It has been a quiet start to the week with no major market moves since I posted 24 hours ago. US equities ended the day mixed with the Dow and S&P marginally lower while the NASDAQ closed marginally higher. A better than expected PMI print has helped the US Dollar stabilise while on the other side of the Atlantic the Euro has lost a bit of ground amid softer than expected activity indicators. Oil prices are a little bit stronger after Saudi Arabia and Russia threatened to escalate the dispute with countries that have not complied with production cuts. Last night President Trump called on all Republican senators to end “the Obamacare nightmare” ahead of a procedural vote to start debate on the health care bill.
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 70 points yesterday and is now ahead by 782 points for July, 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.
Well like Nick Jonas 2015 hit “Levels”, for currency markets it is all about levels at the moment. After falling to a 15 month low, the USD is approaching some critical levels (specifically 92.0 on the narrow DXY index and 1150 for the broader BBDXY). We do have the FOMC meeting tomorrow evening, but US politics could be a big test ahead of that. Opening the debate on repealing and replacing the Obamacare bill could be a positive for the USD as it would improve the prospect for the Trump administration to get its infrastructure spending and tax reform agenda back on track. On the other hand, failure to open the debate is likely to be a significant test for those key levels to hold. I doubt either will break convincingly with ease (at least not at first time of asking) but if we do break through, the potential for accelerated US Dollar losses is fairly obvious.
Meanwhile after three up days, the EUR traded with a softer tone. Yesterday morning the pair traded to an intraday high of 1.1680, but since then it has drifted lower and is currently trading at 1.1642. Mixed German and French PMIs in July saw the EU manufacturing PMI slipped to 56.8 vs 57.2 exp. and while the services PMI printed in line with expectations at 55.4. For now if the Euro pull back, it should find support at 1.1475 while strong resistance is seen at 1.1750. Similar to the Euro, yesterday the AUD reached an intra-day high of 0.7968, but it has traded with a softer tone during the overnight session and the pair opens this morning at 0.7924.
Oil prices are just over 1% stronger following comments from Saudi Arabia in St. Petersburg. At a joint OPEC/Non-OPEC conference Saudi Arabia’s Energy Minister Khalid al Falih said that “We are going to forcefully demand participation “from all producers. He then also added that Saudi Arabia would lead by example and cap its exports in August at 6.6m b/d, down from 6.9m b/d in May and 1m b/d lower than last year’s monthly.
In other news Former Federal Reserve Governor Daniel Tarullo said weak inflation could weigh on the Fed’s discussions about whether to raise interest rates again, with only little risk that prices will surge out of control. Tarullo said the risks of runaway inflation “seem pretty modest at this juncture.”
This morning on the Economic Front we have German IFO Business Climate and Current Assessment/Expectations at 9.00 am. This is followed at 11.00 am by UK CBI Business Optimism and at 2.00 pm by CBI Trends Total Orders/Selling Prices. At the same time the US will release its latest FHFA House Price Index. Finally we have the Conference Board Consumer Confidence and the Richmond Fed Manufacturing Index at 3.00 pm.
September S&P 500
There is an old Wall Street saying ‘’When Complacency Reigns, We All Get Wet’’ I know that this has been a consistent theme of mine over the past few months about how complacent traders are as shown by the 5-Day VIX which just closed at its lowest level in history. Never has there been a greater degree of complacency toward a pickup in market volatility, most often associated with a decline, than there is right now. What size is your umbrella? The current state of low volatility has persisted since last November, which suggests in my opinion that the next spike will be large and swift. As you have seen from my last commentaries I am not short, nor do I have more than one buy level indicated each day as one of these small sell-offs is going to develop into something nasty as we have seen with the DAX over the past week/10 days. Yesterday I was again unlucky with my S&P buy level as the market just missed my 2462 initial level with a 2463.25 before spending the rest of another boring session trading sideways to higher. With the FOMC Rate announcement tomorrow at 7.00 pm I do not believe a lot will happen ahead of this event especially at this stage there is no press conference scheduled with Fed Chair Yellen following the Statement. Today I will raise my buy level slightly to 2458/2464 with a 2453 stop. Meanwhile I will leave my sell level unchanged from 2482/2488 with the same 2493 stop.
After last week’s fireworks the Euro traded in a narrow range yesterday and I am still flat. The trend between the Large Speculators (trend followers) and Commercials (insiders) has widened to its largest level since May 2011 which came at the end of a large advance as we are currently seeing in the market since the Euro bottomed on the first trading session of January at 1.0340. The Euro topped on May 4, 2011 at 1.4944 before declining over 14% in the following 14 months. I am not saying that history is going to repeat itself but I want to show you why I have been reluctant to buy the Euro since we broke 1.14. Maybe the Euro has one more rally and then decline that produces a text book downside Key Day Reversal but I just want to emphasise the risks involved with long Euro positions. Today I will leave my sell level unchanged from 1.1720/1.1760 with a 1.1795 tight stop. Given the significance of the 1.1475 support as mentioned in my Economic Commentary above I will now lower my buy level to 1.1450/1.1510 with a 1.1420 stop.
September Dollar Index
No change as I am still long at 93.85 from last Friday. Again as mentioned yesterday I will only add into this position on any move lower to 93.50 with the same 93.20 stop. The Daily Sentiment Index reading again produced an 8% print which is the second such reading in the last week. In my opinion it is only a matter of time before the Dollar rallies to correct its decline from 103.80 on January 3rd to yesterday’s 93.64 low print.
Yet again my DAX plan worked very well with the market trading lower to my 12170 initial buy level and then my second buy level at 12140 for an average rate of 12155, with a 12133 low print before rallying to my 12205 T/P level and I am now flat. Yesterday’s low print came within striking distance of a long standing ‘’Open Gap’’ at 12120. The DAX is oversold, trading at the bottom of both its Daily Bollinger Band and Williams Index and is due a bounce after falling over 600 points in the past week. Today I will again look to buy the DAX on any dip lower to 12115/12175 with a 12075 tight stop. Naturally I still do not want to be short the market at this time.
The FTSE finally followed the DAX low yesterday after just missing my initial sell level at 7445. Subsequently the FTSE fell over 110 points to a 7291 low print before having a small rally into the 9.00 pm close. Thankfully I had no buy level in yesterday’s commentary and I am still flat. The FTSE has good support below at 7250 and today I will be a small buyer from 7215/7255 with a 7190 stop. Given the large discount to the Cash FTSE, I am not comfortable in chasing the Futures market lower from here and so will have no sell range today.
Dow Rolling Contract
The Dow continues to trade below its July 14 high at 21681 as the intra-market divergence between the Dow and both the S&P and NASDAQ persists. I am still flat the Dow and just like the DAX and FTSE above, I am reluctant to chase this market lower. Today I will leave my sell level unchanged from 21670/21730 with a 21780 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller on any subsequent rally higher to 21850/21920 with the same 21980 stop.
My Bund plan worked well yesterday with the market trading higher to my 162.60 sell level before finally in the late afternoon trading lower to my revised 162.40 T/P level and I am now flat. As my Daily Commentary takes up to 2 ½ hours to write each day I make it my mission where possible to bank points every day and this is why my Platinum Service is so important as I can adjust my T/P levels with my updated emails. This Platinum Service is going to become more and more important when we eventually see the US Stock markets roll over and volatility picks up. Today I will again look to sell the Bund on any rally higher to 162.70/163.10 with a 163.35 tight stop. Ahead of tomorrow’s FOMC Meeting I do not want to be long the Bund at this time.
Gold Rolling Contract
No change as I am still a small buyer on any dip lower to 1226/1234 with the same 1220 stop.
Silver Rolling Contract
The number of net-short positions has increased to 6455 Silver Contracts, compared to the near 100,000 net-long contracts ahead of the 18.69 high back on April 17. The fact that the net-short positions has increased despite the fact that Silver has closed higher over the past two weeks is a bullish sign. For this reason I will now raise my buy level in Silver to 16.10/16.40 with a 15.85 tight stop.