The pattern of a weaker US Dollar has continued to play out since I posted 24 hours ago, as the Bloomberg Spot Dollar index closed down another 0.29% and the DXY down a larger 0.48%. The Euro has been the largest beneficiary, EUR/USD up and over 1.18, levels not seen since January 2015. It’s been a combination of continued momentum appetite for the Euro, aided by somewhat better-than-expected data out of Europe, mixed data from the US, and over recent hours, more revolving doors at the White House. Anthony Scaramucci has been shown the door after that recent venting tirade. Newly-appointed Chief Of Staff John Kelly has apparently been given carte blanche to make changes. And he did. Whether justified or not, it’s only added to the market’s perception that the wider tax reform, budget reform, and growth agenda is even further on the backburner. Adding to the market’s gloom over Washington, Fed Vice Chairman Fischer warned in a Brazil speech how political uncertainty can hurt economic growth. His speech was pondering why interest rates globally have remained so low for so long, including from weaker investment and demographics, evident even before the Global Financial Crisis.
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 email@example.com for details.
For anyone following my Platinum Service it made 6 points yesterday to finish July with a 1096 point gain, 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.
The Euro is trading this morning at 1.1835, the best performing of the majors closing up 1.0%. In some contrast, the AUD has under-performed, now just testing 0.80, up 0.17% ahead of the RBA Board statement later this morning. Euro-Zone Unemployment and core inflation were both better than expected. Unemployment in June was down to 9.1% from 9.2%, also helped by a downward revision. Headline CPI in July was right in line with expectations at 1.3% y/y (unchanged), core CPI a tenth higher than in June and expectations at 1.2%. Admittedly there’s little in all that, but supportive of the momentum.
The Chicago PMI printed at a still high 58.9 (down from 65.7; 60.0 was expected), the Dallas Fed Manufacturing survey was stronger, while Pending Home Sales rose 1.5%, out-shading the 1.0% consensus. Separately, the Fed’s latest Senior Loan Officer’s Survey reported that credit conditions remain fluid with virtually no tightening evident, but also reporting that large and medium firms had the lowest net percentage of loan demand since the December quarter of 2011.
While the Australian Dollar has been a slight under-performer, it’s certainly been in the spotlight. China’s July official PMI printed at a tenth below expectations at 51.4, it seems the market was braced for a lower print – rather than its six month average – that might have played more to the slowing growth story in the second half. Also, the accompanying China Steel PMI was up to 54.9 from 54.1, including from a bounce in orders to 63.1. Chinese iron ore and steel futures had a very strong session yesterday (futures curves lifting across tenors), also evident in the spot price of iron ore that’s up an eye-glazing 7.2% overnight. Met and steaming coal futures prices also had good gains; LME base metals rose 0.57%, largely mirroring the weaker US Dollar.
This morning on the Economic Front we have German, Euro-Zone, UK and US Manufacturing PMI at 8.55 am, 9.00 am, 9.30 am and 2.45 pm respectively. At 1.30 pm we have US Personal Income/Spending and the PCE Deflator. Finally we have the ISM Manufacturing at 3.00 pm.
September S&P 500
The S&P traded in a narrow 9 Handle range as the market missed my initial 2478 sell level with a 2475 high print. Yet again the Dow made another new all-time closing high while both the S&P and NASDAQ struggled as the political situation in Washington worsens by the day. As long the S&P stays below last Thursday’s 2480.50 contract high then this negative divergence between the main Indices will continue. However it is difficult to be short when the US Dollar is weak as we know from the UK experience that following the 20% depreciation in Sterling, the FTSE soared to new highs. As I am short the Dow I will now raise my sell level in the S&P to 2480/2486 with a 2491 stop, given there is still the possibility of the S&P trading to round number resistance at 2500 before the market finally rolls over. The Greed and Fear Index is now showing extreme Greed which is another warning shot that this rally is near at least a temporary end. I am not going to chase my buy level higher and today this will remain unchanged from 2449/2455 with the same 2444 stop.
As I was already long the Dollar Index I waited to sell the Euro which I did at 1.1815. I am still short and as mentioned to my Platinum Member earlier will only add to this position on a move higher to 1.1860 with the same tight 1.1880 stop which is just above the 2010 high and strong resistance at 1.1872. If you look at the Daily Chart, the Euro is now in its spiking stage and I would expect the market to reverse from near current levels in a dramatic fashion. If I am stopped out of this short position I will be a more aggressive seller from 1.1900/1.1940 with a 1.1975 stop. I still do not want to be long the Euro at this time.
September Dollar Index
Unfortunately I was stopped out of my 93.35 long Dollar position at 92.90 shortly after the US Markets opened. Subsequently the Dollar traded lower to my second buy level at 92.80 and I will now only add to this position on any further move lower to 92.40 with the same 92.15 wider stop. Optimism remains bleak towards the Dollar’s prospects, as shown by the 10- Day Daily Sentiment Index, which is at its lowest level in 6 ½ years, since May 2011. The Dollar ended a year-long decline on May 4, 2011, declining 18% from a high made in June 2010. Prices then pushed higher for the following 14 months, rising 16% to July 2012. With a DSI reading of near record lows at 7% it is only a matter of time before we see the Dollar bottom and rally substantially. Back in January when the Euro was trading at 1.0380 I told everyone to cover and Dollar assets. The time has now come to reverse this strategy.
My DAX plan again worked well with the market trading lower to my 12080 initial buy level before rallying 30 points and this rally enabled me to cover my long position at my revised 12098 T/P level and I am now flat. With the DAX trading severely oversold after falling nearly 700 points in the past three weeks I will continue to look to buy the DAX on dips. Today my buy level will be from 11980/12045 with an 11940 tight stop.
Thankfully by the time you got to read my Daily Commentary this morning the FTSE was spiking to a morning high just short of 7360 which would have given you a much better fill than my 7305 exit point and I am still flat. Today I will raise my buy level slightly to 7260/7295 with a 7230 stop. I still do not want to be short the market at this time especially as today is the beginning of a new month when traditionally money managers put funds to work in the UK stock market.
Dow Rolling Contract
The Dow gaped higher at yesterday’s open unaccompanied to a new high by the S&P 500, NASDAQ, the S&P Small Cap Index, the Value Line Index and the Dow Jones Composite. Meanwhile the Dow Jones Transportation Average is now down 6% in the past 11 trading days, since its high on July 14. The NYSE Advance/Decline Ratio was flat during most of yesterday’s trading session, ending the day at 1:10:1. Maybe the Dow trades higher to 22000 round number resistance before this ends with the Greed & Fear Index at such an extreme it is only a matter of time before we have at least a decent correction. However we may need to see the Dollar rally first. Yesterday the Dow traded higher to my 21885 sell level in small size. I will now only add to this position on any move higher to 21980 with a higher 22030 stop. If I am stopped out of this position and remember I am only trading in small size waiting for the sell extreme to emerge, I will again look to sell the market on any move higher to 22060/22120 with a 22175 stop.
The opened in the middle of my sell range at 162.10 before quickly spiking to a 162.19 high print. I went short at 162.10 and subsequently after the Bund traded lower I emailed my Platinum Members to exit any short position at my revised 161.77 T/P level and I am now flat. Today I will again look to sell the Bund on any rally higher to 162.25/162.60 with a 162.85 tight stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1244/1252 with the same 1236 stop.
Silver Rolling Contract
The fact that Silver has rallied over 10% since its July 10 low at 15.17 and is now severely overbought, I will leave my buy level unchanged from 15.95/16.35 with the same 15.60 stop. Despite the market being overbought I still do not want to be short Silver at this time.