U.S. Equity Markets closed lower yesterday after a volatile trading session that saw plenty of two-way volatility. Despite the increased volatility, the VIX also closed lower by 1.72% at a price of 26.82. Markets dropped as U.S. inflation growth for June came in higher than expected. The Consumer Price Index rose 9.1% year over year. Investors fear that this could force the Fed to consider raising interest rates by as much as 1.0%, instead of the previously anticipated 0.75% increase, later this month. This pushed the benchmark U.S. Treasury yield curve (two-year/10-year) on Wednesday to its largest inversion since November 2000. All eyes will be on big banks’ earnings this afternoon and tomorrow for any sign that a recession is not imminent. Meanwhile, in a surprise event, the Bank of Canada, raised Interest Rates by 1%. Within the S&P 500, nine of the 11 sectors finished lower. European Markets closed lower as the Euro dropped to parity with the Dollar for the first time since 2002, stoking fears of worsening inflation. The rising costs of goods mean people will have to spend more on their needs and less on their wants. Comments from Spain’s Prime Minister, Pedro Sanchez, worsened the growth outlook further. He said the country’s government will temporarily implement a tax on banks and power companies to offset inflation. These kinds of moves typically result in costs being passed onto the consumers. At the same time, Germany’s Finance Minister Joerg Kukies said the country will stop buying Russian coal by August and will do the same with oil by the end of this year. The change implies rising costs for energy consumption. In Asia, Equities remained flat ahead of U.S. inflation data. The Yen and other currencies are now at a greater risk of losing steam to the Dollar. larger-than-anticipated rate hikes from the central banks in South Korea and New Zealand highlight the worries that inflation will hurt regional economic growth. Overnight, the Yen weakened to 138.50 against the Dollar, for the first time since 1998. The number of COVID-19 infections in China remains stable, but further outbreaks could pose a threat to global supply chains and stoke inflation more. Elsewhere, Oil rose 0.48% while Copper reversed some of this week’s heavy losses with a gain of 1.05%
To mark my 2575th issue of TraderNoble Daiy 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 made 740 points yesterday and is now ahead by 1820 points for July after closing June with a gain of 3371 points June, while making 3651 points in 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. 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 0.45% lower at a price of 3801.
The Dow Jones Industrial Average closed 208 points lower for a 0.67% loss at a price of 30,772.
The NASDAQ 100 closed 0.14% lower at a price of 11,728.
The Stoxx Europe 600 Index closed 0.9% lower.
This morning, the MSCI Asia Pacific Index fell 0.4%.
This morning, the Nikkei closed 0.65% higher at a price of 26,651.
Currencies
The Bloomberg Dollar Spot Index closed 0.2% lower.
The Euro closed 0.1% higher at $1.0058.
The British Pound closed 0.2% lower at 1.1851.
The Japanese Yen fell 0.6% closing at $137.65.
Bonds
Germany’s 10-year yield closed 1 basis points higher at 1.14%.
Britain’s 10-year yield closed 1 basis points lower at 2.06%.
US 10 Year Treasury closed 6 basis points lower at 2.91%.
Commodities
West Texas Intermediate crude closed 0.48% higher at $95.40 a barrel.
Gold closed 0.55% higher at $1732.10 an ounce.
This morning on the Economic Front we already had the release of German Wholesale Price Index which rose 0.1% versus +1% expected. At 1.30 pm we have U.S. PPI and Weekly Jobless Claims. Finally, we have a speech from Fed Member Waller at 4.00 pm.
Cash S&P 500
Yesterday’s 9.1% CPI print caused a massive sell-off as markets saw increased tightening from the Fed as the Dollar rose to price this in. Subsequently, we saw a large rally after the Bank of Canada raised rates by 100 basis points which caused the Dollar to drop, before Fed Member Bostic put a 100 bp rate hike on the table for this month’s Fed Meeting which caused the Dollar to rise again and Equities to sell-off but still close well off the lows of the day. The only comparable time to current price action was back in 1974 and 1980 when Inflation hit 15%. Once the word ‘’recession’’ was mentioned on both occasions the Fed cut rates even though Inflation had not topped, leading to a 40% rally in Equity Markets. This proves that recession is more dominant than any inflation concerns. In my opinion the more aggressive the Fed are in tightening the quicker we will see a recession, the sooner we will see the Fed flip and start to cut rates again. Yield inversions are becoming even more extreme with several Banks now calling for a recession this year and into 2023. The sooner we see a recession the better for it will bring inflation down and will also shorten the tightening cycle. Thus, the bullish outcome for a forward-looking market is to see a shallow recession followed by rate cuts. In this case damage is minimised. Yesterday, the S&P traded the whole of my buy range for a 3795 average long position before rallying to my 3811 revised T/P level with a 3830 high print and I am still flat. With the Dollar again testing parity this morning, the S&P is trading lower at 3782. We have support at the Weekly 150 MA where the S&P again bounced from following the CPI print. I will be a buyer on any further dip to 3745/3765 with a 3729 ‘’Closing Stop’’. I still do not want to be short the S&P at this time.
EUR/USD
Thankfully, the Euro rallied to my 101.20 T/P level on my latest 100.55 long position. There is no doubt the strength of the Dollar is causing massive pain in both Japan and Europe while at the same time severely affecting the price earnings of the multi-nationals. I bought the Euro again at an average rate of 100.45. I will have an unchanged 99.75 ‘’Closing Stop’’ on this position while my T/P level will be at 101.10. If any of the above levels are hit I will be back with a new update for my Platinum Members.
March Dollar Index
No Change. I am still a seller on any further rally 108.50/109.10 with the same 109.75 stop. The Dollar is now trading outside the bottom of its Daily Bollinger Bank. History tells us that this will not last, setting up for a large move lower in the Dollar over the coming months.
Cash DAX
My DAX plan worked well with the market trading lower to my 12670 buy level before rallying 150 points. This move higher enabled me to cover this position at my revised 12730 T/P level and I am now flat. This morning, the DAX is lower on the Back of the weaker Euro, trading at 12720. We have support from 12570/12650 where I will be an aggressive buyer with a 12495 stop.
Cash FTSE
My FTSE plan worked well with the market trading lower to my 7110 buy level before rallying to my 7160 T/P level and I am still flat. The FTSE has support from 7060/7120 where I will again be a buyer with a higher 6995 stop.
Dow Rolling Contract
With Consumer and Business Sentiment at the lowest levels ever, a recession is inevitable in America. However, as we saw in 1980 when the Fed flipped, Sentiment also surged as the Dow rallied 40%. The Dow has to get through today’s PPI and tomorrow’s Retail Sales ahead of major earnings reports that start with JP Morgan. Yesterday my Dow plan worked well with the market hitting my 30650 buy level before rallying to my revised 30855 T/P level (high 30980) and I am now flat. Today, I will again be a buyer of the Dow on any further move lower to 30250/30550 with a wider 29995 ‘’Closing Stop’’. The ‘’Fear & Greed Index closed at 24 last night which is ‘’Extreme Fear’’. This is another reason not to press the downside given how oversold stocks are across the board. Interestingly, Internals are still reasonable strong despite the aggressive sell-off this week as shown by the McClellan Oscillator still closed barely negative with a -9 print.
Cash NASDAQ 100
The NDX traded lower to my second buy level at 11690. I am still long with a now lower 11770 T/P level and the same 11495 ‘’Closing Stop’’. Lower Treasury Yields should support the NDX in Q3 and is the main reason why I continue to hold my April long position at 14327. I will leave my exit level unchanged at 12900 on this position.
September BUND
My Bund plan worked well with the market trading hitting my initial 153.10 sell level before trading lower to my 152.60 T/P level and I am now flat. This morning the Bund is trading lower at 152.30 as I go to press. We have resistance from 153.00/153.70 where I will again be a seller with a 154.15 ‘’Closing Stop’’. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Following the CPI print, Gold traded lower to my 1708 buy level before turning around and rallied to my 1723 T/P level. I am now flat. Today, I will again be a buyer on any dip lower to 1693/1708 with the same 1683 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still long at 19.40 with the same 20.10 T/P level. Meanwhile, I will leave my 18.35 stop unchanged.
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