, so fully recouping the hit it suffered following Tuesday’s poor Westpac Consumer Confidence survey readings
Ongoing UK political shenanigans have, as one market commentator has suggested, tended to suck the oxygen out of broader financial markets this week. This though has not stopped US stock markets from more than recouping last week’s losses such that the S&P 500 has on an intra-day basis reached its highest level since October 10th last year, when we were just 5 days into the big Q4 sell-off. Amazon has been one of the counters leading the rally, up over 1%, through gains are fairly broad-based across sector. The further travails of Boeing after president Trump ordered the grounding of all 737 Max planes in America against the advice of the FAA, has meant that the Dow (+0.6%) continues to underperform the S&P and NASDAQ (both ending +0.7%)
The US data highlight was Durable Goods Orders, which modestly exceed expectations in both headline (+0.4%) and core terms (+0.8% ex-defence and ex-aircraft) but which failed to provide much of a lift to either US bond yields or the USD. 10 year Treasuries are 0.7bps higher at 2.61% and the 30-year bond +1.6bps at 3.01%, latter not helped by a fairly poorly received 30-year auction. US final demand PPI came in 1/10% less than expected in core terms (so yr/yr down to 2.5% from 2.6%) but with CPI data already released had no impact.
Trade news includes President Trump saying he is in no rush to complete a China trade deal and that it does not matter whether a deal is made before or after a Summit with President Xi. He has though re-iterated that there is a ‘’very good chance’’ a deal will be made.
Meanwhile EU Trade Commissioner Cecilia Malmstrom has sounded an upbeat note about the prospect of receiving the green light from EU governments to start negotiations with the U.S. on cutting industrial tariffs. She adds though that the EU has no intention of making agriculture part of the market-opening talks with the U.S., where some officials have demanded that farm goods be included.
This morning on the Economic Front we already had the release of German CPI which came in at 1.5% versus 1.6% expected. At 12.30 pm we have US Weekly Jobless Claims and Canadian New House Price Index. Finally at 2.00 pm we have US New Home Sales.
June S&P 500
I have now rolled to the June Contract which trades at a 5 Handle Premium to the March Contract. Tomorrow is known as Quadruple Witching when Stock Index Futures (March Contract) Stock Index Options, Individual Stock Options and Individual Stock Futures all expire together. This can be a volatile trading session and a difficult one to read especially after the S&P has now rallied nearly 100 Handles since last Friday’s 7.00 pm low. If it were not for the underperformance of the Dow the S&P could easily be trading 30 Handles higher. Yesterday the S&P made a high of 2821 – March Contract – which was above last week’s 2816 previous high while the Dow is still trading 450 points lower than its equivalent high made on the same day. This is called Negative Divergence and we must keep an eye on this divergence over the coming days. Thankfully we had no sell levels in any of the Indices as yet again anyone shorting these US Markets are getting slammed. The June S&P has resistance from 2836/2844 and today I will be a small seller in this area with a 2852 stop. I will be a buyer on any dip lower to 2798/2808 with a 2791 stop.
Yet again the Daily Sentiment Index proves itself to be one of the most important technical signals. With the Euro closing at 1.1180 last Friday the DSI had a reading of just 10% bulls. The Euro has now rallied to 1.1340. Interestingly the DSI has only risen to 21% as of last night’s close which implies there is plenty of room for the Euro to trade higher over the coming days. I will now raise my buy level to 1.1235/1.1275 with a 1.1195 stop. I no longer want to be short the Euro at this time. A break and close over 1.1400 will be bullish.
June Dollar Index
I have now rolled to the June Contract which trades at a 54 point Discount to the March Contract. My March sell level did not hit yesterday and I am still flat. Today I will be a seller of the June Contract on any rally higher to 96.50/96.90 with a 97.30 stop.
I have now rolled to the June Contract which trades at a small 18 point Premium to the March Contract. The DAX is still underperforming the US Indices but despite the weak price action I have no interest in being short the market. Today I will be a buyer of the June Contract on any dip lower to 11450/11510 with a 11395 stop.
The JUNE FTSE trades at a hefty 84 point Discount to the March Contract. I am still flat the FTSE and today I will be a buyer in the June Contract on any dip lower to 6980/7030 with a 6945 stop. With Cable above 1.33 we may see the FTSE trade lower to my buy level as we wait for the Article 50 Vote this evening at 7.00 pm.
Dow Rolling Contract
I am still flat the Dow and today I will now raise my buy level to 25450/25610 with a 25345 tight stop. I still do not want to be short the market at this time.
I have now rolled to the June Contract which trades at a 29 point Premium to the March Contract. The NASDAQ has been on fire all week rising by nearly 4%. The market is getting overbought and is approaching strong resistance from 7360/7410 where I will be a seller with a 7465 stop.
I am still flat the Bund and today I will now lower my sell level to 164.60/165.00 with a 165.35 stop.
Gold Rolling Contract
With Silver just hitting my buy level I will now lower my Gold buy level to 1280/1289 with a 1272 stop.
Silver Rolling Contract
In the last few minutes Silver has traded lower to my 15.31 buy level. I will now lower my T/P level on this position to 15.45. For now my stop will remain unchanged at 14.60. If any of the above levels are hit I will be back with a new update for my Platinum Members.