U.S. Equity Markets finished Wednesday slightly lower following a volatile trading session that saw plenty of two-way price action. The S&P led the decline, closing lower by 0.2%. Markets pulled back following the biggest two-day rally since April 2020 to start the week. Bond yields rose and the Dollar strengthened, renewing concerns over tighter financial conditions. September’s ISM Services Index slipped to 56.7 from 56.9 (a bit firmer move than expected), while the Employment Index increased to the highest level since March. OPEC+ agreed to slash output targets by 2 million barrels per day – the biggest cut since the pandemic and a move that could further exacerbate global growth and geopolitical concerns. Meanwhile, job switchers’ annual wage growth fell at its fastest pace since January 2021, showing signs that the labour market is finally starting to ease. The outlook for a slowdown in rate hikes is improving. Throughout the last nine months, the most important factor in terms of stock market performance has been central-bank rate hikes. As inflation spiralled higher, central banks around the world were forced to increase rates in an attempt to bring cost growth back under control. Money managers are worried about what the long-term consequences of those policy actions will mean for the global economic growth outlook. After all, policymakers like Federal Reserve Chairman Jerome Powell have said they need to kill economic demand to slow exploding cost growth. And now, with rates going up and stocks and bonds falling, investors are wondering when the cycle might end, because when they get a sense that the tide has turned, they will want to do two things: lock in the highest yields on U.S. sovereign debt in over a decade and buy cheaper equities. On Tuesday, there were signs that time horizon is approaching, supporting the long-term outlook for the S&P 500 Index. The Reserve Bank of Australia (“RBA”) was the first global central bank to flinch. Governor Philip Lowe said it would raise the benchmark cash rate by 25 basis points (or 0.25%) to 2.6%, compared with the consensus expectation for a 50-basis-point increase (or 0.50%). This caught investors anticipating continuously aggressive global central-bank rate tightening off guard. You see, the RBA has been the most aggressive central bank behind the Federal Reserve in terms of tightening rates. Since the start of April, it has increased the cash rate from 0.1% to 2.6% compared with the Fed’s 3% increase. The Bank of England (“BOE”) is not far behind, having increased its bank rate from 0.1% to 2.25% since December of last year. Meanwhile, the European Central Bank (“ECB”) is trailing the group, having bumped its deposit facility rate from -0.50% to 0.75%. Now don’t get me wrong, the RBA is not finished with increasing interest rates. The central bank said it still intends to increase rates further. But the change in strategy is significant. Behind the Fed, Australia’s central bank has been the most aggressive with policy tightening. So, this adjustment could signal that we are getting closer to peak interest rates for this rate-hike cycle. The RBA said it has increased rates significantly in a short period of time. Now, it wants to step back and study the effects of its rate hikes on the economy. The central bank believes the world’s growth outlook is becoming increasingly uncertain. It said rising inflation and the consequent rate increases are placing pressure on household budgets at home and abroad. The RBA also stated that Consumer Confidence is deteriorating and the fallout in the housing market from rising mortgage rates will take time to play out. Policymakers said they want to keep the economy on an “even-keeled” path, which could prove difficult due to the uncertain outlook. The Job Openings per Number of Unemployed survey tells us the number of hires, quits, and job openings each month. It collects data from 20,700 nonfarm and government businesses and estimates changes on a national basis. So, it helps the Federal Reserve and Money managers gauge the job market’s relative tightness. In other words, they can see how easy or difficult it is for an individual to find work. We want to compare the survey’s metrics with the number of people out of work and looking for new jobs. The most recent BLS numbers showed just over 6 million people are unemployed. So, with 10 million job openings, there are roughly 1.7 available jobs for every unemployed person. In other words, it’s recognising the risk of raising rates too far too fast. At the same time, the U.S. is also seeing a drop in domestic labour-market tightness. The U.S. Bureau of Labour Statistics (“BLS”) released its Job Openings and Labour Turnover Survey (“JOLTS”) for August. The number of job openings came in at 10.05 million compared with the expectation for 11.1 million. In July, the same number had been revised lower from 11.24 million to 11.17 million. The latest report marked the lowest number of job openings since June of last year. The shift also accelerated the downtrend that had been in place since March. Powell has said that he wants to see this ratio move lower. Prior to the COVID-19 pandemic, the ratio of job openings to unemployed individuals averaged around 1.0 compared with the current average of around 1.15. Tuesday’s reading marked the first time since the start of the central bank’s rate hikes that the number of employment opportunities decidedly dropped. It’s also a sign that the economic data is beginning to catch up with the environment. That should start to give the Fed room to back off its pace of rate hikes going forward. Within the S&P 500 Index , eight of 11 sectors finished lower. European Markets closed lower. Markets continued to waver on concerns of a central-bank pivot as growth concerns and economic stability return to the forefront of investors’ fears. As mentioned above, the OPEC+ policy shift serves as a headwind for the region. The U.K.’s Services Purchasing Managers Index (“PMI”) was revised up to 50.0 from 49.2 (the flash estimate was 49.8, in comparison), which was the biggest drop in activity since early 2021, while Euro-Zone Services PMI activity fell to a 19-month low of 48.8 in September. In Asia, the markets that were open saw their third straight day of equity gains. The Reserve Bank of New Zealand hiked its official cash rate by 50 basis points to 3.50%. The central bank reiterated that core inflation remains too high. South Korea’s September consumer prices grew again, but the pace was slower for a second straight month. Japanese Prime Minister Fumio Kishida said that he wants companies to offer pay increases to match the rising inflation rate. Elsewhere, Oil closed 1.72% higher while Gold fell 0.33%.
To mark my 2625th 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 made 570 points yesterday and is now ahead by 1720 points for October, after finishing September with an incredible gain of 6660 points, after closing August with a gain of 2228 points, 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 0.2% lower at a price of 3783.
The Dow Jones Industrial Average closed 42 points lower for a 0.14% loss at a price of 30,273.
The NASDAQ 100 closed 0.08% lower at a price of 11,573.
The Stoxx Europe 600 Index closed 1.02% lower.
This morning, the MSCI Asia Pacific Index rose 0.2%.
This morning, the Nikkei closed 0.70% higher at a price of 27,311.
Currencies
The Bloomberg Dollar Spot Index closed 0.8% higher.
The Euro closed 0.9% lower at $0.9883.
The British Pound closed 1.1% lower at 1.1325.
The Japanese Yen fell 0.2% closing at $144.54.
Bonds
Germany’s 10-year yield closed 15 basis points higher at 2.02%.
Britain’s 10-year yield closed 16 basis points higher at 4.03%.
US 10 Year Treasury closed 14 basis points higher at 3.75%.
Commodities
West Texas Intermediate crude closed 1.72% higher at $87.92 a barrel.
Gold closed 0.33% lower at $1719.10 an ounce.
This morning on the Economic Front we already had the release of German Industrial Orders which fell 2.4% versus -0.7% expected. Next, we have Euro-Zone Retail Sales at 10.00 am, followed by the Minutes from last month’s ECB Meeting at 12.30 pm. At 1.30 pm we have U.S. Weekly Jobless Claims. Finally, we have speeches from Fed Members: Mester, Evans and Waller at 1.50 pm, 6.00 pm and 8.00 pm respectively.
Cash S&P 500
Earlier in yesterday’s session all markets sold off. Subsequently we saw a big recovery to new recovery highs above 3800 involving a big options trade cited by Wells Fargo helping the S&P to hit the Weekly 5 EMA which again proved resistance. The rally off the 3722 low was surprising given the surge in bond yields and the strength in the Dollar. My S&P plan worked well as the market traded lower to my 3750 buy level before rallying to my revised 3762 T/P level. Subsequently, I emailed my Platinum Members to buy the S&P again at 3745 before covering this position too early at 3760. Shortly before the close my 3802 sell level was triggered. As I want to be flat overnight, I covered this position at 3798. The S&P has still left an enormous gap from Monday’s 3678 Chicago close to yesterday’s 3722 low print. As you know all ‘’Open Gaps’’ eventually get filled. It would be healthier for the S&P if we did test the 3700 area over the coming days before trading higher. Today, I will be a small buyer from 3748/3768 with a 3729 ‘’Closing Stop’’. The S&P has resistance from 3822/3840 where I will be a small seller with a tight 3851 stop.
EUR/USD
The Euro reversed yesterday morning’s gains hitting my .9870 buy level. I am still long and I will add to this position at .9810 while leaving my .9745 stop unchanged. I will now lower my T/P level to .9930 and 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 short at 108.90 with the same 109.60 exit level. If this level is triggered, I will be back with a new update for my Platinum Members.
Cash DAX
Frustratingly, the DAX missed yesterday’s 12450 initial buy level by 5 points before rallying to sit at 12630 this morning. Today, I will again raise my buy level to 12380/12480 with a higher 12295 stop. I still do not want to be short the DAX at this time.
Cash FTSE
The FTSE had a nice sell-off yesterday morning, hitting my 7010 T/P level on Tuesday’s 7040 average short position. Despite Gilts trading back above 4% the FTSE is trading higher at 7085 this morning. We have resistance from 7120/7180 where I will again be a seller with a 7235 tight stop.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 29890 buy level before rallying 500 points. This move higher helped me to exit this position at my 30000 revised T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 29900/30100 with a higher 29695 ‘’Closing Stop’’. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
After the NDX hit my initial 11450 buy level, the market continued to sell-off, hitting a low of 11305. Then out of nowhere, the NDX rallied over 300 points, hitting my 11520 T/P level and I am now flat. This was impressive by the NDX given the 15 basis points rise in 10-year Treasuries. Today, I will again be a buyer on any further dip lower to 11330/11480 with the same 10995 wider stop.
December BUND
My Bund plan worked well as after the market hit my 140.40 buy level I emailed my Platinum Members to exit any long position at 140.90 and I am now flat. This was a lucky call as the Bund fell 150 points, sitting at 139.35 this morning. The Bund has support from 138.00/138.80 where I will be an aggressive buyer with a 136.95 wider ‘’Closing Stop’’.
Gold Rolling Contract
No Change. I am reluctant to chase the price of Gold higher. Therefore, I will leave 1680/1695 buy level unchanged with the same 1669 ‘’Closing Stop’’.
Silver Rolling Contract
Silver sold off to my 20.40 buy level. I am still long and I will add to this position at 19.70 with no stop. I will now lower my T/P level to 21.05.
Recent Comments