U.S. Equity Markets were relatively flat on Friday aside from the NASDAQ 100 which saw notable underperformance due to tech weakness after weak earnings reports from INTC, KLAC and FICO. The Treasury curve bear flattened after the PCE report, which on the face of it was relatively in line with expectations with Core Y/Y at 2.9%, just shy of expectations. However, the Core services ex housing print accelerated in December while Personal Income and Consumer Spending were strong, showing consumer demand is still high. The U.S. Dollar saw two-way price action on the data with the Dollar Index ultimately flat on Friday, and essentially flat for the week. Oil prices were choppy in initially technically driven trade but a large rally was seen pre- and -post-settlement after it was revealed the Houthis attacked a UK Trafigura oil tanker which caught alight, seeing both Brent and WTI settle at the highest levels since late November. Attention this week turns to the FOMC, NFP and ISM Manufacturing report to gauge when the Fed’s first-rate cut will occur. In Europe, the Bank of England takes the limelight with Thursday’s Monetary Policy announcement, while Euro-Zone CPI and GDP will also be in focus. Overall, the PCE data was in line with expectations with the headline M/M rising 0.2%, up from the prior -0.1%, with Y/Y matching the prior 2.6%. Core M/M rose by 0.2% up from November’s 0.1% while the Core Y/Y eased to 2.9% from 3.2%, a touch beneath the 3.0% forecast. Looking into the report, however, the Fed eyed Core PCE Services ex housing rose 0.3%, accelerating from the prior 0.1% while core prices ex housing rose 0.1%, up from the 0.0% in November. There was a lot of attention on the annualised metrics too however, the 6 month annualised rate eased to 1.9% with the 3 month at 1.5%, both beneath the Fed’s 2% target. Overall, money market pricing was little changed in wake of the data with markets pricing in the first cut by May with a c. 50% probability of an earlier cut in March. Analysts at Oxford Economics write that ” By late April, I expect the Fed will have enough confidence to begin cutting interest rates at its late April/early May meeting, although the backdrop of a strong economy means it is likely to only cut rates gradually this year.” Elsewhere in the report, consumer spending was strong, rising 0.7% in December, above the 0.4% forecast while the prior was revised up to 0.4%. Personal income rose 0.3%, in line with expectations, although the US savings rate declined to 3.7% from 4.1% – the lowest since 2022. Pending Home Sales were hot, the headline rose 8.3% taking the index to 77.3 from 71.4, well above the expected 1.5% rise and more than offsetting November’s 0.3% decline. “The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” said Lawrence Yun, NAR chief economist. “Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.” As was widely expected, the ECB opted to stand pat on all three of its key rates last Thursday. The initial policy statement passed with little in the way of fanfare with the Governing Council stating that the declining trend in underlying inflation has continued and that past interest rate increases keep being transmitted forcefully into financing conditions. Furthermore, “Incoming information has broadly confirmed its previous assessment of the medium-term inflation outlook”. At the subsequent press conference, President Lagarde noted that it is “premature” to talk about rate cuts, adding that the ECB will be data-dependent and not fixated on the calendar. With regards to events in the Red Sea, the President noted that the Bank is being careful given that shipping costs have increased, and deliveries have been delayed. On wages, which have been a key source of focus when it comes to the timing of the first rate cut, Lagarde suggested that data is ‘directionally good’ and the Bank is not seeing second-round effects. However, this was followed up by the judgement that the ECB needs to be further along the disinflation process before it can be confident that inflation is moving back towards target sustainably. Overall, the lack of explicit pushback from the President on current market pricing and positive commentary on wages has allowed market pricing to drift in a more dovish direction with an April cut priced at around 84% vs. circa 68% pre-announcement with a total of 134bps of easing priced by year-end vs. 123bps pre-announcement. In wake of the meeting, Reuters sources reported that ECB policymakers are open to start discussing future rate cuts in March if data points to inflation hitting 2% this year, adding a March pivot would pave the way for a rate cut most likely in June, despite markets pricing in over an 80% probability of a rate cut in April. Elsewhere, Oil rose 0.84% while Gold closed flat.
To mark my 2925th 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 406 points on Friday and is now head by 3382 points for January. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 points, after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, 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 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 0.07% lower at a price of 4890.
The Dow Jones Industrial Average closed 60 points higher for a 0.16% gain at a price of 38,109.
The NASDAQ 100 closed 0.55% lower at a price of 17,421.
The Stoxx Europe 600 Index closed 1.11% higher.
Last Friday, the MSCI Asia Pacific closed 0.7% higher.
Last Friday, the Nikkei closed 1.55% lower at a price of 35,751.
Currencies
The Bloomberg Dollar Spot Index closed 0.10% lower.
The Euro closed 0.2% lower at $1.0853.
The British Pound closed 0.1% lower at 1.2702.
The Japanese Yen fell 0.4% closing at $148.17.
Bonds
Germany’s 10-year yield closed 4 basis points lower at 2.30%.
Britain’s 10-year yield closed 4 basis points lower at 3.97%.
U.S.10 Year Treasury closed 4 basis points lower 4.14%.
Commodities
West Texas Intermediate crude closed 0.84% higher at $78.01 a barrel.
Gold closed 0.2% higher at $2018.10 an ounce.
The only data of note today on either side of the Atlantic is the Dallas Fed Manufacturing Business Index which will be released at 3.30 pm.
Cash S&P 500
Thursday’s Goldilocks report of debt financed GDP growth of 3.3% and a 1.5% low GDP Price Index was the latest excuse for the S&P to break above 4900.This move higher saw the 4892-sell level triggered before selling off to my 4878 T/P level. Subsequently, I mailed my Platinum Members to sell the S&P again at a price of 4905. After this level was hit the S&P fell 30 handles. Unfortunately, I covered this latest short position at 4896 and I am still flat. The S&P has still not been able to have a 5 EMA reconnect, having a late rally into the close to sit at 4880 as I go to press. The S&P’s rally over the past week sees the market sit at the top of its Daily Bollinger Band. I am seeing a number of negative divergences on these rallies. This is no surprise when you see the S&P has closed higher for 13 of the last 14 weeks. The S&P is now a massive 800 handles above its October 27 low print. Today, I will again be a seller from 4898/4913 with a 4927 ‘’Closing Stop’’. I no longer want to be a buyer of the S&P at these levels.
EUR/USD
News that the ECB are considering not cutting interest rates until June saw the Euro trade lower to my 1.0835 buy level. I am still long with a now lower 1.0900 T/P level. I will add to this position at 1.0775 while leaving my 1.0715 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar just missed my initial 103.80 sell level before falling 40 points and I am still flat. I will not chase the Dollar lower, leaving my 103.80/104.50 sell level unchanged with the same 105.05 ‘’Closing Stop’’.
Cash DAX
No Rate cuts until June seems to be the ‘’take’’ from Thursday’s ECB Meeting and Lagarde press conference. No matter as the DAX is trading 300 points higher from where I marked prices early Thursday morning. I am still flat the DAX. The DAX has support from 16680/16760 where I will be a small buyer with a 16595 tight ‘’Closing Stop’’. I still do not want to be short the DAX at this time.
Cash FTSE
For the first time this month, the FTSE has closed higher for two consecutive trading sessions, trading at 7640 as I go to press. We were right not to press the downside given how oversold and decoupled the FTSE had become. I will now raise my buy level to 7500/7570 with a higher 7435 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 7615.
Dow Rolling Contract
The Dow closed strong on Friday at yet another new all-time closing high. Thankfully, we have had no sell levels in the Dow for a number of weeks as short positions continue to get slammed. However, the Dow does have some short-term resistance from 38250/38500 where I will be a small seller with a wider 38705 ‘’Closing Stop’’. Meanwhile, I will continue to be a buyer on any dip lower to 37300/37550 with the same 37155 ‘’Closing Stop’’.
Cash NASDAQ 100
The idea of shorting the NDX on rallies has certainly worked well over the past week. Of course, you have to be quick to take gains. Even a 12.5% fall in Tesla shares on Thursday could not prevent the NDX from closing higher. Earlier the NDX traded lower to my 17440 T/P level on my latest 17525 short position. With financial conditions getting ever easier by the day, it feels like Interest Rates were never raised. Bulls remain in total control despite negative divergences below the surface. The NDX has resistance from 17480/17630 where I will again be a seller with the same 17705 ‘’Closing Stop’’. I still do not want to be long the NDX at this time.
March BUND
My latest long 133.95 Bund position worked well as the market rose on Thursday to my 134.45 T/P level and I am now flat. The Bund has support from 133.20/133.90 where I will again be a buyer with a lower 132.65 ‘’Closing Stop’’. Despite the incredibly low Yield for the Bund I have no interest in pressing the short-side. If this view changes, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am still flat Gold. As I still long both the Euro and Silver, I will leave my 1873/1998 Gold buy level unchanged with the same 1959 wider ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I still believe in the bull case for this precious metal. I will continue to hold my 24.40 average long position with no stop or T/P level for now. This morning, Silver is trading slightly higher at a price of 22.82. I will look to add to my existing long position on any further move lower to 21.50. If this view changes, I will be back with a new update for my Platinum Members.
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