Last Friday’s US Payrolls Report was strong in all respects, lifting the US Dollar and US yields across the board while allowing for small-scale gains in US stocks and risk sentiment. Non-Farm Payrolls rose by 209k against 180k expected with trivial 2-month net revisions, the unemployment rate fell by 0.1% to 4.3% as expected and while average earnings only rise by the 0.3% expected, rounding meant the year-on-year growth rate held at 2.5% rather than the expected drop to 2.4%. President Trump’s chief economic policy adviser Gary Cohn was banging the (autumn) tax reform gong loudly on Friday (including making clear than incentives for US firms to repatriate profits held overseas was an integral part of the administration tax plans). Fed dove Neel Kashkari meanwhile tweeted said the payrolls report didn’t change anything (implying he still wants to see evident of higher inflation before being persuaded to vote for higher rates.)
To mark my 1400th 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 email me on email@example.com for details.
For anyone following my Platinum Service it made 70 points on Friday and is now ahead by 241 points for August, having made 1096 points in July, 1023 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.
It has been a slow start to the week, as it is a case of one swallow doesn’t make a summer, markets not yet prepared to extrapolate last Friday’s strong US Employment Report into a major view change about the Fed and the US Dollar. Resident Fed doves James Bullard and Neel Kashkari were both out yesterday evening reiterating they see no need for further rates rises anytime soon. US Treasuries are now about 2.5bps back from their post-payrolls highs, but this may be more to do with lower Bund (and gilt) yields, which responded to yesterday’s weaker than expected German Industrial Production numbers (-1.1%m/m against an expected 0.2% rise). This also looks to have been responsible for underperformance by German and broader European stocks relative to an ongoing rise in US Indices (S&P up another 0.16%). The bigger picture story here though remains the strength of the Euro and weakness of the US dollar this year and what that is doing in terms of translating offshore earnings back into local currency. Year to date, the S&P is up 11% and the DAX less than 7%. EUR/USD is up 12%. Enough said.
Far and away the biggest FX move since the start of the week has been the NZD, off 0.67% and now almost two cents back from its late July highs above 0.7550. While yesterday’s drop in 2-year inflation expectations, to 2.09% from 2.17%, looked to have had some negative impact this was hardly surprising after the reported drop in CPI in Q2 (from 2.2% to 1.7%). Rather, record long speculative positioning, judging from MM futures data, is the bigger story, with NZD then one of the bigger causalities as soon as US Dollar sentiment became less bearish as was the case even before Friday’s US data.
The other big currency mover is the Rand, +1.67% on news of a secret no-confidence vote in President Zuma to take place Tuesday. If he loses, ZAR looks set to soar.
Commodity currencies in general have been softer, with AUD/USD spending a brief amount of time sub-0.79 (low of 0.7899) and USD/CAD +0.28%. Lower oil prices are part of the story here. OPEC and non-OPEC countries are meeting in Abu Dhabi to discuss noncompliance with previously agreed production cuts. Latest slippage is said to be due to Libya’s Sahara oil field coming back on tap after being halted on Sunday by armed protestors, while energy consultants Baker Hughes reported that worldwide drilling reached its highest level in two years in July.
This morning on the Economic Front we have German Current Account at 7.00 am and this is followed at 11.00 am by US NFIB Small Business Optimism. Finally at 3.00 pm we have the JOLTS Job Openings which one indicator that Fed Chair Yellen pays a lot of attention to.
September S&P 500
Yet again the S&P closed at a new record high on what turned out to be a low volume low trading session with what seems like most traders are already on vacation including the US President. Despite all these new highs the S&P as yet has not closed over the 2480.50 high from last Thursday week, although as I write this commentary we are close to this price. The S&P needs to break and close below 2450 for the market to turn at least temporarily bearish with the next support not until 2425.50 which is a small ‘’Open Gap’’ from July 11. I am still flat the S&P and today I will now raise my buy level to 2463/2469 with a 2458 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2451 with a 2445 stop. As I have a tiny short position in the Dow I still do not want to be short the S&P at this time especially as there is a fair chance we are going to test the key resistance at 2500/2510 first before we see some more pronounced selling.
Unfortunately my Euro plan did not work well on Friday as after the Euro just missed my 1.1930 sell level, the Euro got hit hard to my average buy level at 1.1790 before frustratingly stopping me out of this position near the low of the day at 1.1740 before rallying back above 1.1800 yesterday. In my view there is little or no chance of more than one rate hike in the US for the rest of this year and this is why the Dollar is finding it so hard to rally despite the extreme negative sentiment towards the greenback. However the reversal on Friday suggests that rallies are to be sold and today I will look to sell the Euro from 1.1850/1.1885 with a 1.1920 stop which is just above last week’s high print.
September Dollar Index
My long 92.65 Dollar position worked well on Friday with the market rallying to my 92.80 T/P level. Subsequently after the NFP was released I emailed my Platinum Members to re-buy the Dollar on any dip lower to 93.20 and this was filled early yesterday morning with a revised 93.40 T/P level. Shortly after the US Markets opened the Dollar rallied to my T/P level and I am now flat. Today I will again look to buy the Dollar on any dip lower to 92.65/93.05 with a 92.35 stop.
Unfortunately the DAX just missed my 12070 buy level on Friday before the market rallied over 200 points on the weakening Euro and I am still flat. Today I will now raise my buy level to 12100/12160 with a 12050 stop. Despite the DAX having trouble in breaking the key 12300 resistance level I still do not want to be short the market at this time.
Shortly before the NFP was released on Friday the FTSE traded higher to my initial 7435 sell level. The beauty of my Platinum Service is my updated emails and after I went short I emailed them to cover this position at 7430 as I wanted to be flat ahead of the Payroll release especially with Sterling so weak. I am still flat and today I will now raise my buy level to 7390/7420 with a 7365 stop. Given the weakness in Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
The idea of selling the Dow a second time worked well on Friday as the market spiked higher to my 22100 sell level before selling off and this sell-off enabled me to cover this position at my revised 22028 T/P level. I am still short in tiny size at 21885 as I patiently wait for a sell extreme in the Dow. Yesterday the Dow closed 25 points higher for a new all-time record close. However the NYSE Advance/Decline Ratio was slightly negative while the McClellan Oscillator again is weak closing in negative territory over the past three trading sessions which is insane when apart for Transports the other main US Indices are at or close to all-time highs while sentiment remains near extreme levels. With the S&P pushing 2480 this morning I am not going to add to my existing short Dow position and will just observe the market for today. If the market sells off I will be back with an updated emails for my Platinum Members.
The Bund just missed my 163.20 T/P level ahead of the NFP and as I wanted to be flat ahead of this release I covered my short 163.35 position at my revised 163.32 T/P level and I am still flat. The Bund subsequently traded to a 162.89 low print before rallying yesterday. Today I will again look to sell the Bund on any rally higher to 163.75/164.05 with a 164.25 tight stop.
Gold Rolling Contract
Gold continues to trade in a sideways fashion with little or no movement with the market back below the key 1260/1270 resistance level. I do not trust this market and today I will now lower my buy level to 1238/1246 with a 1232 stop.
Silver Rolling Contract
After Friday’s NFP release Silver traded lower to my 16.30 buy level. I am still long and will only add to this position on any subsequent move lower to 16.00 with a 15.80 stop. I have now lowered my T/P level to 16.45 as my fears for a sell-off in Silver increase especially as the market has rallied strongly from last month’s 15.17 low print.