In an otherwise relatively quiet trading session with only the mildest of risk-on tones, gold was something of a standout. The price action came at 9am London time ( just after I posted yesterday’s commentary ) when gold immediately plunged by $20/oz after a huge spike in the volume of orders. It had all the makings of another “fat finger” episode, whether it was selling incorrect volumes, a junior episode or whatever. The interesting thing is that gold did not immediately revert to it pre fat finger level and is still off $11.90 overnight. Mild risk on is consistent with gold lower. European equities closed 0.37% higher (Eurostoxx 600), while US stocks have closed almost flat. The VIX has eased further back into single digit territory.
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For anyone following my Platinum Service it made 87 points yesterday and is now ahead by 782 points for June, having made 1071 points 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 1750 points.
On the currency front, both AUD and NZD have inched higher, the AUD trading this morning at 0.7610, also well within its recent ranges. US Treasury yields were marginally lower, including at the shorter end of the curve, notwithstanding comments from Fed President John Williams in Sydney yesterday that he still sees interest rates rising gradually with inflation getting to the 2% target next year. Like Yellen, he spoke of the transitory factors pulling US inflation down. Oil prices were up, WTI by 1.12% to $43.49, Brent too by 0.86%.
Former Fed Chairman Bernanke and ECB President Draghi have both been speaking, at different venues but on a similar theme. Bernanke’s was the opening address at the ECB Forum in SIntra, Draghi’s at the Lisbon School of Economics and Management. (He’s speaking at the ECB Forum later.) Bernanke spoke of how the US election showed growth was not enough, voters questioning whether government has improved their lives. Draghi was defending QE, saying that youth unemployment is still too high, noting that millenials that found a job on the back of ECB policy are not complaining. He welcomed interest in the policy issue of inequality. And he even batted back on the hit to savers from negative rates saying that “recessions are not good for anybody, savers or non-savers. If there is no growth, there is no saving”. Saver will see a return on their savings “in due time”. The ECB is still not on the cusp of winding back QE, it seems.
All this came after of yet another very strong German IFO Survey, June’s again beating market expectations, the German economy still accelerating through mid-year. US Durable Goods Orders report for May underwhelmed, both headline and core orders down and softer than expected. The Atlanta Fed did not change its GDPNow estimate for Q2 GDP from 2.9%, which if averaged with 1.2% keeps the US on that moderate 2% growth track.
This morning on the Economic Front the Bank of England will release its Financial Stability Report at 9.00 am and this is followed at 11.00 am by the CBI Retailing/Distributive Reported Sales. Finally at 3.00 pm we have the US Conference Board Consumer Confidence and the Richmond Fed Manufacturing Index at 3.00 pm.
The key event the market will centre on today will be Fed Chair Yellen’s speech in London at 6.00 pm, among an array of central bank speakers. She is though slated to speak on global issues and I think the market knows what comments she would make on the US, inflation and rates. ECB president Draghi is giving a speech at the ECB Forum Sintra event. Also at the same session are senior ECB members Coeure and Praet. Fed President’s Harker and Kashkari are both speaking, Harker in London (focussing on international issues) while Kashkari is keeping it real at a town hall event in Michigan just after the markets close at 10.30 pm.
September S&P 500
The S&P just missed my 2451 sell level before selling off as yet again the NASDAQ got hit hard after a brief rally. The NASDAQ has never really recovered from its 250 point sell-off earlier this month. Internally the market was Okay with the McClellan Oscillator closing with a positive reading of +28 after been negative for most of the past week. Of course this helped generate the last two Hindenburg Omens. After a nine year bull market the stock market is not going to suddenly crash unless we get a Black Swan Event and despite my grave concerns for this market especially given the high PE Ratios I am reluctant to be short until we get a sell extreme that lasts for more than a few days. There is no doubt the US economy is slowing as shown by the reluctance for the 10 Year Treasury Yields to rise. Eventually a recession will be signalled when the 10 Year Rate trades below the Fed Funds Rate which will happen after another 2/3 rate hikes. Today I will now lower my sell level to 2447/2453 with a 2458 stop. I will also lower my buy level slightly to 2422/2428 with a 2417 stop.
Yet again the Euro traded in a narrow range with the market stuck either side of 1.12 which it has done for most of the past seven weeks. I am still flat the Euro and today I will leave my buy level unchanged 1.1100/1.1140 ahead of both Yellen and Dragi’s speeches later. I will now lower my sell level slightly to 1.1250/1.1290 with a 1.1330 stop. Remember a break and close over 1.13 for a couple of days is a breakout and could well see the market accelerate to the upside.
September Dollar Index
No change as I am still a buyer of the Dollar on any dip lower to 96.30/96.60 with the same 96.05 stop.
Despite the stronger German Economic data over the past few weeks the DAX is finding it difficult to break higher. This is no surprise given last Tuesday’s sizeable Downside Key Day Reversal. I am still flat the DAX as I emailed my Platinum Members earlier this morning to cancel any buy level from yesterday’s commentary. The DAX has strong support at 12660 ahead of the low from last month at 12570. My only interest in buying the DAX is now on a further dip lower to 12590/12645 with a 12545 tight stop. Despite me concerns for this market I still do not want to be short the DAX at this time.
The FTSE continues to trade in a narrow range ahead of strong support at 7335 and the two week low at 7315. I am still flat and today I will now lower my buy level to 7310/7340 with a 7285 stop. Remember we had a Downside Key Day Reversal last Tuesday so the market should work its way lower to my buy range. Given the huge discount to the Cash FTSE, I still do not want to be short the September Contract at this time.
Dow Rolling Contract
I am still flat the Dow which is selling off as I write this commentary. Unfortunately the Dow just missed my 21380 buy level by 6 points before rallying. The Dow made a high at 21506 yesterday before spending the rest of the trading session selling off. Today I will now lower my sell level to 21500/21570 with a 21625 stop. The Dow has strong support at 21300 and today I will now lower my buy level to 21275/21335 with a 21225 tight stop.
My Bund plan worked well with the market trading higher to my 165.45 sell level before selling off 30 points. As I want to continue with my theme of banking points when available especially after such a quiet trading month so far I covered this position at my revised 165.33 T/P level and I am now flat. Today I will again look to sell the Bund on any move higher to 165.50/165.80 with a 166.05 stop.
Gold Rolling Contract
My Gold plan worked well with the market getting slammed shortly after I posted yesterday morning to my average buy level at 1240, before trading higher to my revised 1246.50 T/P level and I am now flat. Almost $2 billion of Futures Contracts hit the market causing Gold to fall $20 in a matter of seconds. So far Gold is holding its key 1237 Moving Average support ahead of long-term support at 1225. I do not like large Red Candles in such a short space of time and I do not believe the Fat Finger Trade explanation for yesterday’s sell-off as none of yesterday’s Gold trades at the day’s low were busted. Given the strength of the 1225 support level I will again look to buy Gold on any dip lower to 1224/1232 with a 1218 tight stop.
Silver Rolling Contract
Silver traded the whole of my buy 16.25/16.60 buy range shortly after I posted yesterday morning which put me long at an average rate of 16.42. Just like Gold above I do not like the aggressiveness of this sell-off and as a result I covered my long position at my revised 16.52 T/P level and I am now flat. For any member still long both Gold and Silver from yesterday I would use this rally to exit their position. We have made a lot of points in Silver over the past 18 months and I must confess to been totally surprised by the recent sell-off. Silver has strong support from 15.70/16.00 from last December and a break and close below here could well see Silver accelerate lower to a 14 handle. Today I will again look to buy Silver on any dip lower to 16.00/16.30 with a 15.65 stop.