The big news in equity markets has been the Dow Jones move up to 22000 for the first time ever boosted by Apple’s better than expected sales report. Amid a soft US Dollar environment the Euro briefly traded above 1.19 and UST yields are little changed. Meanwhile commodities have had a mixed day, although oil staged a small recovery on better than expected US inventory and demand data. All that said, with most traders away on vacation yesterday’s trading session could best be described as a typical holiday thinned market day. Apple shares rose 4.7% to 157.14 after posting a 7% increase in revenue in the most recent quarter and forecast a better than expected performance in the three months to September. The rise in Apple shares represented a jump of 50 points in the Dow, helping the Index close above 22000 for the first time ever. Mixed performance on other tech shares weighed on the NASDAQ (0.0%) and after trading for the most part in negative territory, the S&P closed at 0.05%.
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 in this offer can you please email me on firstname.lastname@example.org for details.
For anyone following my Platinum Service it made 110 points yesterday and is now ahead by 133 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.
Tuesday’s small US Dollar recovery in Index terms was more than reversed yesterday with DXY now back below the 93 mark and getting ever so close to its big support level of 92. Most of the USD weakness came from the Euro and other European currencies, including Sterling. The Euro traded to a high of 1.1910, the first time it has traded above the figure since early May 2015.The move was short lived, however, and now the pair trades at 1.1855. Meanwhile Sterling spent a second day above the 1.32 mark, up 0.20% over the past 24hrs and currently trading at 1.3224.
US Dollar weakness cannot be attributed to a single factor. The July ADP numbers disappointed (178k pvt payrolls vs 190k), but the healthy revision to June (191k from 158k) made up for that and a little bit more. Relative to where I marked prices 24 hours ago, US Treasury 10y yields are little changed (+0.5bps to 2.271%) while 10y Bunds closed -0.6bps at 0.48%. So moves in rates differentials were not the casue for a softer USD. Instead, it seems that the market wants to take the Euro higher, after breaking through key resistance levels (1.1750 -1.1850), the next key resistance level is at 1.2167 (61.8% retracement).
Commodity link currencies, barring the AUD which is essentially unchanged at 0.7968, were the underperformers. Yesterday oil prices were under pressure, but a report from the US Energy Information noting a decline in crude inventories and an increase in gasoline demand helped oil prices recover during the US session. WTI now trades at $49.62 and Brent is at $52.37.
In US politics, President Trump has reluctantly signed the Russian sanction bills. The president also announced plans to cut immigration in half (little market reaction) and yesterday’s reports that the administration is preparing a broad move against China over trade has also had a muted market reaction so far.
Finally we have also had a few Fed speakers. Fed Mester noted that she has lowered her estimate of the lowest sustainable level of unemployment to 4.75 % from 5% and said that conditions remain in place for inflation to gradually return to Fed’s symmetric 2 % goal. Mester remains of the view the Fed should continue gradually raising rates. Fed Rosengren said increasingly tight labour markets should keep the US Central Bank on its path to gradually raise rates. Meanwhile, Fed Bullard said more hikes would inhibit return to 2% Inflation.
This morning on the Economic Front we have German and Euro-Zone Services/Composite PMI at 8.55 am and 9.00 am respectively. This is followed at 12.00 pm by the Bank of England Rate Announcement. As for the BoE while a no change in the official bank rate is almost unanimously expected, today’s meeting also comes with a new set of forecasts and the outlook on inflation should be an important guide on what to expect in terms of future policy settings. Kristin Forbes is no longer a Monetary Policy Committee member, however, Ian McCafferty and Michael Saunders are still expected to vote for a 25-bp increase in interest rates. If we get any more dissenters, then the pound is likely to get a boost. Next at 1.30 pm we have the Weekly Jobless Claims, followed at 2.45 pm by the US Services/Composite PMI. Finally we have the ISM Non-Composite and Factory Orders at 3.00 pm
September S&P 500
My S&P plan worked well with the market trading lower to my 2466 buy level with a 2463.25 low print before rallying late on the back of Apple shares which helped propel the Dow to close over 22,000 for the first time. This rally saw me cover my long position at my revised 2470 T/P level and I am now flat. However as long as the S&P holds below last Thursday’s 2480.50 high print we still have negative divergence vis-a-v the Dow. Today I will again look to buy the S&P on any dip lower to 2461/2467 with a 2456 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2451 with a 2445 stop. I still do not want to be short the S&P at this time as we approach the key 2500/2510 resistance level.
My Euro plan also worked well with the Euro trading higher to my 1.1860 sell level before selling off just before the US Markets opened to my 1.1825 T/P level and I am now flat. The Euro subsequently topped at 1.1910 before having a late sell-off into the New York close. Yet again the Euro has closed over its 500 Week Moving Average at 1.1800 in what is one of the most severely overbought markets that I have witnessed in many years. When the Euro does sell-off the fall could be dramatic with the Euro falling several hundred points. Today I will again look to sell the Euro on any rally higher to 1.1900/1.1950 with a 1.1985 stop.
September Dollar Index
Finally the Dollar sold off yesterday afternoon with the market trading to a new low at 92.39 for this move. This move lower saw me buy the Dollar at 92.65 and again at 92.45 which now has me long at an average rate of 92.55. I will now raise my stop on this position to 92.05. With the Daily Sentiment Index reading at near record lows it is only a matter of time before we see a dramatic turnaround in the Dollar which has now fallen over 12% since January which is a huge move.
I keep saying how important my Platinum Service is especially with the updated emails which means you can email any change as markets move during the day. Yesterday after the DAX missed my initial 12190 buy level by a few points before having a decent rally I emailed my Platinum Members to lower their buy level 12150 with a revised T/P level at 12185 which was subsequently filled and I am now flat. For the second consecutive trading session the DAX topped at the key 12300 resistance level. However I still do not want to be short the market at this time and today I will now look to buy the DAX on any dip lower to 12020/12080 with an 11970 stop. The DAX has massive support at 12060 and any test of this level should see a decent recovery especially if it coincides with a top in the Euro.
The FTSE just missed my 7315 buy level before rallying into the close and I am still flat. With Sterling weak against the Euro as we approach the key 0.90 resistance level it is very difficult to be short the market. However the 8 week trend line that I mentioned yesterday which comes in at 7415 is strong resistance and today I will again look to sell the market on any rally higher to 7410/7445 with a 7475 stop. I will also lower my buy level slightly to 7260/7295 with a 7230 stop.
Dow Rolling Contract
A rare occurrence happened for the Dow yesterday as the Index gapped higher on the open for the sixth time out of the past seven trading sessions. There was a five consecutive-day higher opening in May of this year but prior to that there was no comparable streaks from 1988 until this year. That is a lot of history. Several streaks of higher opening Dow gaps occurred in 1987. For instance, the Index gapped higher on 5/6 days from May 21-29, 1987. It gapped higher at the open for 5/6 days from June 9-17, 1987. Finally the Dow gapped higher at the open for 5/7 days from August 5-13 1987. The stock market peaked on August 25, 1987 and by October was crashing. There were also several streaks in 1982, 1983 and 1984. I am not saying that history is going to repeat itself but the fact that the Dow Transports have had a large fall since it’s July 14 high and if this high manages to stay unbroken then we have what is called a Dow Theory Non-Confirmation. This is significant as no sell-off in the past 85 years has occurred without this key development. With sentiment levels at extreme levels this is one dangerous market. I am still short the Dow in extremely small size at 21885 and today I will only add to this position on any move higher to 22090 with a 22140 stop.
I am still flat the Bund and today I will lower my sell level slightly to 163.20/163.50 with a 163.75 stop. Naturally I do not want to be long the Bund at this time given the insane 48 basis point yield.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1244/1252 with the same 1236 stop as I still do not trust this market.
Silver Rolling Contract
Very frustrating as Silver missed my 16.45 buy level with a 16.47 low print before rallying 30 points and I am still flat. Today I will leave lower my buy level to 16.10/16.35 with a 15.90 tight stop.