U.S. Equity Markets closed mixed yesterday following an extremely quiet session. While the Russell 2000 again closed higher, rising Bond Yields saw the NASDAQ 100 close with a loss of 0.67%. All eyes are on this afternoon’s CPI release. Since the start of 2022, investors have been focused on one thing: inflation. If prices are rising, the Federal Reserve must hike interest rates even more to cool the economy and bring inflation back down. On the flip side, if prices are falling, it gives the central bank room to stop rate hikes or even implement rate cuts. Even though the two move in vastly different ways, the economy and the stock market are inextricably linked. So, if the Fed needs to raise interest rates more than expected, therefore putting even more pressure on the economy, stocks may be in for another round of selling. But if the end of the rate-hike cycle is upon us, it could be a tailwind for the S&P 500 Index. On Monday, Adobe Analytics released its Adobe Digital Price Index (“DPI”) for March. The Index tracks the latest online inflation data across 18 categories. It is typically a leading indicator of where headline inflation is trending. The Index compliments the BLS’ CPI – which tracks offline prices – by providing up to date pricing data on more than 100 million products across one trillion visits to retail sites online. The latest data from the DPI is telling us that this week’s CPI for March – which is released this afternoon – should show inflation continuing its gradual decline. The overall DPI for March showed prices falling 1.7% year over year. This marks the seventh straight month of annual decline and the largest since December 2022. These declining figures point toward a significant change in trend over the past several months. Since online inflation peaked in early-2022, consumers gradually became much more price sensitive. They shopped for bargains, cut out unnecessary expenditures, and ultimately reached the point where the cost of a product began to trump brand or store loyalty. In this digital era, online shopping has altered the way companies can price their goods. With access to live pricing data via smartphones, computers, or other Internet connected devices, customers can easily comparison shop even at brick-and-mortar locations. The result was that many retailers had little room to lower prices as the new digital era made it nearly impossible for there to be much pricing discrepancy, which in turn lead to most goods being repriced at the lowest acceptable margins. But when we start to see online goods decrease in price, that tells us that demand is falling. Unsurprisingly, the largest price declines were reflected in discretionary categories, as consumers continue to gravitate away from goods spending and toward services-based spending. At the end of the day, inflation never goes up in a straight line and it is not going to come back down in one either. Its decline will be steady and incremental. As we get further into the year, the annualised comparisons will continue to grow more as we approach this inflation cycle’s peak, which occurred last June. So, we can expect the pace of inflation to keep slowing from here, which will be good news for consumers. Within the S&P 500 Index, nine of 11 sectors finished higher. European Markets closed higher. The British Retail Consortium reported a sharp decline in the volume of goods purchased in March as retail spending rose 5.1% YOY, more than halving the latest consumer price inflation figure of 10.4%. Norway’s Inflation unexpectedly rose in March increasing the likelihood that the central bank will continue to raise rates aggressively. Meanwhile, the U.K. is facing an unprecedented doctors’ strike that threatens to cause upheaval to the nation’s health system, as thousands of junior doctors protest their lack of wage growth compared to inflation. In Asia, China’s CPI and PPI came in lower than expected with producer prices remaining in a deflationary state, prompting calls for further government stimulus intervention to aid in the economic recovery. Australia’s NAB Business Confidence Index for March surged as consumer sentiment rose more than 9% following the Reserve Bank’s pause to rate hikes. Tensions continue to rise following the latest round of military drills from China that saw a record number of warplanes encroaching Taiwan’s territorial waters. Elsewhere, Oil rose 2.16% while Gold reversed some of Monday’s losses, closing higher by 0.80%.
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For anyone following my Platinum Service it made 140 points yesterday and is now ahead by 670 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 0.01% lower at a price of 4108
The Dow Jones Industrial Average closed 98 points higher for a 0.29% gain at a price of 33,684.
The NASDAQ 100 closed 0.67% lower at a price of 12,964.
The Stoxx Europe 600 Index closed 0.62% higher.
Yesterday, the MSCI Asia Pacific rose 0.20%.
Yesterday, the Nikkei closed 1.05% higher at a price of 27,923.
Currencies
The Bloomberg Dollar Spot Index closed 0.4% lower.
The Euro closed 0.5% higher at $1.0912.
The British Pound closed 0.4% higher at 1.2427.
The Japanese Yen fell 0.1% closing at $133.73.
Bonds
Germany’s 10-year yield closed 12 basis points higher at 2.30%.
Britain’s 10-year yield closed 11 basis points higher at 3.54%.
U.S.10 Year Treasury closed 2 basis points higher at 3.43%.
Commodities
West Texas Intermediate crude closed 2.16% higher at $81.46 a barrel.
Gold closed 0.80% higher at $2005.10 an ounce.
This afternoon on the Economic Front we have U.S. MBA Mortgage Applications at 12.00 pm. This is followed by CPI at 1.30 pm. Next, we have speeches from ECB Member De Guindos at 1.35 pm and the Bank of England Governor Bailey at 2.00 pm. At 3.00 pm we have the Bank of Canada Monetary Policy Announcement. Finally, at 7.00 pm we have the FOMC Minutes from last month’s meeting.
Cash S&P 500
Another boring session as the S&P traded in a narrow range. I am still flat as neither my buy nor sell level was tested. There is still a lot that can derail the market this week, namely CPI this afternoon, PPI tomorrow and the start of Bank Earnings on Friday. As I mentioned yesterday, most of the S&P’s gain has come from a handful of stocks like Apple and Tesla. It will be interesting that when these companies report will they be able to justify the rapid rise in their share prices. Another large concern is the dramatic drop in bank lending which fell by a record $104.7bn in the last two weeks of March. Once the effect of this dramatic drop filters through the economy it may have a huge effect on small companies who may not be able to secure finance and forcing them out of business. The S&P positioning shows the highest short positioning in the Futures Market since 2011, which is another reason why I am not really comfortable in being short. Ahead of CPI I will continue to be a small seller from 4135/4150 with the same 4165 ‘’Closing Stop’’. Meanwhile, I will leave my 4058/4073 buy level unchanged with the same 4045 ‘’Closing Stop’’.
EUR/USD
A weaker Dollar saw the Euro rally to my 1.0890 T/P level on my latest 1.0840 long position. I am now flat. Ahead of CPI I will continue to be a buyer of dips. The Euro has support from 1.0790/1.0860 where I will be a buyer with a 1.0715 ‘’Closing Stop’’.
June Dollar Index
I am still flat. The Dollar traded in a narrow 40-point range yesterday. I will continue to be a buyer on any dip lower to 100.80/101.50 with a lower 100.15 ‘’Closing Stop’’. I still do not want to be short the Dollar at this time.
Cash DAX
The DAX rallied as expected yesterday but unfortunately fell shy of my sell range. I will not chase the market lower, leaving my 15840/15940 sell level unchanged with the same tight 16015 ‘’Closing Stop’’. I still do not want to be long the DAX at this time.
Cash FTSE
The FTSE made a new recovery high above 7800 yesterday but falling short of yesterday’s sell level. I am still flat. Ahead of CPI, I will now raise my sell level to 7850/7920 with a higher 7975 ‘’Closing Stop’’.
Dow Rolling Contract
Thankfully we exited any short Dow position last week with the market now trading 340 points higher from our 33380-stop level. With the 14-Day RSI closing at 63 last night the Dow is only one decent ‘’up day’’ away from being severely overbought. I am amazed at the complacency in the market but as I said at the end of last month the liquidity intervention form the Fed is huge as the balance sheet has grown by over $400bn. For this reason, I have no interest in being short as history tells us that equity markets keep rallying until the Fed does its first-rate cut following the confirmation of a recession. This will continue to be my view until we break the 50 Day Moving Average (33110). Ahead of CPI, I will now raise my buy level to 33250/33500 with a higher 33095 ‘’Closing Stop’’. Despite my concerns I no longer want to be short the market at this time.
Cash NASDAQ 100
Although the NDX traded heavy yesterday I am still flat as my buy range was not triggered. Ahead of CPI, I will now lower my buy level to 12740/12890 with the same 12595 ‘’Closing Stop’’. Today, I will continue to be a seller from 13280/13430 with a tight 13505 ‘’Closing Stop’’.
June BUND
The Bund got hit hard yesterday, playing catchup with the U.S. Treasury Market were Yields rose 12 Basis Points on Monday. This move lower saw my 135.90 buy level triggered. I am still long and will add to this position on any further move lower to 135.30. I will have a T/P level on this position at 136.50 while leaving my tight 134.95 ‘’Closing Stop’’ unchanged.
Gold Rolling Contract
Monday’s 1990 average long Gold position worked well as the market rallied to my 1999 T/P level and I am now flat. Gold has support below from 1970/1985 where I will again be a buyer with a 1959 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 1996.
Silver Rolling Contract
No Change. I am still flat Silver as the market traded in a narrow range since yesterday’s Daily Commentary. Today, I will leave 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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