U.S. Equity Markets finished Monday lower led by the 1.06% fall in the NASDAQ 100. Despite the lower closes, the VIX also closed lower by over 2%. Markets had a quiet start to a holiday-shortened trading week. A surge in COVID-19 cases in China quelled burgeoning macroeconomic optimism in that region last week. The latest in Fedspeak continues to suggest a dovish central-bank policy as Federal Reserve Bank of Atlanta President Raphael Bostic said he favours slowing the pace of interest-rate hikes over the weekend. And oil and energy recovered lost ground early in the day after later refuted reports arose of an increase in production from OPEC+. Big gains for the stock market could be right around the corner. Since the start of this year, the Federal Reserve has been raising interest rates to try and get a handle on inflation. After all, the U.S. Bureau of Labour Statistics’ Consumer Price Index (“CPI”) hit a four-decade high of 9.1% in June. That change is destroying the disposable income of households and businesses. So, the central bank is trying to slow inflation growth and bring about price stability. That way, consumers and companies can better understand what their income will look like going forward. Then they can better budget their money in terms of spending and saving. The Fed has said it needs to kill economic demand to get inflation back under control. Its best tool for doing that is by raising interest rates. However, that means it costs more to borrow- making the Dollar more valuable. As a result, it pulls money out of the financial system because the Dollar’s value rises and investors want to pour more money into the safety of higher-yielding U.S. Treasury bonds. But this won’t go on forever. Based on recent commentary from central-bank policymakers like San Francisco Fed President Mary Daly and St. Louis Fed President James Bullard, interest rates need to get to at least 5% before they pause or stop raising rates. We are already at 4%, so that would imply the bulk of the rate hikes are in the past. Heck, even Fed Governor Christopher Waller, a noted hawk (meaning he is inclined to raise interest rates), said last week that he is open to slowing the pace of hikes. Looking at stock market outcomes from past rate-hike-cycle peaks shows that a pause will act as a tailwind for the S&P 500 Index. Fiscal (government) and monetary (central bank) policies during the COVID-19 pandemic created trillions of Dollars’ worth of liquidity that previously did not exist in the financial system. All of the consequent spending caused domestic economic output to rise last year by 5.7% compared to the 2.3% average between 2009 and 2019. Throughout this year, members of the central bank have said they want to get to a point where they feel monetary policy is restrictive once more. In other words, where it is weighing on inflation growth. A number of policymakers, including Vice Chair Lael Brainard, have said we are already there. But they would like to go a bit further to ensure inflation growth comes back to the 2% target. So, considering the Federal-Funds Rate is already at 4%, that means we don’t have much further until we hit the 5% mark. In past rate-hike cycles, the Fed has sought to keep raising rates until the real Fed-Funds rate turns positive. That metric is derived from current interest rates minus CPI annualised growth. Back in March, the number stood at -8%. But since then, as inflation growth has eased and interest rates have jumped, the number has dropped to -4.5% in October. Federal Reserve Chair Jerome Powell has told us this is an outcome the central bank is currently seeking. At the last policy meeting in November, he said the real Fed-Funds Rate must turn positive before the central bank would consider pausing its rate hikes once more. Within the S&P 500 Index, four of the 11 sectors finished lower. European Markets also closed in the red. Markets ended lower as attention continues to focus on global central bank policy. The region’s largest economy showed potential for slowing inflation as Germany’s Producer Prices unexpectedly dropped in October. The European Central Bank’s chief economist Philip Lane said that the bank must continue to raise rates as there will be certain economic lags in the process of combatting inflation. And analysts continue to focus on U.K. and Euro-Zone recession outlooks as economic output continues to shrink close to pandemic-level lows. In Asia, Markets ended largely weaker after a quiet trading day. Overarching themes continue to influence investors – one being the reaction to the U.S. markets ending the week with a loss and the other a resurgence of COVID-19-related infections and deaths. This comes on the heels of last week’s announcement by Beijing to ease COVID-19 restrictions in China. South Korean exports shrank year-over-year as chip and smartphone demand fell globally. And Thailand’s economy posted its fastest growth in a year for the third quarter despite the recent rise in global uncertainty. Elsewhere, Oil fell 0.42% while Gold fell a further 0.82%.
To mark my 2675th 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 has made 110 points yesterday and is now ahead by 3736 points for November, after finishing October with a record gain of 9619 points, making 6660 points in September, 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 0.39% lower at a price of 3950.
The Dow Jones Industrial Average closed 44 points lower for a 0.14% loss at a price of 33,700.
The NASDAQ 100 closed 1.06% lower at a price of 11,553.
The Stoxx Europe 600 Index closed 0.013% lower.
Yesterday, the MSCI Asia Pacific Index fell 0.8%.
Yesterday, the Nikkei closed 0.16% higher at a price of 27,944.
Currencies
The Bloomberg Dollar Spot Index closed 0.9% higher.
The Euro closed 0.7% lower at $1.0238.
The British Pound closed 0.5% lower at 1.1815.
The Japanese Yen fell 1.1% closing at $142.10.
Bonds
Germany’s 10-year yield closed 4 basis points lower at 1.99%.
Britain’s 10-year yield closed 4 basis points lower at 3.20%.
U.S.10 Year Treasury closed 1 basis points higher at 3.83%.
Commodities
West Texas Intermediate crude closed o.42% lower at $80.03 a barrel.
Gold closed 0.82% lower at $1737.10 an ounce.
This morning on the Economic Front we have Euro-Zone Current Account at 9.00 am. The only other data of note is U.S. Richmond Fed Manufacturing Index at 3.00 pm.
Cash S&P 500
The S&P traded in a narrow range with the 3930-support level again tested and bought by intra-day traders. There is still risk to 3860 but ‘’Bears’’ need to get something going soon on the short side as seasonality is against them. My S&P plan worked well with the market hitting my 3934-buy level before rallying 20 Handles. As I wanted to bank some points for yesterday’s session, I covered this latest long position at my 3945 revised T/P level and I am still flat. Today, I will again be an aggressive buyer on any further dip lower to 3910/3930 with a 3895 ‘’Closing Stop’’. The S&P has strong resistance from 3998/4015 where I will be a strong seller with a tight 4031 ‘’Closing Stop’’.
EUR/USD
The Euro got hit hard yesterday and I am still flat. The Euro has support from 1.0110/1.0180 where I will be a buyer with a 1.0055 ‘’Closing Stop’’. I will lower my sell level slightly to 1.0330/1.0400 with a lower 1.0495 ‘’Closing Stop’’.
March Dollar Index
I am still flat the Dollar as the market never came close to my buy range before ending yesterday’s session with a gain of 0.9%. The neckline breakdown is at 109.63 and any rally to this area will sell me be an aggressive seller. Short-term the Dollar has support from 106.60/107.20 where I will be a strong buyer with a 104.95 higher ‘’Closing Stop’’.
Cash DAX
No Change. The DAX had a small sell-off yesterday which was no surprise given how overbought the market is at this time. The DAX has resistance from 14580/14680 where I will be a small seller with a wider 14805 ‘’Closing Stop’’. My only interest in buying the DAX is still on a dip lower to 13920/14020 with the same 13855 ‘’Closing Stop’’.
Cash FTSE
The boring action in the FTSE continues. It has spent most of the past 12 months trading between 6980 on the downside and 7690 on the high end. This narrow range is amazing when you consider the political nightmare the UK is. Add into the mix the extreme volatility in both Sterling and Gilt Yields, it is remarkable how stable the FTSE has been. I am still flat. Today, I will again raise my sell level to 7445/7505 with a 7561 tight ‘’Closing Stop’’. I do not want to be long the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow. The Dow continues to outperform the other main Indexes I will now raise my Dow buy level to my buy level to 33250/33500 with the same wider 32995 ‘’Closing Stop’’.
Cash NASDAQ 100
The NDX led yesterday’s move lower. This resulted in my 11550 buy level getting triggered. I am still long with a lower 11630 T/P level. I will add to this position at 11420 while leaving my 11295 ‘’Closing Stop’’ unchanged.
December BUND
The Bund missed yesterday’s nuy level before having a nice rally into the close. I am still flat and today I will continue to be a buyer on any dip lower to 138.50/139.30 with the same 137.65 ‘’Closing Stop’’.
Gold Rolling Contract
Although, Gold fell over 1% yesterday, the market still fell shy of my buy range and I am now flat. The aggressive move higher in the Dollar should see Gold fall further over the coming days as the world and his mother are still long the precious metal. I am still flat. I will now lower my buy level to 1710/1722 buy level with the same 1699 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still long at 21.10 with the same 21.75 T/P level. I will add to this position at 20.40 with no stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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