U.S. Equity Markets reversed Wednesday’s gains in what turned about to be a savage move lower as the NASDAQ 100 made a new low for the year, ending the day with a loss of 5.06%. This move lower saw the VIX spike over 22%, closing at a price of 31.20. The U.S. Department of Labour reported that another 200,000 people filed Initial Jobless Claims in the week ending April 30. This figure was above the week prior’s upwardly revised figure of 181,000 and Wall Street’s forecast of 180,000. The data came shortly after the U.S. Bureau of Labour Statistics’ Job Openings and Labour Turnover Survey hit a record high. This means individuals are not having trouble finding jobs with better pay, which indicates that many consumers have more money in their bank accounts to spend on goods. As a result, this is sending inflation higher. The Fed is intent on returning monetary policy back to pre-pandemic levels at a minimum. After all, economic activity has rebounded and even surpassed levels achieved in 2019. That means interest rates need to go back to a target range of at least 1.50% to 1.75% while the balance sheet needs to shrink to $4 trillion from the current $9 trillion. Central bank policymakers nationally agree. Chicago Fed President Charles Evans and San Francisco Fed President Mary Daly have called for interest rates to return to neutral (neither hurts nor helps the economy) by December. Policymakers have said getting to that neutral rate of 2.4% should slow inflation’s growth… but they need to get there first. That is where the pain comes in. The implication of achieving neutral by December means rates need to rise by another 1.25% to 1.5% over the next four meetings in June, July, September, and November. You do the math… that’s at least two 0.5% increases and one 0.25%. The FOMC also began shrinking the $9 trillion balance sheet. Starting June 1, it will reduce the amount of proceeds that it reinvests when bond holdings mature. The initial reduction will be at a pace of $47.5 billion per month ($30 billion in Treasurys and $17.5 billion in mortgage-backed securities). The amount will adjust to $95 billion per month ($60 billion in Treasurys and $35 billion in mortgage-backed securities) by September. So, the Fed is not selling its bond holdings in the open market. It is just not reinvesting proceeds. By the end of the year, at least $522.5 billion worth of maturities will no longer be reinvested in current bond holdings. Adding to the inflation problem is Russia’s invasion of Ukraine. The conflict and the resulting sanctions are creating shortages of energy, metals, and grains. As supplies dwindle, demand remains the same. Prices have risen in anticipation. European Markets closed mixed. European Central Bank Executive Board Member Fabio Panetta said the regional economy is “de facto stagnating” as inflation weighs on activity. The Bank of England released its latest policy announcement, raising interest rates (to 1%) for the fourth straight meeting while saying the economic growth outlook is worsening. French Industrial Production figures for March declined more than expected as automobile and transportation material manufacturing slowed. German Factory Orders for March were weaker than anticipated due to easing demand for metal production and automobiles. In Asia, Equity markets in Japan and South Korea were closed for holidays. Bank of Korea Senior Deputy Governor Lee Seung-Heon said economic uncertainty will remain high due to the Ukraine conflict while recent weakness in the Won must be closely monitored. The People’s Bank of China said it held a meeting to discuss policies it can implement to support the economy as well as the “health development” of technology companies. Caixin China Composite Purchasing Managers’ Index (“PMI”) data for April dropped versus March, marking its lowest level since February 2020 due to weak services-sector activity. Elsewhere, Oil rose 0.52% after the oil cartel OPEC said it would maintain present production plans, while Gold fell 0.82% on a stronger Dollar.
To mark my 2525th 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@tradernoble.com for details
For anyone following my Platinum Service it lost 1050 points yesterday and is now down by 435 points for May having made 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss, having made 2466 points in November, 1028 points in October, 2866 points in September, 1543 points in August, and 996 points in July. The Platinum Service made 1366 points in June, 1439 points in May, 1244 points in April, after ending March with an impressive gain of 3769 points. 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
Equities
The S&P 500 closed 3.56% lower at a price of 4156.
The Dow Jones Industrial Average closed 1063 points lower for a 3.12% loss at a price of 32,997.
The NASDAQ 100 closed 5.06% lower at a price of 12,850.
The Stoxx Europe 600 Index closed 0.4% higher.
Yesterday, the MSCI Asia Pacific Index rose 0.6%.
Yesterday, the Nikkei closed 0.11% lower at a price of 26,818.
Currencies
The Bloomberg Dollar Spot Index closed 0.5% higher.
The Euro closed 0.6% lower at $1.0545.
The British Pound closed 2.1% lower at 1.2356.
The Japanese Yen fell 0.9%, closing at $130.14.
Bonds
Germany’s 10-year yield closed nine basis points higher at 1.04%.
Britain’s 10-year yield closed two basis points higher at 1.99%.
US 10 Year Treasury closed 12 basis points higher at 3.04%.
Commodities
West Texas Intermediate crude closed 0.52% higher at $107.95 a barrel.
Gold closed 0.82% lower at $1874.10 an ounce.
This morning on the Economic Front we have U.K. Global Construction PMI at 9.30 am. This is followed by the U.S. Non-Farm Payrolls including Average Earnings and the Unemployment Rate. Finally, we have a speech from Fed Member Williams at 2.15 pm.
Cash S&P 500
Although I expected a small pull-back in Equity Markets yesterday, I certainly did not see the absence of buyers across most asset classes. To have the NDX fall over 5% and hit a new low for the year after rising over 3.4% on Wednesday is not the sign of a healthy market. There were plenty of rumors of a risk parity fund seeing plenty of liquidations. This is the kind of news we see following a capitulation event and the way the Dow and S&P rallied in the last 10 minutes of trading may be significant. Technically, charts are severely oversold and I will stick to my game plan of buying the dips. Although my Platinum Service had one of its worst losses in points terms ever, it could have been much worse only for the fact that I had fixed stops. After the S&P hit my 4255 average buy level I was quickly stopped out of this position at 4219 and I am still flat. The S&P made a late low of 4105 before rallying nearly 50 Handles into the close. Given how oversold the S&P is trading, I will be a buyer today from 4100/4130 with a 4069 stop. If I am taken long I will have a T/P level at 4178. I still do not want to be short the S&P at this time.
EUR/USD
The Euro traded the whole of my buy range for a now 1.0565 average long position. The Euro will have resistance at yesterday’s 1.0625 high print. I will leave my 1.0485 stop on this position while lowering my T/P level to 1.0605.
March Dollar Index
The Dollar rallied hard yesterday and I am now short at an average rate of 103.30. I will leave my 104.05 stop unchanged while raising my T/P level to 102.90.
Cash DAX
The DAX traded sideways for most of yesterday’s session before getting slammed after the Cash Markets closed. This move lower saw my 14050 average buy level triggered before getting the DAX traded lower to my 13945 tight stop and I am still flat. I am going to stay flat the DAX over the weekend as I do not see a decent opportunity at these prices.
Cash FTSE
The 1% rate hike by the Bank of England accompanied by comments that inflation will get much worse than expected saw Sterling fall over 2% against the Dollar. This move helped the FTSE to trade higher for most of the day before a late sell-off saw the market hit my 7490 buy level. I am still long with the same 7395 stop. I will now lower my T/P level to 7540.
Dow Rolling Contract
It is a long time since I have seen the Dow fall over 1400 points from early yesterday morning’s highs in one day before having a late 300 point rally into the close. As I was long the S&P, NDX and DAX, I waited to buy the Dow which I did at the bottom of my buy range at 33600 before getting stopped out of this position a few minutes later at 33445 and I am still flat. This was a good stop given that the Dow is trading at 33000 as I go to press. The Dow has support from 32500/32750 where I will be a small buyer with no stop for now. If I am taken long I will have a T/P level at 33070. Remember both Google and Apple have announced $70bn and $90bn buybacks alone this month respectively and this should help underpin any further losses.
Cash NASDAQ 100
My NDX plan did not work well yesterday as I was stopped out of my 13200 long position at 12985. I continue to nurse last month’s 14327 long position which I have now carried into May. I will now lower my exit level on this position to 14100 which I am hopeful we will see this month. Given the fact that the NDX closed over 5% lower yesterday I will not add to this position today as I have enough exposure ahead of the weekend.
June BUND
Frustrating. The Bund made a rebound high at 154.15 just missing my 154.30 T/P level before stopping me out at 152.75 and I am still flat. The Bund is now trading above 1% after having one of the most aggressive sell-offs in history. There is a lot of pain in the European Bond Markets with Central Banks sitting on massive losses. The Bund has support from 151.50/152.20 where I will again be a buyer with a 150.95 stop.
Gold Rolling Contract
No Change. I am still flat as I continue to be a buyer on any dip lower to 1845/1860 with an 1831 stop
Silver Rolling Contract
Silver traded lower to my 22.60 buy level. I am still long with the same 21.65 stop and T/P level at 23.30.
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