Equity Markets had their first significant down day in many months following the downgrade of the U.S. Government’s Sovereign Credit Grade from AAA to AA+ by Fitch. The NASDAQ 100 led the decline closing lower by 2.21%. This was the largest one-day fall since September 21, resulting in the VIX closing higher by a huge 15%. This move by Fitch has sparked criticism from leading economists. Fitch cited reasons such as ballooning fiscal deficits, an erosion of governance, and repeated debt limit clashes over the past two decades. The credit grader highlighted tax cuts, new spending initiatives, and economic shocks as factors contributing to the swelling budget deficits. Fitch also expressed concerns about the unaddressed medium-term challenges related to rising entitlement costs. This downgrade highlights the need for effective management of fiscal policies to address these challenges and ensure economic stability. Economists in Bank of America revised their forecast for a U.S. recession, making them the first large Wall Street bank to officially reverse their call. This change comes in light of growing optimism about the economic outlook and only a week after Federal Reserve Chair Jerome Powell stated that the central bank’s economists are also no longer predicting a recession. Bank of America economists, led by Michael Gapen, highlighted positive economic indicators such as low unemployment and easing price pressures over the past three months as the basis for their revised forecast. Meanwhile, U.S. lavish spending habits are about to change as their cash reserves run dry. The report from the Brookings Institution, conducted by Wendy Edelberg and Sofoklis Goulas, highlights that real income growth has slowed below the pre-pandemic levels. Although consumers have maintained their spending habits from a couple of years ago, the wealth accumulated during this period has significantly diminished. However, there was a rebound in personal consumption in June, indicating increased spending adjusted for inflation. European Markets closed lower. Worries over an impending recession in the Euro-Zone saw markets get slammed yesterday led by the 2% fall in the DAX. In Asia, the Chinese Government is intensifying its efforts to support the Country’s economy by urging local governments to accelerate the sale of bonds for infrastructure spending. Regulators have instructed local authorities to utilise their quota of special purpose bonds for this year by the end of next month, with the proceeds to be utilised by the end of October. Bloomberg’s calculations reveal that borrowing costs for local governments have already increased, indicating the financial strain faced by some provinces and the anticipated rise in bond supply. The yield on a bond issued by Jilin province has surged to its highest level in nearly two years compared to sovereign bonds. Elsewhere, Oil fell 2.31% while a stronger Dollar saw Gold close lower by 0.8%.
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For anyone following my Platinum Service it made 230 points yesterday and is now ahead by 440 points for August following a small gain of 285 points gain in 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 1.38% lower at a price of 4513.
The Dow Jones Industrial Average closed 348 points lower for a 0.98% loss at a price of 35,282.
The NASDAQ 100 closed 2.21% lower at a price of 15,370.
The Stoxx Europe 600 Index closed 1.35% lower.
This morning, the MSCI Asia Pacific closed 0.6% lower.
This morning, the Nikkei closed 1.68% lower at a price of 32,159.
Currencies
The Bloomberg Dollar Spot Index closed 0.3% higher.
The Euro closed 0.3% lower at $1.0945.
The British Pound closed 0.4% lower at 1.2713.
The Japanese Yen rose 0.1% closing at $143.21.
Bonds
Germany’s 10-year yield closed 2 basis points lower at 2.51%.
Britain’s 10-year yield closed 1 basis points higher at 4.41%.
U.S.10 Year Treasury closed 3 basis points higher at 4.08%
Commodities
West Texas Intermediate crude closed 2.31% lower at $79.49 a barrel.
Gold closed 0.8% lower at $1934.10 an ounce.
This morning on the Economic Front we already had the release of the German Trade Balance which came in at Euro 18.7 billion versus 15.0 billion expected. Next, we have German, Euro-Zone and U.K. Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. At 10.00 am we have Euro-Zone PPI and a speech from ECB Member Panetta. This is followed by Bank of England Rate Announcement and Minutes from the last meeting. At 1.30 pm we have Weekly Jobless Claims and Unit Labour Costs, followed by Services PMI at 2.45 pm, ISM Services PMI and Factory Orders at 3.00 pm. Finally, after the close we have both Apple and Amazon Earnings.
Cash S&P 500
Wonders do happen as the S&P finally had a lower close by over 1%. In the process 13 days of stubborn buying has been taken out. This how tight the daily ranges have been. The S&P closed below its 5 EMA, 8 MA and 20 MA as a small trendline was finally broken. With three ‘’Open Gaps’’ on the VIX there is every chance we will get a rally in the S&P in order to close these VIX Gaps. Remember all VIX Gaps eventually get filled. I am still looking for a reconnect to the 50 Day Moving Average at 4394. This will not be a straight line especially as we have to negotiate the earnings from both Apple and Amazon after the close. I am still flat the S&P. We have support from 4475/4490 where I will be a buyer with a 4459 ‘’Closing Stop’’. The S&P has resistance from 4558/4578. I will lower my sell level to this area with a tight 4595 ‘’Closing Stop’’.
EUR/USD
Ni Change. I am still long from Thursday at an average rate of 1.1030. I will leave my T/P level unchanged at 1.1070 with the same 1.0935 ‘’Closing Stop’’. If any of the above levels are hit, I will be back with anew update for my Platinum Members.
June Dollar Index
The Dollar traded in a narrow range yesterday and I am still flat. This morning the Dollar is trading higher at 102.60. The Dollar has resistance from 103.10/103.70 where I will be a seller with a higher 104.25 ‘’Closing Stop’’. We have support from 100.80/101.50. Ahead of Non-Farm Payrolls tomorrow I will leave my buy level unchanged with the same 100.15 tight ‘’Closing Stop’’.
Cash DAX
The sell-off in the DAX continued yesterday and again overnight, trading at 15940 as I go to press. The DAX has short-term support from 15700/15780 where I will be a strong buyer with a 15625 ‘’Closing Stop’’. I do not want to be short the DAX at this time as we are oversold on the 15-minute chart.
Cash FTSE
The FTSE traded lower to my second buy level at 7540 for a 7570 average long position. The FTSE hit a morning low at 7512 before rallying in the afternoon to my revised 7597 T/P level and I am now flat. This morning, the FTSE is trading lower at 7520. We have short-term support from 7380/7450 where I will be a strong buyer with a 7325 ‘’Closing Stop’’.
Dow Rolling Contract
My 35493 average short Dow position worked well as the market sold off to my 35340 T/P level and I am now flat. This morning the Dow is trading lower at 35250. We have short-term support from 34850/35100 where I will be a buyer with a 34695 tight ‘’Closing Stop’’. Ahead of this evening’s Apple earnings and NFP tomorrow I do not want to be short the Dow. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX got hit hard yesterday having its worst one-day fall in over five months. In the process two ‘’Open Gaps’’ were filled. This move lower all fits in with the seasonality chart that I have mentioned over the past week. The NDX is now trading over 600 points lower from last week’s high. The Apple earnings this evening will see a large gap either up or down depending on the result making it difficult to have any confidence in today’s levels. The NDX has strong support at its 50-Day MA (14980). As a result, I will be an aggressive buyer from 14900/15050 with a 14795 ‘’Closing Stop’’. I am not going to chase the NDX lower leaving my 15680/15830 sell level unchanged with a tight 15965 ‘’Closing Stop’’.
September BUND
My 132.20 Bund buy worked well as the market rallied to my 132.70 T/P level and I am now flat. This morning the Bund is lower at 132.01. We have short-term support from 130.80/131.60 where I will again be a buyer with a 130.25 ‘’Closing Stop’’.
Gold Rolling Contract
Gold fell a further 0.8% yesterday and I am still flat. As I am long Silver I will again lower my Gold buy level to 1903/1918 with a lower 1889 ‘’Closing Stop’’.
Silver Rolling Contract
Silver closed a further 2% lower yesterday, hitting my 23.80 second buy level for a now 24.20 average long position. I will now lower my T/P level on this position to 24.70 while still maintain a no stop on this position. reversing most of Monday’s gains. I am still long from last week at a rate of 24.60.
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