U.S Equity Markets reversed earlier losses to again close higher. The Small Cap Russell 2000 led Monday’s gains, closing higher by 1%. Economic indicators are all pointing in the same direction. A touted recession indicator is now at its most dire level since 1980. The first step towards an economic recovery is a rate-hike pause. If the economic cycle read like a classic novel, we would currently be at the point where the final major plot-twisting event has taken place. The only thing left to do is bide time until the inevitable conclusion is realised. Today, investors find themselves in this very position within the economic cycle. Last week, multiple data points showed economic activity rapidly contracting. The Institute for Supply Management’s (“ISM”) Manufacturing Purchasing Managers’ Index (“PMI”) showed declining orders, activity, and prices. It was the same story for the ISM’s Non-Manufacturing PMI. Even more, the Job Openings and Labour Turnover Survey and Challenger, Gray & Christmas’ report on job cuts both indicated that a once-strong labour market has started to crack at its foundation. Now, it is only a matter of time before a recession fully engulfs the U.S economy. One of the most reliable recession indicators – the 10-year/three-month Treasury yield spread – is painting a very ominous picture of economic conditions at the moment. Every time the yield on near-term maturity bonds is greater than the yield on longer-term bonds – otherwise known as an “inverted yield spread” – a recession has followed. This happens when investors believe that long-term debt carries more risk than short-term debt. Remember, all interest rates are affected by the Fed’s policy moves. Short-term rates tend to track more closely to the Federal-Funds target rate, while longer-term rates take into account investor sentiment and the economic growth outlook. As you may have guessed, the current rate-tightening cycle – which is the fastest in a generation – has caused short-term yields to surge over the past year. Meanwhile, increasingly bearish economic conditions over the past several months have sent long-term yields tumbling. The three-month Treasury has now reached an inversion of more than 1.5% to the 10-year Treasury. The last time the yield curve experienced this big of an inversion was in 1980. That is a strong sign the U.S. economy is headed for a deep recession. The probability of a recession has risen to a high of nearly 60%. Once again, this is the highest reading since 1980. Federal Reserve Chairman Jerome Powell suggested that the central bank is avoiding making the same mistakes it did in the 1970s – where it cut rates too quickly during the recession of 1973 to 1974. This could mean that whenever we reach peak rates – and about half of investors believe we already we have – the Fed might be inclined to keep them elevated for some time, which will be a rude awakening for investors who believe rate cuts are on the horizon. The bottom line is that Powell and the Fed already know they have wounded the economy. What they are not saying is that they are far past the point of no return- and they don’t want the pain they know they have caused to be in vain. However, even an end to rate hikes would likely start to bring stability back to yields and eventually send them lower. Investors may look to lock in current rates with the belief that yields will fall in the future. As money managers begin to invest in lower-valuation risk assets like stocks, it should serve as a tailwind for the S&P 500 Index. Within the S&P 500 Index, six of 11 sectors finished higher. European Markets were closed yesterday for Easter Monday. The Bank of England is working to create a team to oversee the development of its central bank digital currency. French President Macron called on fellow European nations to develop stronger autonomy over global economic and political conflicts to avoid becoming collateral damage in the event of any further conflicts between the U.S. and China. U.K First time home buyers are proving resilient despite surging interest rates, opting for smaller residencies instead of remaining in a tight rental market. In Asia, Japan’s Consumer Confidence Index for March improved to its highest level sine May 2022 as the economy showed further signs of recovering post-COVID. New Bank of Japan Governor Ueda said that there was no need to revise the central bank’s current yield control agreement with the government. Elsewhere, Oil fell 1.03% while Gold closed lower by 0.97% after a volatile trading range.
To mark my 2750th 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.combryan@tradernoble.com for details
For anyone following my Platinum Service it lost 55 points yesterday and is now ahead by 530 points for April after closing March with a gain of 6168 points, while finishing February with a gain of 3164 points, after closing January with a gain of 4687 points, while finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while 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 HEREHERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 0.10% higher at a price of 4109
The Dow Jones Industrial Average closed 101 points higher for a 0.30% gain at a price of 33,586.
The NASDAQ 100 closed 0.09% lower at a price of 13.051.
The Stoxx Europe 600 Index closed 0.16% lower.
Yesterday, the MSCI Asia Pacific fell 0.37%.
Yesterday, the Nikkei closed 0.42% higher at a price of 27,633.
Currencies
The Bloomberg Dollar Spot Index closed 0.4% higher.
The Euro closed 0.4% lower at $1.0854.
The British Pound closed 0.6% lower at 1.2375.
The Japanese Yen fell 1.4% closing at $133.61.
Bonds
Germany’s 10-year yield closed 7 basis points lower at 2.18%.
Britain’s 10-year yield closed 1 basis points higher at 3.43%.
U.S.10 Year Treasury closed 10 basis points higher at 3.41%.
Commodities
West Texas Intermediate crude closed 1.03% lower at $79.87 a barrel.
Gold closed 0.97% lower at $1990.10 an ounce.
This morning on the Economic Front we have Euro-Zone Retail Sales at 10.00 am. This is followed by U.S. NFIB Business Optimism Index at 11.00 am. Next, we have a Three-Year Treasury Auction at 6.00 pm. Finally, we have speeches from Fed Members Goolsbee and Harker at 6.30 pm and 9.00 pm respectively.
Cash S&P 500
It does not matter what the news is, but every dip continues to be bought as we saw again yesterday after the morning dip was again erased. This highlights how difficult a market it is for anyone to short. My bank in account in Florida is with a bank called Fifth Third Bank. They are constantly being stress tested by the Fed which is no surprise given that they are the ninth largest bank in America. I had a meeting with the branch manager yesterday to find out how bad is the banking crisis in the U.S. The total sun borrowed from American Banks in the last month is so high it makes COVID look like child’s play. The bank manager told me that Fifth Third senior management are hearing of a number of banks in trouble. This ties in with the Bank Index that still cannot rally. I know April is one of the seasonally strongest months of the year, but my own view is that any aggressive rally from here will see me look to finally set up a macro short position. For Quarter one 2023, 92% of the S&P’s 9% rally has come from just seven stocks with Apple accounting for one – quarter of it. This is not sustainable and needs to be pointed out. The S&P is trading at 4112 as I go to press. We have strong resistance from 4135/4150. I will now raise my sell level to this range with a higher 4165 ‘’Closing Stop’’. I will now raise my buy level to 4058/4073 with a higher 4045 ‘’Closing Stop’’.
EUR/USD
The Euro had a small sell-off yesterday, trading lower to my 1.0840 buy level. I am still long with a now lower 1.0890 T/P level. I will add to this position at 1.0760 while leaving my 1.0695 ‘’Closing Stop’’ unchanged.
June Dollar Index
I am still flat. The Dollar had a small rally yesterday, trading 40 points higher at 102.30 as I go to press. Given how oversold the Dollar is trading I will now raise my buy level to 101.00/101.70 with a higher 100.35 ‘’Closing Stop’’.
Cash DAX
The DAX has been closed since Thursday. I am still flat. Given the late rally in the American Indexes, the DAX should open higher this morning. As a result, I will now raise my sell level to 15840/15940 with a tight 16015 ‘’Closing Stop’’. I still do not want to be long the DAX at this time.
Cash FTSE
The FTSE surged on Thursday, closing at 7740 which is just 300 points below its all-time February high. I am reluctant to chase the FTSE higher from here as we are short-term overbought. The FTSE has resistance from 7830/7890 where I will be a small seller with a 7955 tight ‘’Closing Stop’’.
Dow Rolling Contract
The Dow sold off to a low at 33330 on Thursday and again yesterday morning. This move lower enabled me to cover my 33325 average short position for a small loss at 33380 and I am still flat. The 50 Day Moving Average at 33115 continues to offer strong support. With CPI and the first of the earnings reports from Bank stocks on Friday, the Dow has a number of challenges to get through this week. Today, I will be an aggressive buyer from 33130/33380 with a 32995 tight ‘’Closing Stop’’. Despite my concerns I no longer want to be short the market at this time.
Cash NASDAQ 100
Unfortunately, the NDX missed my initial 12800 buy level three times since Thursday’s Daily Commentary. I am still flat. I will now raise my buy level to 12770/12920 with a higher 12595 ‘’Closing Stop’’. Today, I will continue to be a seller from 13280/13430 with a tight 13505 ‘’Closing Stop’’.
June BUND
The Bund has been closed since Thursday and I am still flat. The Bund has resistance from 139.00/139.80 where I will be a small seller with a 140.50 ‘’Closing Stop’’. We have short-term support from 135.40/136.10 where I will be a small buyer with a 134.75 tight ‘’Closing Stop’’.
Gold Rolling Contract
Gold got hit hard yesterday, trading the whole of my buy range for a now 1990 average long position. I will leave my 1971 ‘’Closing Stop’’ unchanged while lowering my T/P level to 1999. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Even though Gold was weak, Silver did not hit Thursday’s buy range and I am still flat. I will not chase the market higher leaving my 23.70/24.50 buy level unchanged with the same 22.95 ‘’Closing Stop’’. Update : the cash Silver that I bought for my pension last month at 20.00 – I will now look to scale out of 50% of this position at a price of 25.50.
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