The past 24 hours have been quiet on the Economic Front with little or no news to excite markets. The low volatility saw stock markets make new recovery highs while the VIX closed below its 50 Day Moving Average for the first time since early October. Markets saw some support for the US Dollar re-emerge, while US Treasury yields ticked higher, but not sufficient to do any damage to stocks, the US main board indexes making some gains during the afternoon session, led by the tech stocks.
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For anyone following my Platinum Service it made was made 25 points yesterday and is now ahead by 25 points for February, having made 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 Australian Dollar took a mini hit yesterday after the release of another very weak Building Approvals Report, the second in a row, this one for December, the data point revealing a 22.5% decline over the course of last year, confirming the coming decline in residential dwelling investment. After seeing a small rally into the number, the AUD lost 20 pips, ending the local session only a little above its session lows. It has lost a little more ground this morning, but more from the move back toward the USD. It is hard to see too much of a move higher given the current environment ahead of today’s Retail Sales and Trade data which are both expected to be soft.
The Financial Services Royal Commission was released yesterday after the local stock market has closed, receiving wide press coverage yesterday, but no discernible currency impact.
RBA pricing has moved away from a mild tightening bias to an easing bias, the market yesterday factoring in just over a 50% chance that the Bank would ease by the end of this year. Understandably, that is an about face from the expectation last year that there was an equivalent chance that the Cash Rate would rise.
German Chancellor Angela Merkel is urging creativity to unlock the UK-EU Irish backstop impasse. “There are definitely options for preserving the integrity of the single market even when Northern Ireland isn’t part of it because it is part of Britain while at the same time meeting the desire to have, if possible, no border controls,” Merkel said. “To solve this point you have to be creative and listen to each other, and such discussions can and must be conducted,” she said at a news conference with Japanese Prime Minister Shinzo Abe in Tokyo. Merkel said the backstop could be solved as part of a discussion over the separate ‘’future relationship’’ agreement. Even so, EUR/GBP has been gaining a modicum of support, though there is not too much in it, the Euro gaining a net 0.12% since I posted yesterday morning.
As further background to Brexit, a FT story released says that the UK government had promised Nissan circa $80mn in return for the car maker to invest and expand a new SUV model in Sunderland as well as Qashqai and X-Trail models. At the weekend Nissan said it would produce the new SUV in Japan. UK Business Secretary Greg Clark has said that Nissan will need to reapply if it wants a U.K. financial grant, after it decided not to produce the X-Trail model at its Sunderland plant. Meanwhile Prime Minister May is travelling to Northern Ireland for a speech today.
Most high credit quality Bond yields have ticked higher over the past 24 hours in a mild risk-on session. The German 10y bund yield is up a net 1.1bps to 0.177% while the 10y Treasury yield is also ticking back higher to 2.72%, up 3.58bps with 2s also higher by 2.44bps to 2.5263%. Very small moves but hints of yields having overdone it on the downside after the FOMC and Powell press conference.
With China out this week, the Dalian exchange is closed, limiting true price discovery on the bulk commodities until next week. Oil is softer ahead of Weekly Inventories, with crude stockpiles expected to rise another 1.2mb after last week’s reported 0.919 gain. WTI is down 1.19%, only partly reflecting the US Dollar’s uptick. Brent is down a lesser 0.25%. Base metals on the LME have posted good gains (led by nickel +4.74%; copper +0.47%), the jump in nickel on the back of lower stockpiles in Shanghai and the LME. Among the softs, sugar prices rose 1.98%, US wheat futures also making some gains.
There is little to report with US Factory Orders the only release of note and follow the release of already-released Capital Goods Orders. Headline Factory Orders missed estimates, orders down 0.6% against expectations of a 0.3% gain. These moves are well within normal monthly volatility and do not suggest any underlying shift in momentum. Core Capital Goods Orders for November were left unrevised at -0.6%. Noting to trouble the scorers from this report.
The UK Construction PMI was much weaker than expected at 50.6 from 52.8 prior and 52.5 expected. Anecdotes suggested Brexit-related anxiety and associated concerns about the domestic outlook continued to weigh on client demand. Of note the Employment Index hit a two and a half year low with concerns about the near-term outlook for new projects resulting in more cautious staff hiring.
This Morning on the Economic Front we have German, Euro-Zone and UK Markit Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. Next we have Euro-Zone Retail Sales at 10.00 am. This is followed by US Services PMI at 2.45 pm. Finally at 3.00 pm we have ISM Non-Manufacturing.
March S&P 500
Very late in the Chicago session the S&P finally closed the 2723.50 Open Gap from December 5, with a high of 2725. This move higher saw the S&P hit my 2723 sell level. As I had no interest in hold this position overnight I emailed my Platinum Members to exit any short position at 2720.50 and I am now flat. This incredible move higher in the S&P since the December 26 low saw the VIX finally close below its 50 Day Moving Average with a 15.75 print. The S&P still has a tough hurdle at 2741 which is the 50 Day Moving Average to negotiate before we can say that this move higher is not a correction, but a massive move higher. Today I will again look to sell the S&P on any further move higher to 2733/2745 with a 2753 tight stop. I will also move my buy level higher to 2688/2700 with a 2679 stop.
I am still flat the Euro which again traded in a narrow range which it has done for most of the past six months. Today I will lower my buy level again to 1.1350/1.1390 with a 1.1305 stop.
March Dollar Index
No Change as I am still a small seller on any further rally to 95.90/96.30 with the same 96.55 tight stop.
I am still flat the DAX and today I will now raise my buy level to 11000/11080 with a 10945 stop.
The weakness in Sterling helped the FTSE to rally yesterday with the market coming nowhere near my buy range and I am still flat. I will also raise my buy level here to 6900/6945 with a 6855 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow continues to build value above its 200 Day Moving Average. I have had the correct view in this market without been able to get a meaningful long position on board. Thankfully we have not been short for any of this now 3500 points rally over the past six weeks. Today I will now raise my buy level to 24940/25090 with a 24825 stop.
The NASDAQ was the strongest of the US Indices yesterday as thankfully we also had no sell levels in this market yesterday. Today I will now raise my buy level to 6825/6875 with a 6775 stop.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1295/1304 with the same 1288 stop.
Silver Rolling Contract
Silver made a low of 15.67 before having a small rally into the New York close. I am still long at 15.83 with the same 16.00 T/P level. Meanwhile I will leave my stop unchanged at 15.35.