U.S. Equities closed a whisker higher after treading water for most of the session as markets braced for an onslaught of central bank news this week. The US Dollar strengthened to its highest level since mid-June and Treasuries slipped. The S&P 500 Index perked up just before the close yesterday, with gains in technology shares helping to offset a slump in materials and consumer staples. So-called FAANG shares — including Amazon.com Inc. and Facebook Inc. — led advancers in the equity benchmark. Trading may stay choppy ahead of key testimony this afternoon from Federal Reserve Chair Jerome Powell as observers assess prospects for easing following conflicting signals on the global economy. Stock and bond investors are struggling to find fresh reasons to chase this year’s rallies, but an interest rate cut by the Fed this month is already priced and recent economic data has been mixed, making the path for future policy less clear.
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For anyone following my Platinum Service it made 135 points yesterday and is now ahead by 424 points for July, having made 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Powell is likely to walk a fine line between the hawks and doves in his testimony — giving a nod to the underlying strength in the domestic economy on the one hand, while also acknowledging the persistently subdued inflation backdrop and global uncertainties on the other. The S&P 500 Index gained 0.1% to close at 2979, 20 Handles off its intra-day low. The Stoxx Europe 600 Index closed lower after the world’s largest chemical company, BASF, slashed its 2019 earnings forecast, blaming global trade conflicts, ending the European session 0.5% lower. The U.K.’s FTSE 100 Index decreased 0.2%, while Germany’s DAX Index slid 0.9%, the biggest decrease in more than five weeks.
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index rose 0.2% to its highest in three weeks.
The British pound fell 0.4% to $1.2464, the weakest in more than two years.
The Euro decreased 0.1% to $1.1207, the lowest in three weeks.
The Japanese yen weakened 0.2% to 108.89 per dollar.
The Mexican peso dropped 1.1% to 19.1273 per dollar, the biggest tumble in over five weeks, after the country’s Finance Minister announced his resignation.
Hong Kong’s Dollar dipped as the city’s leader Carrie Lam said a controversial bill that would allow extraditions to China was “dead,” but stopped short of saying she’d withdraw the legislation after weeks of protests.
Bond Markets are on hold ahead of this afternoon’s Fed Testimony with the yield on 10-year Treasuries rising one basis point to 2.06%, a three-week high. In Europe, Germany’s 10-year yield increased one basis point to -0.35%, the highest in more than a week while Britain’s 10-year yield also rose one basis point to 0.72%.
West Texas intermediate crude gained following a report that Russian output declined, gaining 0.6% to $58.02 a barrel. Gold rose 0.1% to $1,396.76 an ounce, while Bitcoin extended Monday’s 11% jump to sit at $13,000 as I go to press.
This morning on the Economic Front we have UK GDP, Industrial/Manufacturing Production, Index of Services and the Trade Balance at 9.30 am. This is followed at 12.00 pm by US MBA Mortgage Applications. At 3.00 pm Fed Chair Powell testifies before Congress on monetary policy and the state of the U.S. economy (the House of Representatives). Tomorrow at the same time he will testify to the Senate. Finally we have the Bank of Canada Rate decision at 3.00 pm followed by the FOMC Minutes at 7.00 pm.
September S&P 500
The S&P traded lower after I posted early yesterday morning which gave you a chance to buy the market as I had done at a price of 2968. It took a while before finally the market rallied to my 2974 T/P level and I am now flat. As long as the S&P can hold the key 2950/2960 support area then I will continue to be a buy on dips. In my opinion given the unfair advantage that European Countries hold over the US in relation to negative Bond Yields, the US will have no choice but to let their yields join the party. It is insane that with the US the largest and best economy, and the most liquid bond markets, of any major nation has yields higher than most other countries. Yet with the exception of Greece, which is only 10 bps higher, the highest yield for 10 year debt. As US Yields fall and the Fed cut Rates further than anyone expects, fund managers will have no choice but to buy Equities. This is why the S&P will continue to move higher over time. Today I will be a buyer on any dip lower to 2955/2965 with a 2947 stop.
I am still long the Euro at 1.1225 with the same 1.1235 T/P level and 1.1185 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September Dollar Index
Ahead of Powell’s testimony I am not going to chase the Dollar higher and today I will leave my 96.00/96.40 buy level unchanged with the same 95.55 stop.
The recent rally in the DAX did not last long with the market trading lower to my 12380 buy level. Subsequently the market rallied 80 points and I used this move higher to cover this long position at my revised 12415 T/P level and I am now flat. Today I will again look to buy the DAX from 12310/12370 with a 12255 stop. As long as the DAX can hold the key 12300/12400 support area then I will continue to be a buyer on dips in the market.
No Change as I am still a seller on any rally higher to 7505/7545 with the same 7575 stop.
Dow Rolling Contract
As I wanted to hang on to the gains made in the DAX and S&P, I emailed my Platinum Members to exit any long Dow position at my revised 26710 T/P level and I am now flat. For those members who did stay long the Dow traded to an overnight high of 26820 before falling 100 points from this rebound high. The Dow has strong support from 26470/26620 and today I will be a buyer on any dip to this area with a 26340 wider stop. I still do not want to be short the market at this time.
Unfortunately, the NASDAQ just missed my 7730 buy level by 13 points before spending the rest of the session trading higher. Today I will move my buy level higher to 7730/7780 with a higher 7675 stop.
I am still flat the Bund and today I will now lower my sell level to 173.20/173.65 with a 174.05 stop.
Gold Rolling Contract
Gold just missed my 1383 buy level before having a strong rally into the close. Ahead of Powell this afternoon I am not going to chase the Gold market higher and I will leave my 1373/1383 buy level unchanged with the same 1365 stop.
Silver Rolling Contract
Shortly after I posted yesterday morning Silver rallied to my 15.05 T/P level on my latest 14.95 long position and I am now flat. Today I will again look to buy the market from 14.60/14.90 with a 14.25 stop. If I am taken long I will have a T/P level at 15.10.
I have not commented on Cable for many months but with the market trading to a two-year low I feel there is a buying opportunity here. Cable is trading below its Daily Bollinger Band and at the bottom of the Williams Index. This is a volatile contract but as emailed to my Platinum Members yesterday I bought GBP/USD at 1.2460 with a 1.2380 stop and a 1.2530 T/P level.