US Equities closed yesterday in negative territory with the Dow and S&P ending the trading session with a fall of -0.25% and -0.33% respectively on what turned out to be another quiet trading session. The Financials were again the worst performing sector in the S&P 500 as the internals continued to weaken with the McClellan Oscillator closing with a -127 print. Early in the session, the main European equity Indices ended day down between 0.3% and 0.6% with Deutsche Bank dragging financial shares lower after announcing plans to raise capital. Yesterday’s news that North Korea had launched four missiles with three of them landing inside Japan’s Exclusive Economic Zone didn’t help sentiment while commodities were also under the pressure on diminished Chinese growth prospects.
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For anyone following my Platinum Service it made 40 points yesterday and is now ahead by 35 points for March, having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Copper and aluminium ended the day down 1% and iron ore closed at -1.7%. Gold and oil prices were little changed.
In currencies, the US Dollar recovered a bit of lost ground after the mild sell off triggered by Fed Chair Yellen’s speech on Friday evening. Gains in the big dollar have coincided with a late selloff in US Treasury yields with the move led by the back end of the curve amid longer dated corporate issuance and prospects of UST issuance later in the week.
The Japanese Yen is the only G10 currency that has managed to withstand the late rise in the USD. USD/JPY is essentially unchanged at ¥113.80 with the AUD a little bit softer, down 0.14% at 0.7600. Meanwhile NZD has remained under pressure, slipping another 0.5% over the past 24hrs and spending most of the night just under the 70c mark. Expectations of a soft dairy auction tomorrow morning and yesterday’s soft dwelling’s data have not helped the Kiwi.
The Euro is 0.3% lower against the USD and currently trading at 1.0587. Just after I posted yesterday morning the currency pair traded to an overnight high of 106.4, but then it quickly sold off following news that Alain Juppe had ruled himself out of the French Presidential race. Evidently, Juppe’s pull out has been interpreted as lessening the chances of Far Right Le Pen being knocked out in the first round. The move also saw the spread of 10y French to German bonds widen from 58 to 62 bps.
This morning on the economic front we already had the release of German Factory Orders. These came in much weaker than expected with a fall of 7.4% versus the consensus of -2.5%. At 8.30 am we have UK Halifax House Prices and this is followed at 10.00 am by Euro-Zone GDP. Finally on another quiet day for US data we have the Trade Balance at 1.30 pm and Consumer Credit at 8.00 pm. A pick up in Consumer Credit is expected after a soft December print ($18bn exp. vs 14bn previously.) and advance data on goods Trade Balance suggest the US trade deficits could have widened to a five year high of $49bn from $44bn in December, mainly on the back of rising imports. A trade deficit is a drag on growth and overnight US trade adviser Peter Navarro said the U.S. faced a growing economic and potential national security risk from the commercial behaviour of its major trading partners and added that the Administration would make the reduction of U.S. trade deficits its top policy focus. Watch this space.
March S&P 500
Yesterday was another frustrating trading session for me with regards the S&P as the market just missed my 2366 buy level with a 2366.75 low print before rallying 10 Handles and I am now flat. For those Members who bought in front of my buy range then this strategy worked well. The S&P has now closed most of the huge ”Open Gap” from last Tuesday’s Chicago close to Wednesday afternoon’s low. Remember the S&P almost always closes any large ”Gap’s”. As mentioned above the McClellan Oscillator got hit hard over the past few days closing with a -127 reading which is incredible when you see the US markets trading within 1% of all-time highs. This fits in with my view that the market will have at least one more attempt of last Wednesday’s 2401 high before finally having a sell-off that is meaningful. Today I will raise my buy level to 2361/2367 with a 2356 stop. My only interest in selling the S&P is still on a rally higher to 2396/2402 with the same 2408 stop. We may not get this rally until the FOMC Meeting next Wednesday.
My Euro plan worked well with the market trading lower to my 1.0585 buy level shortly before lunch before rallying to a 1.0610 high and this rally enabled me to cover this position at my revised 1.0605 T/P level and I am now flat. Today I will again look to buy the dip in the Euro as we saw how three days of losses for the Euro were wiped out in just a few hours late on Friday post-Yellen. Thus my buy level will be from 1.0540/1.0575 with a 1.0505 tight stop. I still do not want to be short the Euro at this time.
March Dollar Index
I am not comfortable in being long the US Dollar at this time as I believe the rally we have had over the past four weeks to correct some of January’s 5% fall is just about over. Yesterday I covered my latest long 101.40 Dollar position too early at 101.35 and I am still flat. Today I will look to sell the Dollar on any rally higher to 101.85/102.20 with a 102.60 stop which is just above the important 102.45 pivot point.
No change as I am still a small buyer on any dip lower to 11835/11885 with the same 11785 stop. Despite the woes of Deutsche Bank weighing on the market, I still do not want to be short the DAX at this time.
Unfortunately the FTSE just missed my 7315 buy level with a 7323 low print before rallying 30 points and I am still flat. Today I will raise my buy level slightly to 7285/7320 with the same 7255 stop. The weakness in Sterling continues to support the FTSE at this time and is the main reason why I am not comfortable in being short the market despite how overbought we are trading.
Dow Rolling Contract
In my opinion the Dow is close to at least a short-term low that should result in a rally back to 21,000 especially with the MO closing with a -127 print last night. I am still flat the Dow which just missed my buy range before rallying. Today I will raise my buy level slightly to 20820/20890 with a 20750 stop. I will still be an aggressive seller on any rally higher over the coming days to 21140/21200 with the same 21260 stop.
My Bund plan worked well with the market trading lower to my 161.00 buy level before rallying and this rally enabled me to cover this position at my revised 161.25 T/P level. Subsequently I emailed my Platinum Members to re-buy the Bund at 160.90 and I am still long with a 161.15 T/P level. My stop on this position I will now raise to 160.70. If I manage to cover this position at 161.15, I will again look to buy the Bund on any dip lower to 160.65/160.95 with a 160.35 stop and a T/P level again at 161.15. Given the massive difference in the roll between the March and June Contracts I do not want to be short the Bund at this time.
Gold Rolling Contract
As I am back long Silver I reduced my buy level in Gold in an email to my Platinum Members and I am still flat. Gold has essentially traded flat over the past 24 hours following its $40 sell-off over the previous few days. The one worry for Gold bulls is the huge amount of rising bets in the precious metal as Money Managers went net long over 34,500 contracts over the past few weeks to a net-long of 121,720 contracts. This is a large position and probably explains the recent sell-off in both Gold and Silver. Today my only interest in buying Gold is on a dip lower to 1206/1213 with a 1199 stop.
Silver Rolling Contract
I bought Silver again late yesterday at 17.75. I am nervous in holding a long position given the excessive long position from the Money Managers and probably explains the surprise 4% fall in Silver last Thursday. In light of this information I have now cut my long Silver position at a breakeven and I am now flat as I believe we will get a better chance to buy Silver cheaper. Today I will lower my buy level to 17.10/17.40 with a 16.80 stop.