U.S. Equity Markets closed lower for the third consecutive trading session led by the 2.66% fall in the NASDAQ 100. It was an ugly day as the VIX ended Monday with a gain of 16% at a price of 23.80. Markets were hammered as investor fears grow ahead of Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole on Friday. Consensus is growing on Wall Street that the Fed will strike a harshly hawkish tone to combat market optimism and resilient economic indicators in the labour market. Europe’s worsening energy crisis has driven the Dollar even higher. The Federal Reserve Bank of Philadelphia released its Manufacturing Business Outlook Survey for August. The index rose to a reading of +6.2 compared to the expectation for -5 and July’s -12.3. It marked the first improvement since March. The Philadelphia Fed began administering the survey in May 1968 to gauge regional business activity. It sends questionnaires out to manufacturing executives in the area, asking them about the state of current business in addition to forecasting the state of activity six months down the road. For August, the decline in new and unfilled orders became less severe, while shipments, delivery times, and inventories all improved. Key measures of inflation, both metrics showed a steady downward trend since peaking earlier this year. This is the same result we saw from the New York Fed’s Manufacturing Survey last week. A sustained move lower in inflation metrics should support a steady long-term rally in the S&P 500 Index… Prices paid is important because it tells us what manufacturers are paying to produce goods… In other words, we can think of it relative to the U.S. Bureau of Labour Statistics’ Produce Price Index (“PPI”). In the August survey, the gauge hit the lowest level since December 2020. This points toward a further drop in manufacturing costs. Prices received is an equally important reading. This measure tells us what companies are collecting for their finished goods… in other words, what it’s costing individuals to buy something. So, we can think of it relative to the U.S. Bureau of Labor Statistics’ Consumer Price Index (“CPI”). The August reading is at the lowest level since February 2021 and points toward further weakness in the CPI… The subindexes tell us inflation is cooling. That has been a mantra of the Federal Reserve. Chairman Jerome Powell has told us it will need to slow overall economic growth in order to ease rising costs. The central bank started down that path in March by raising interest rates. The change in policy direction corresponds closely with the shift in prices paid and received. Longer term, this is a trend Money Managers who are investing for eight to 12 months down the road must see in order for them to grow more optimistic about risk assets like stocks. They realise the hyper growth experienced during 2021 due to massive amounts of stimulus is unsustainable. Those big-money investors want to see economic activity revert back toward the mean. That way, they have less to worry about from a liquidity and Fed policy perspective. It took roughly 30 months for inflation to reach these levels, and it is going to take at least 12 months to notice a meaningful slowdown. But this is a step in the right direction. A sustainable move down will tell us the Fed can back off its aggressive rate-hike path moving forward. This will support a longer-term rally in the S&P 500. Within the S&P 500, all 11 sectors finished lower. European Markets closed lower. Citigroup warned that inflation in the U.K. is on course to hit 18.6% by next year as energy prices soar. Bundesbank Chief Joachim Nagel said the European Central Bank must tighten its policies further to combat inflation. Just last week, German and French energy prices posted fresh highs with Consumer Price Index (“CPI”) estimates suggesting inflation may exceed 10% in coming months. In Asia, Following, a weak Friday in U.S. markets, nearly all Asian equities ended lower Monday. China cut its lending rate again as it attempts to stimulate economic spending. Meanwhile, Reserve Bank of New Zealand’s Deputy Governor Christian Hawkesby said that rates could be increased to as much as 4.25%. The Yen’s weakness compared to the Dollar intensifies fears as analysts anticipate a hawkish tone from the U.S. Fed this week. Elsewhere, Oil closed 0.59% lower after a volatile session while Gold fell a further 0.78% on continued Dollar strength.
To mark my 2600th 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 lost 1070 points yesterday and is now ahead by 623 points for August, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 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 2.14% lower at a price of 4137.
The Dow Jones Industrial Average closed 643 points lower for a 1.91% loss at a price of 33,063.
The NASDAQ 100 closed 2.66% loss at a price of 12,890.
The Stoxx Europe 600 Index closed 1.7% lower.
This morning, the MSCI Asia Pacific Index fell 0.8%.
This morning, the Nikkei closed 1.18% lower at a price of 28,455.
Currencies
The Bloomberg Dollar Spot Index closed 0.8% higher.
The Euro closed 0.9% lower at $0.9940.
The British Pound closed 0.8% lower at 1.1744.
The Japanese Yen fell 0.2% closing at $137.49.
Bonds
Germany’s 10-year yield closed 9 basis points higher at 1.31%.
Britain’s 10-year yield closed 8 basis points higher at 2.50%.
US 10 Year Treasury closed 5 basis points lower at 3.03%.
Commodities
West Texas Intermediate crude closed 0.59% lower at $89.44 a barrel.
Gold closed 0.78% lower at $1735.10 an ounce.
This morning on the Economic Front we have German, Euro-Zone, U.K. and U.S. Global Services PMI at 8.30 am, 9.00 am, 9.30 am and 2.45 pm respectively. Finally, at 3.00 pm we have New Home Sales and the Richmond Fed Manufacturing Index.
Cash S&P 500
Wrong!! The S&P has now fallen nearly 5% since last week’s 4327 high print as one long position after anther got stopped yesterday. It was an ugly session with all 11 sectors within the S&P closing lower. These are brutal markets at the moment with now two-way price action on the way down which, similar to the six-week up move when the market went vertical with zero two-way price action. This price movement does not suit my trading style at this time. I was stopped out of Friday’s 4242 long position near the close at 4150 and I am still flat. From an overbought situation last week the S&P is getting oversold. The McClellan Oscillator closed last night with a -199 print, very close to a -250 buy signal. My expectation of a rally into Fed Chair Powell’s Jackson Hole speech has so far to be wide of the mark. However, the S&P has strong support from 4092/4102 where I will be an aggressive buyer with a 4079 ‘’Closing Stop’’. If I am taken long I will have a T/P level at 4140. Remember the Dollar is severely oversold and is trading over 10% lower on a Purchasing Parity Basis. A weaker Dollar is key as it will lead to a rally in both Bond and Stock Markets going forward.
EUR/USD
The Euro made a new 20 year low yesterday, trading below the 2002 low of .9950, sitting at .9910 this morning. As I mentioned above the Euro is severely oversold. The Euro has suffered a peak- to- trough decline of over 20% from its 2021 peak highs to last month’s move lower through parity for the first time since the early 2000s. The Euro is now trading 1.5 Standard Deviations below its 200-Day Moving Average, implying there is a lot of negativity reflected in the price. If you are long Dollars I would certainly look to take your long-term gains at current prices. Yesterday I added to my 1.0039 long position at .9979 for a now 1.0009 long position. Given how oversold the Euro is trading I will continue to hold this position with no stop. I will now lower my T/P level to 1.0060. 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. The Dollar continues to rally, trading at 109.00 this morning. The last time the Dollar was this overvalued, at the end of 2016, we quickly saw a 10% decline in the Dollar over the following 12 Months. I am expecting a similar outcome, I just do not know what the catalyst will be. Based on a longer-term outlook, the risk/reward is skewed to the downside. In my view, a key source of prior support has disappeared (strong economic growth) and another is fully discounted and may be on the verge of reversing which of course is a divergence in Central Bank rate hike expectations. I am now short the Dollar at an average rate of 107.50. Given how overbought the Dollar is trading I will have no stop on this position, fully believing that we are close to a reversal in the Greenback. I will leave my T/P level unchanged at 106.80 for now.
Cash DAX
The weak Euro saw the et hit hard again yesterday, trading the whole of my buy range for a now 13270 average long position. I will leave my 13175 ‘’Closing Stop’’ unchanged while lowering my T/P level to 13350.
Cash FTSE
The FTSE continues to trade in a narrow range despite Gilt Yields rising further to 2.50%. Yesterday’s small-sell-off saw the FTSE hit my initial 7490 buy level. I am still long with a now lower 7540 T/P level. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow fell a further 600 points yesterday, and is now trading over 1200 points lower from last week’s high print. This move lower has me long at an average rate of 33225 with the same 32995 ‘’Closing Stop’’ I will now lower my T/P level to 33410 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX sold off to my buy range yesterday afternoon enabling me to buy the market at 13000. I added to this position at 12850 for a now 12925 average long position. The NDX has fallen over 6% since last week with the market having strong support at the 12800 level. I will leave my 12745 ‘’Closing Stop’’ unchanged while lowering my T/P level to 12990.
September BUND
My latest long 152.65 Bund position did not work well as I was stopped out of this position at 151.65 and I am now flat. With Yields rising over 50 Basis Points in the past week, the BUND is severely oversold. We have short-term support from 150.40/151.10 where I will again be a buyer with a tight 149.75 stop. If I am taken long I will have a T/P level at 151.80.
Gold Rolling Contract
I am still long Gold from Friday at 1739. Gold has traded in a narrow range over the past 24 hours. I will continue to look to add to this position at 1725 with the same 1714 stop. I will now lower my T/P level to 1751, and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Silver Rolling Contract
I was stopped out of my latest 19.60 long position at 19.10. This morning Silver is trading slightly lower at 18.89. I have bought Silver again here at this level with a 17.95 stop. I will have a T/P level at 19.70 on this position.
Recent Comments