U.S. Equity Markets ignored yesterday’s downside Key Day Reversal by rallying to new recovery high for the year-to-date. The NASDAQ 100 led Thursday’s gains, closing higher by over 2%. This move higher saw the VIX get crushed falling over 6% to sit at its lowest level since February at a price of 17.80. The Federal Reserve is looking at one final rate hike. The second quarter of 2023 is off to a much different start than the first quarter. The narrative surrounding inflation and the economy has taken a sharp turn in recent weeks. While recent media coverage has been fixated on the banking crisis and questions about the strength of the U.S. Dollar, the Fed has largely remained focused on inflation. Even after receiving a handful of economic readings last week, which showed a resiliently strong labour market starting to show signs of cracking. The Fed has been dead set on bringing inflation back down to its 2% target. It has raised the Federal-Funds rate from a level of 0% to 0.25% last March to a current range of 4.75% to 5.00%. As we experienced in 2021 and 2022, inflation skyrocketed. In fact, last June, the U.S. Bureau of Labour Statistics’ (“BLS”) Consumer Price Index (“CPI”) grew 9.1% on a year-over-year (“YOY”) basis. That marked the highest level in more than four decades. March’s inflation grew 5% YOY. That was down from June’s 9.1%, and growing ever closer to the Fed’s 2% target. Inflation grew 0.1% month over month. That marked the slowest monthly rate of price growth since December. Shelter and rent inflation, which make up nearly 42% of the CPI, have yet to see significant price growth deceleration. But they appear to be extremely close to peaking. This lack of further downward momentum for CPI has created uncertainty around the path of future rate hikes. But if we look toward the money supply, which surged at an unprecedent rate due to pandemic spending, it tells us that inflation will return to the Fed’s preferred 2% target in time. With inflation falling, the central bank is now approaching a point where it has stopped raising interest rates in past rate-hike cycles. And from what our models tell us the current cycle could be at its end. That could lead to big returns for the S&P 500 Index and bond markets. The real Federal- Funds rate currently sits at 0.15%. So, the next question is when will the real Federal-Funds rate turn positive again? And will it stay positive? The next couple of months should answer this question. Within the S&P 500 Index, 10 of 11 sectors finished higher. European Markets rose. ECB Member de Galhau said the current rate-tightening cycle is almost over. Euro-Zone Industrial Output for February was stronger than forecast with the production of capital and consumer goods proving resilient in the face of a recession. ECB Policymakers are reportedly leaning towards easing current tightening policy by moving forward with a 25-basis point rate hike at its May meeting. In Asia, China’s Exports rose in March as global demand improved, boosting the overall outlook for the economy. Elsewhere, Oil fell 1.12% while Gold surged, closing higher by 1.45%.
For anyone following my Platinum Service it made 130 points yesterday and is now ahead by 1050 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 1.33% higher at a price of 4146.
The Dow Jones Industrial Average closed 383 points higher for a 1.14% gain at a price of 34,029.
The NASDAQ 100 closed 2.03% higher at a price of 13,109.
The Stoxx Europe 600 Index closed 0.40% higher.
Yesterday, the MSCI Asia Pacific closed 0.41% higher.
Yesterday, the Nikkei closed 0.26% higher at a price of 28,156.
Currencies
The Bloomberg Dollar Spot Index closed 0.6% lower.
The Euro closed 0.5% higher at $1.1044.
The British Pound closed 0.3% higher at 1.2524.
The Japanese Yen rose 0.4% closing at $132.56.
Bonds
Germany’s 10-year yield closed 8 basis points higher at 2.38%.
Britain’s 10-year yield closed 3 basis points higher at 3.57%.
U.S.10 Year Treasury closed 5 basis points higher at 3.45%.
Commodities
West Texas Intermediate crude closed 1.12% lower at $82.33 a barrel.
Gold closed 1.45% higher at $2040.10 an ounce.
This morning on the Economic Front we have German Wholesale Inventories at 7.00 am. This is followed by U.S. Retail Sales and the Import/Export Price Index at 1.30 pm. Next, we have a speech from Fed Member Waller at 1.45 pm. At 2.15 pm we have Industrial Production and Capacity Utilisation. Finally, at 3.00 pm we have the University of Michigan Consumer Sentiment Index and Business Inventories.
Cash S&P 500
Minutes form the FOMC Minutes on Wednesday showed the central bank is forecasting a mild recession starting in the second half of 2023. That is the Fed’s staff outright calling for a recession, albeit ‘’mild’’. Have you ever heard of the Fed calling for a severe recession?. You have not because they never do. If you go back to the Global Financial Crisis in 2008 the Fed as usual were in recession denial all the way into the collapse. So, for the Fed to actually call for a mild recession is unusual, an impression echoed by former Fed President Rosengren on Twitter late Wednesday. Risks of a hard landing are increasing despite yesterday’s positive PPI Report. Everyone knows that a recession is needed to get rid of inflation but the Fed will never admit this fact. Bottomline: The recent banking crisis they caused by is producing tightening in lending standards and further reduces credit availability will end up producing a recession. But according to the Fed and Yellen the banking system is sound and stable – there is never one cockroach is my response. Yesterday the S&P just moved higher all session, and in the process completely reverses Wednesday’s aggressive downside Key Day Reversal. The April seasonality really kicked as short positions were again slammed. With the $BPSPX RSI at 73 I have no interest in any long positions. I am now short at an average rate of 4124 with the same 4147 ‘’Closing Stop’’. This stop will get tested today. I will now raise my T/P level on this position to 4112.
EUR/USD
The Euro closed above 1.10 for the first time since February. This move higher saw the market hit my 1.1060 sell level. I am still short and I will add to this position on any further move higher to 1.1120. With the 14-Day RSI closing at 66 last night the Euro is one up day away from being severely overbought. I will now raise my T/P level on this position to 1.1010 while leaving my 1.1175 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
June Dollar Index
The sell-off in the Dollar saw my initial the Dollar hit my second buy level at 100.80 for a now 101.15 average long position. The Dollar closed lower at 100.72 last night. I will leave my 100.15 ‘’Closing Stop’’ unchanged while lowering my T/P level to 101.60.
Cash DAX
After the DAX hit my initial 15750 sell level we had a small 70 point sell-off. As I wanted to be flat the DAX ahead of U.S. PPI, I emailed my Platinum Members to exit any short position at 15710 and I am still flat. I still do not like the price action in the DAX as every bit of good news is well priced into the market. The DAX has further resistance from 15850/15950 where I will again be a seller with a 16035 ‘’Closing Stop’’. The technical picture appears to be shifting as Tuesday’s highs as come on a weekly negative divergence. It is a similar scenario with Apple Shares as it has led the S&P higher all-year. Apple has got so big that it has accounted for nearly 25% of the S&P gain for the year. These moves are not sustainable and are a red flag for me as we approach the key May period. I still do not want to be long the DAX at this time.
Cash FTSE
The relentless rally off last month’s 7200 low in the FTSE continues as the market rallied to my latest 7850 sell level. I am still short, and I will add to this position at 7920 with a higher 7975 ‘’Closing Stop’’. I will now raise my T/P level on this position to 7795.
Dow Rolling Contract
I am still flat the Dow as the market did not come close to yesterday’s buy range as the market surged, closing above 34,000. Thankfully we had no sell level. I will now raise my buy level 33550/33800 with a higher 33395 ‘’Closing Stop’’.
Cash NASDAQ 100
The NDX surged yesterday, reversing Wednesday’s sell-off with a strong 2% gain. This move higher saw my 12960 T/P level trigged on Wednesday’s late 12870 long position and I am now flat. As I am already short both the S&P and FTSE, I will not be a seller of the NDX today. The NDX has support from 12900/13050 where I will be a small buyer with a 12795 tight ‘’Closing Stop’’.
June BUND
No Change. I am still long the Bund at an average rate of 135.60 with the same 136.15 T/P level. I will also leave my 134.95 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am still flat as Gold never came close to yesterday’s buy range. I do not trust this latest recovery in Gold as the Dollar is getting more oversold. The 14-Day RSI for Gold closed at 68 last night. Gold has resistance from 2062/2080 where I will be a small seller with a 2095 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 2049.
Silver Rolling Contract
Silver surged 2% yesterday for a gain of 32% since last month’s 19.80 low. This is a massive move and is the main reason why I cut 50% of my long pension position yesterday at 25.50. With the 14-Day RSI closing at a severely overbought 78 last night I certainly will not be buying Silver at these levels. I will hold on to the rest of my pension position, but I will stay flat the Silver Contract until we get a pullback. However, I do not want to be short as overall Silver is still extremely cheap. If this view changes I will be back with a new update for my Platinum Members.
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