U.S. Equity Markets ended the week on a positive note, after strong gains across the board, led by Dow which closed Friday with a gain of 2.47% Markets ended the week on a high note, following a noisy day with concerns over higher rates and a rally in the Dollar. However, markets responded to a Wall Street Journal report that stated the Federal Reserve could pivot in policy after the anticipated 75-basis-point rate hike in November. Additionally, San Francisco Fed President Mary Daly warned of overtightening, furthering the dovish sentiment Investors look ahead to this week as the majority of companies in the S&P 500 Index report third-quarter earnings. The Federal Reserve is going to break something in the financial system. This is why we saw the above leak from the Wall Street Journal. Chairman Jerome Powell and the interest-rate-setting Federal Open Market Committee (“FOMC”) have been raising interest rates at an unprecedented pace. In September, it chose to raise rates by another 0.75%. This was the third consecutive increase of this magnitude following similar moves in June and July. The change increased the Federal-Funds target from a range of 2.25%-to-2.50% up to a range of 3.00%-to-3.25%. But since then, a month has passed. And economic data from the labour market to housing conditions and inflation figures have made things less clear – painting a blurry and unsure outlook on the economy that investors have struggled to digest. Pricing pressures have stubbornly remained as shown by the latest Federal Reserve Manufacturing Indexes. This has forced the Fed to continue toeing the same line toward further rate hikes. But eventually, the economy is going to crack, which will weigh on the near-term outlook for the S&P 500 Index Remember, economic data takes at least six to eight months to begin showing the effects of interest-rate hikes, meaning the majority of this year’s rate hikes are still unaccounted for in current economic data. The longer it takes for employment data and pricing pressures to show tangible and sustained influences of the Fed’s rate hikes, the closer the Fed gets to going too far. At the end of last year, the Fed’s own dot plot showed a peak rate of 2.1%. When we saw the first rate increase in March, the estimate climbed to 2.8%. Now that number has risen all the way to 4.6% as of its latest release. But since the last meeting about a month ago, the projected terminal rate is now breaching 5.00%. The pace at which rates have risen this year is unprecedented. We are already in the midst of one of the quickest tightening cycles ever. With the Fed yet to see tangible results, the risk continues to increase that we are only one more aggressive rate hike away from igniting a deep economic downturn. Remember, the central bank is focused on the long term. It is not just looking for one or two months of slowing data. It is going to maintain high rates until it sees a sustainable and significant decline in inflation. Until supply and demand come back into balance, the Fed will keep hiking rates to engineer that faster alignment. Within the S&P 500, all 11 sectors finished higher. European Markets closed flat. Markets finished the week mixed as investors await the European Central Bank’s rate-policy decision next week. Expectations are for a 75-basis-point rate hike, which put some scepticism on economic growth prospects. Meanwhile, focus remains on the energy crisis and political ramifications out of the U.K. and Italy. European Union member nations agree on a gas buyers’ cartel, but remain split on a gas price cap, while Consumer Sentiment in the U.K. remains weak as Retail Sales slid more than expected. In Asia, Markets ended the week lower as the Yen’s weakness continues to dominate headlines. Japanese Finance Minister Shunichi Suzuki said he is ready to take decisive action, though he repeated that volatility over actual Yen levels as the cause. Late Friday, the BoJ intervened after $yen hit a 32-year high at 151.80, causing a 2% rally in the Yen. Japan’s labour group also announced its goal for a 5% wage hike for next year. And investors believe that the People’s Bank of China will allow the Yuan to fall further following the end of the Communist Party Congress this weekend. Elsewhere, Oil rose 0.76% while a weaker Dollar saw Gold soar 1.38%.
To mark my 2650th 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 610 points on Friday and is now ahead by 8088 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 2.37% higher at a price of 3752.
The Dow Jones Industrial Average closed 749 points higher for a 2.47% gain at a price of 31,082.
The NASDAQ 100 closed 2.39% higher at a price of 11,310.
The Stoxx Europe 600 Index closed 0.62% lower.
This morning, the MSCI Asia Pacific Index rose 0.8%.
This morning, the Nikkei closed 0.31% higher at a price of 26,974.
Currencies
The Bloomberg Dollar Spot Index closed 1.1% lower.
The Euro closed 0.8% higher at $0.9863.
The British Pound closed 0.6% higher at 1.1293.
The Japanese Yen rose 1.8% closing at $147.63.
Bonds
Germany’s 10-year yield closed 2 basis points higher at 2.42%.
Britain’s 10-year yield closed 14 basis points higher at 4.05%.
US 10 Year Treasury closed 2 basis points lower at 4.22%.
Commodities
West Texas Intermediate crude closed 0.76% higher at $86.97 a barrel.
Gold closed 1.38% higher at $1643.10 an ounce.
This morning on the Economic Front we have German, Euro-Zone and U.K. Global Manufacturing PMI at 8.30 am, 9.00 am and 9.30 am respectively. This is followed by U.S. Chicago Fed National Activity Index at 1.30 pm. Finally, at 2.45 pm we have Manufacturing PMI.
Cash S&P 500
Just as it looked like on Friday that the S&P was going to break its trendline, the Wall Street Journal put out an article that several Fed Members were becoming ever more concerned of over doing it on the rate hike front. This was no accident given the vertical move in yields. Just as this article was being published the Bank of Japan intervened to strengthen the Yen and boom we had one of these strongest rallies of the year with the S&P rising 135 Handles into the close before tagging another 35 Handles overnight to hit a rebound high at 3801 which is just below the early October high of 3806.The Fed will still raise rates but they have now signalled they are aware of the risks of over doing it. There is no doubt the price action in the Bond Market has freaked them out. The result, yields and the Dollar dropped with stock markets ripping higher. This is the main reason why I have not been on the short side for the last few weeks preferring to be a buyer on dips and this plan has worked well all month, even if we left some points on the table like Friday. After the S&P hit my 3639 buy level I covered this position too early at 3652 and I am still flat. This morning, the S&P is trading 40 Handles below its overnight high at 3760 as I go to press. A break and close over the 3800/3820 resistance area should see the S&P retest its September FOMC post rate hike high at 3900. I will be a small seller from 3800/3820 with a tight 3835 ‘’Closing Stop’’. The S&P has support from 3718/3738 where I will be a small buyer with a 3705 ‘’Closing Stop’’.
EUR/USD
On Friday, the Euro traded lower to my .9730 second buy level for a .9765 average long position. The Euro rallied on the BoJ to my .9850 T/P level before selling off again. I bought the Euro at .9805. I am still long with a now .9890 lower T/P level. I will add to this position at .9745 while leaving .9675 ‘’Closing Stop’’ unchanged.
March Dollar Index
No Change. I am still short at 108.90 with the same higher 111.20 exit level. Unfortunately, the Dollar just missed my exit level before rallying again overnight. If this level is triggered, I will be back with a new update for my Platinum Members. Given the huge points made this month, I will look to exit this trade by the end of next week at the latest.
Cash DAX
My DAX plan worked well with the market trading lower to my 12550 buy level before rallying 300 points, sitting at 12850 as I go to press. Unfortunately, given the number of calls that were triggered on Friday, I covered my long DAX position at 12605 and I am still flat. The DAX has support from 12620/12710 where I will again be a buyer with a 12535 higher ‘’Closing stop’’.
Cash FTSE
The FTSE never came close to Friday’s buy level and I am still flat. It looks like Sunak will be the latest PM after Boris pulled out last night. Good luck to him trying to unite the Conservative party. Despite the ongoing political mess, the price action is telling you to be a buyer of the FTSE on dips. Today, my buy level will be from 6850/6920 with a higher 6785 ‘’Closing Stop’’.
Dow Rolling Contract
Incredible move higher in the Dow with the market trading over 1000 points higher from where I marked prices on Friday, after hitting an overnight high at 31420. On Friday, the Dow hit my buy level at 30150 before rallying to my 30240 T/P level and I am still flat. The only consolation of cutting too early on Friday, was not being short. The Dow has resistance from 31400/31650 where I will be a small seller with a 31825 ‘’Closing Stop’. The Dow has short-term support from 30650/30910 where I will be a small buyer with a 30495 tight ‘’Closing Stop’’.
Cash NASDAQ 100
My NDX plan worked well on Friday. Shortly after I posted the market rallied to my 11020 T/P level on my latest 10950 long position. Subsequently, I emailed my Platinum Members to buy the NDX gain at 10910 before rallying to my 11010 T/P level and I am still flat. This morning, the NDX is trading a lot higher at 11325. We have support from 11050/11200 where I will be a strong buyer with a 10945 ‘’Closing Stop’’.
December BUND
The buy the dip in the Bund continues to pay dividends. On Friday the Bund rallied to my 135.35 T/P level on my latest 134.55 long position and I am now flat. This morning, the Bund is trading higher at 136.30. We have support from 134.90/135.60 where I will again be a buyer with a wider 133.95 ‘’Closing Stop’’.
Gold Rolling Contract
Gold just missed my 1611 buy level with a 1617 low print before rallying $40 on the weaker Dollar. I will now raise my buy level to 1620/1635 with a higher 1609 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still long at 20.05 the same 20.60 T/P level.
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