Despite the Friday crush in the VIX, U.S. Equity Markets closed flat on Friday following a quiet session. The S&P 500 has surpassed most of Wall Street’s year-end predictions, defying concerns over recession risks, inflation, and monetary tightening. The unexpected market surge has put strategists in a dilemma as they face pressure to revise their forecasts upwards. Piper Sandler’s Michael Kantrowitz, previously the most bearish strategist, raised his target from 3,225 to a range of 3,600 to 3,800. However, some caution that this upward trend could lead to a potential 20% decline, meeting the definition of a “bear market,” in the next five months. The Nasdaq 100 is experiencing an out-of-cycle rebalance aimed at reducing the influence of technology mega caps, which coincides with a flood of expiring options today. Passive investors are using this window to align their portfolios with the benchmark before the changes take effect today, leading to potential volatility in the market. The revamp is expected to increase the presence of smaller members, with an estimated $60 billion in two-way transactions. Johnson & Johnson (JNJ) exceeded expectations in its second-quarter earnings report, with revenue and adjusted earnings beating Wall Street’s estimates. The company’s MedTech division, which offers devices for surgeries, orthopaedics, and vision, experienced a surge in sales. This growth is attributed to the recovery in demand for nonurgent surgeries among older adults who postponed such procedures during the pandemic. As a result of the strong performance, Johnson & Johnson raised its full-year guidance. Former Federal Reserve Chair Ben Bernanke believes that the upcoming interest rate increase by the Fed is widely expected, but it may also be the last one in the current tightening campaign. Investors seem to share this sentiment, as they are pricing in a near-certain rate hike at the Fed’s July meeting, with limited chances of further increases thereafter, according to trading in the Federal Funds Futures Market. European Markets closed higher. Two forecasters who previously warned of the possibility of U.K. interest rates reaching 7% have now stated that the risk has decreased after a significant drop in the headline inflation rate last week. Allan Monks, an economist at JPMorgan Chase (JPM), believes that the risk has declined, but warns that inflation could still remain above 2%. Adam Posen, the president of the Peterson Institute for International Economics and a former member of the Bank of England’s rate-setting committee, agrees that the likelihood of rates reaching 7% has decreased, but advises against ruling it out completely at this stage. Average rent for new tenants in London has reached a new record in the second quarter, driven by high demand and increased mortgage rates, leading landlords to raise prices. Tenants in the capital are facing an average monthly rent of £2,567 ($3,310), representing a 13.7% increase from a year ago and a significant 28% rise compared to pre-pandemic levels in 2019. The surge in rental costs is impacting U.K. consumer confidence, which fell for the first time in six months, raising concerns about the impact of soaring prices on household finances. In Asia, Japan’s consumer prices showed a faster increase in June, indicating persistent inflationary pressures ahead of the Bank of Japan’s meeting this week. Prices excluding fresh food rose 3.3% year on year, slightly accelerating from May due to less impact from energy prices. However, a broader measure of inflation that excludes energy decelerated to 4.2% after reaching a 40-year high in the previous month. Elsewhere, Oil rose 1.08% while Gold closed lower by 0.2%.
To mark my 2800th 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 94 points on Friday and is now down by 122 points for July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made 3164 points in February, 4687 points in January 2054 points in December, 4789 points in November and a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 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 0.03% higher at a price of 4536.
The Dow Jones Industrial Average closed 2 points higher for a 0.01% gain at a price of 35,227.
The NASDAQ 100 closed 0.26% lower at a price of 15,425.
The Stoxx Europe 600 Index closed 0.32% higher.
This morning, the MSCI Asia Pacific closed 0.3% higher.
This morning, the Nikkei closed 1.14% higher at a price of 32,672.
Currencies
The Bloomberg Dollar Spot Index closed 0.1% higher.
The Euro closed 0.1% higher at $1.1131.
The British Pound closed 0.1% lower at 1.2865.
The Japanese Yen fell 0.9% closing at $141.41.
Bonds
Germany’s 10-year yield closed 5 basis points higher at 2.45%.
Britain’s 10-year yield closed 8 basis points higher at 4.27%.
U.S.10 Year Treasury closed 3 basis points lower at 3.85%
Commodities
West Texas Intermediate crude closed 1.88% higher at $77.07 a barrel.
Gold closed 0.2% lower at $1960.10 an ounce.
This morning on the Economic Front we have German, Euro-Zone and U.K. Manufacturing and Services PMI at 8.30 am, 9.00 am and 9.30 am respectively. At 1.30 pm we have U.S. Chicago National Activity Index at 1.30 pm. Finally, at 2.45 pm we have Global Manufacturing PMI.
Cash S&P 500
The S&P had an inside session on Friday with price holding above its 5 EMA hence nothing has broken down despite Thursday’s red candle. Friday saw another small ‘’Open Gap’’ making Friday’s initial gap up number nine since the ongoing bank interventions from early March. This is absurdity pure and simple, unless all of market history no longer applies. In my opinion most if not all of these gaps will get filled at some point. As far as the larger picture the larger trendline held last week as the S&P reversed from the upper risk zone at a price of 4580. This week will see lots of earnings coming in and reactions will be of interest. All eyes will be on the FOMC Meeting on Wednesday when the Fed is now presumed to offer a dovish final rate hike before pausing ahead of cutting rates next year without a recession ever happening. Will this be a sell news event or an excuse to squeeze one more set of highs? Can’t say but it certainly has the potential to be a volatile week with plenty of two-way volatility. I am still short the S&P from last week at an average rate of 4505 with the same 4520 exit level. If this exit point is triggered, I will be back with a new update for my Platinum Members.
EUR/USD
No Change. I am still flat the Euro as the market traded in a narrow range on Friday, following Thursday’s aggressive move lower. I will leave my sell unchanged at 1.1180/1.1260 with the same 1.1315 ‘’Closing Stop’’. The Euro has short term support from 1.1000/1.1060 where I will be a strong buyer with a 1.0935 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 1.1130. If I am taken long, I will have a T/P level at 1.1130.
June Dollar Index
The Dollar had an inside session on Friday and I am still flat. The Dollar has support from 100.00/100.60. I will now raise my buy level to this range with a higher 99.45 ‘’Closing Stop’’.
Cash DAX
After the DAX hit my initial 16180 sell level, late Friday, I emailed my Platinum Members to exit any short position at my revised 16166 T/P level and I am now flat. This morning, the DAX is opening slightly lower at 16130. We have resistance from 16210/16300 where I will again be a seller with a higher 16375 ‘’Closing Stop’’.
Cash FTSE
No Change. The FTSE has resistance from 7790/7860 where I will be a seller with a 7915 tight ‘’Closing Stop’’. I will now raise my buy level to 7510/7580 with the same 7435 ‘‘’Closing Stop’’.
Dow Rolling Contract
The Dow closed higher for the 10th consecutive trading session. This is the first time in many years that the Dow has had such a positive run of consecutive closes. I know Friday was only a 2-point gain but still counts for statistical purposes. The 14-Day RSI again closed at an extremely overbought 72 while the ‘’Fear & Greed Index improved to an overbought 82 on Friday. All of the above is telling me to be short the Dow. I am still short at a price of 35236. I will add to this trade at 35500 with a fixed 35705 stop. I will have a T/P level on this position at 35050. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
My NDX plan worked well as the market hit my 15590-sell level before trading lower to my revised 15910 T/P level and I am still flat. Talk of a fresh interest-rate hike has been dominating the headlines as this week’s Federal Reserve meeting looms ahead. But also on the docket for this week is another key economic event happening for some of the biggest names in the market. For the third time in its entire history, the Nasdaq 100 Index will undergo a special rebalancing. Sure, the index gets minor rebalances every quarter. But this week’s rebalancing is particularly important. It will address a problem that has been plaguing the Nasdaq 100 as of late – one you can thank Big Tech for, which is the issue of concentration. This benchmark index tracks the performance of the largest non-financial companies listed on the Nasdaq stock exchange. Over the past year, a handful of tech (and tech-ish) companies have experienced significant growth. This has led to a lack of diversity within the Nasdaq 100. At one point, just seven companies accounted for more than half of the index’s total weight. Along with the Nasdaq 100, those major players even fuelled the larger Nasdaq Composite (which includes the Nasdaq 100 constituents plus thousands of other tech stocks). Both indexes have been outperforming the S&P 500. To address this concentration issue, the Nasdaq committee will use a modified market-cap-weighted methodology for the index. This ensures that no individual constituent can carry a weight greater than 24% of the index. For constituents with weights greater than 4.5%, it will also keep their total weight under 48%. However, earlier this month, Tesla’s (TSLA) surge pushed the collective weight of these high-weight constituents beyond the threshold, prompting the need for a rebalancing. Among the most affected companies are Nvidia (NVDA) and Microsoft (MSFT), both of which will see their weights decrease by approximately 3 percentage points. The redistributed weight will be allocated to smaller caps within the index. The rebalancing will take effect before the market opens on Monday, July 24, and it is expected to have implications for both passive and active mutual funds benchmarked to the Nasdaq 100 Index. According to analysts at EPFR Global, approximately $251 billion in assets under management from passive mutual funds and exchange-traded funds are tied to the index. Rebalancing events, especially when executed by passive funds, can create some level of market churn. However, the details of the rebalancing have been known since Nasdaq’s announcement on July 10. So, the trading activity that has taken place since could lessen the chances of significant volatility. In fact, during the previous week, the top seven Nasdaq 100 stocks outperformed the index, suggesting that traders and investors may have already factored in the rebalancing. Also, when you look at previous special rebalances, it becomes clear that they tend to be uneventful in the long run. For instance, a special rebalancing occurred in 2011 when Apple’s (AAPL) weight in the index reached an uncomfortable 20%. Despite the reallocation of a significant portion of Apple’s weight to Microsoft, there was no lasting effect on share prices. This precedent suggests that this week’s rebalancing is unlikely to have a profound impact on the overall market. The NDX has resistance from 15550/15700. I will again be a seller on any rally to this area with a 15805 lower ‘’Closing Stop’’. I still do not want to be long the NDX at this time.
September BUND
I am still flat. The Bund has support from 131.40/.132.20 where I will be a small buyer with a 130.85 ‘’Closing Stop’’. Meanwhile, my only interest in selling the Bund is still on a rally higher to 134.30/135.10 with the same 136.05 ‘’Closing Stop’’.
Gold Rolling Contract
No Change. The stronger Dollar led to a small sell-off in Gold on Friday. I am still flat. Today, I will continue to be a buyer on any dip lower to 1933/1948 with the same 1921 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 1959.
Silver Rolling Contract
I am still flat as Silver continues to build value above 24.50. I will leave my 23.80/24.50 buy level unchanged with the same no stop. If I am taken long, I will have a T/P level at 25.20.
Recent Comments