After a quiet February, Volatility picked up in the US stock market with the Indices reversing all of Friday’s gains and then some, the S&P and NASDAQ closing down 0.4% and the Dow by 0.8% (albeit losses for the former were closer to 1% at 5.00 pm). Friday’s moves themselves still remain something of a mystery coming on the heels of the softer than expected US Manufacturing ISM release and which offered some further evidence that US tariffs on China are hurting the US just as much as they are China. In this respect, Bloomberg is reporting on two separate papers published over the weekend where some of the world’s leading trade economists declared Trump’s tariffs to be the most consequential trade experiment seen since the 1930 Smoot-Hawley tariffs blamed for worsening the Great Depression. They also found the initial cost of Trump’s duties to the U.S. economy was in the billions and being borne largely by American consumers (not by China, as Trump continues to claim).
To mark my 1800th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it lost 260 points yesterday and is now down 253 points for March, having made 1013 points in February, 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
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notification
This then makes yesterday’s sell off all the more mysterious in so far as it comes in the midst of the news published at the start of yesterday’s trading suggesting that a Sino-US trade deal was almost done and could be signed off by Presidents Trump and Xi later this month. This produced a decent risk rally across all equity markets during the London session (including a 0.5% jump in the S&P futures) but the New York market moves are now being read as proof that a trade deal must surely now be fairly fully priced?
I have some sympathy for this view, though would not underestimate Mr. Market’s ability to discount the ‘’same news twice’’ if and when a deal is done in. In this respect, one still-nagging doubt on a trade deal surrounds Huawei, where the apparent response to the weekend news that Canada has agreed to extradite the Chinese technology behemoth’s CFO to the United States, has been to accuse the two Canadians detained by China last month soon after the arrest of the Huawei CFO of spying.
Possibly of some relevance to the weaker equity tone is the soft US Construction spending release at -0.6%, though this is for December so of more relevance to possible downward revisions to Q4 GDP than what is says about Q1 (where the current ‘’Nowcast’’ models are at this early stage not painting a particularly pretty picture though will of course be reflecting the impact of the US government shutdown that lasted through January).
As for the 3%+ surge in the Shanghai Composite yesterday (but where gains were reduced to little over 1% by the close) it is probable that speculation of new economic stimulus measures to be unveiled at this week’s National Peoples’ Congress, may have had a hand. We learned yesterday that one such announcement could be a 3% cut to the VAT rate, a move some economists are suggesting could be worth some 0.6% of GDP; it would provide a significant boost to flagging Chinese corporate profitability.
In FX, there is not a lot of rhyme nor reason to what is a fairly disjointed set of moves across the G10 currency spectrum. The USD is overall a touch stronger which is consistent with it being a ‘’risk off’’ session; then again the USD was stronger on Friday alongside higher stocks with higher US bond yields blamed but which are lower today, go figure! Seeing the AUD, NZD and JPY as the only three G10 currencies to be stronger versus the US Dollar sums up the difficulty of succinctly characterising FX moves of the last 24 or rather 48 hours.
Bond markets are seeing Friday’s yield back-up largely reversed, so US 10-year Treasuries down 3.5bps at 2.72%, having been up by almost 4bp Friday. The 2-year yield is 1bp lower. Earlier, European 10-year bond yields fell on average of 2bps. News that German public sector workers have secured an 8.8% pay rise to be spread over the next 3 years – so roughly twice the current rate of inflation – is something that can help bolster confidence in a somewhat stronger domestic demand story for the German economy going forward, but doesn’t appear to have had any market impact. Do though expect the ECB to play this up when it meets on Thursday.
Not too much to say about commodities, where iron ore and most non-ferrous metals are lower, as is gold, but oil prices are 50-70- cents higher.
This morning on the Economic Front we have German, Euro-Zone, UK and US Markit Services PMI at 8.50 am, 9.00 am, 9.30 am and 2.45 pm respectively. At 10.00 am we have Euro-Zone Retail Sales, followed by US Building Permits at 1.30 pm. Finally at 3.00 pm we have US New Home Sales and ISM Non-Manufacturing PMI.
March S&P 500
I had the right idea about buying the dip yesterday just the wrong stop across the Dow and S&P. After the Dow traded the whole of my buy range I waited to buy the S&P which I did at a price of 2784 before getting stopped out of this position near the low of the day at 2772 and I now flat. Yesterday was doubly frustrating as it was my worst session in a few months compounded by the fact that the S&P rallied over 25 Handles off the low into the close. If the S&P had of closed near its lows we would have had a Downside Key Day Reversal but the late rally saved this key technical indicator from happening. Yesterday’s 2820 high should act as strong resistance over the coming days and today I will now lower my sell level to 2815/2828 with a 2835 stop. The S&P has strong support from 2763/2773 and I will be a buyer on any dip to this area with a 2755. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer on any further dip lower to 2732/2745 with a 2724 stop.
My Euro plan worked well with the market selling off to my 1.1310 buy level before rallying back above 1.1345. This move higher enabled me to cover this long position at my revised 1.1322 T/P level and I am now flat. Today I will again look to buy the Euro on any further dip lower to 1.1250/1.1290 with a 1.1205 stop.
March Dollar Index
The US Dollar is at a critical juncture. If the Dollar does not break lower there is a good chance that we can test the next key resistance area at 100 over the coming weeks. I am still flat and today my only interest in selling the market is from 97.10/97.50 with a 97.85 stop. The Dollar has good support from 95.90/96.30 and today I will be a buyer in this area with a 95.55 tight stop.
My DAX plan also worked well with the market trading lower to my 11525 buy level before rallying to my revised 11549 T/P level and I am now flat. This morning the DAX is trading higher at 11590. Today I will again look to buy the DAX on any dip lower to 11420/11490 with a 11365 stop. I still do not want to be short the DAX at this time
The FTSE fell just short of my 7060 buy level before rallying into the close which was no surprise given the renewed weakness in Sterling. Today I will move my buy level higher to 7040/7085 with a 7005 stop.
Dow Rolling Contract
While the S&P Cash Market rallied to a new high for the year at 2817 the Dow did not with the rally stopping short of its February 25 high of 26241. Subsequently the Dow fell 600 points before rallying over 200 points off its 25610 low into the close. My Dow plan did not work well with the market trading the whole of my buy range for an average long position of 25875 before stopping me out of this position at 25710 and I am now flat. As long as the Dow can hold above its key support level at 25200 I will continue to be a buyer on dips. Today I will be an aggressive buyer on any further dip lower to 25420/25620 with a 25320 stop. I still do not want to be short the Dow at this time.
My NASDAQ plan worked well with the market trading lower to my 7090 buy level before rallying to my revised 7119 T/P level and I am now flat. This morning the NASDAQ is trading higher at 7155 as yet again the buy the dip wins the battle. Today I will again look to buy the market from 7050/7095 with a 7010 stop.
I have now rolled to the June Contract which trades at a discount of 260 points to the March Contract. The June Contract has strong resistance from 163.30/163.70 and today I will be a seller in this area with a 164.05 tight stop.
Gold Rolling Contract
I am still long Gold at 1296. Today I will now add to this position on any further move lower to 1279 with a now lower 1271 stop. If I am taken long a second time I will then lower my T/P level to 1290. Otherwise I will leave my T/P level unchanged at 1297.
Silver Rolling Contract
I was stopped out of my 15.50 long Silver position at 15.10 and I am now flat. Silver has strong support from 14.50/14.90 and today I will be a buyer in this area with a 14.15 stop. If I am taken long I will have a T/P level at 15.15.