U.S Equity Markets rallied further on Monday with continued momentum from the soft NFP data on Friday that has increased the chances of the Fed being able to cut this year. The rate-sensitive small-caps saw outperformance, indicative of the appetite for duration, which will be tested at this week’s refunding auctions. The technical setup has improved for stocks too with analysts flagging the lower implied volatility and resumption of share buybacks with little major data catalysts this week to knock off sentiment. Treasuries were choppy within post-NFP ranges with no major catalysts ahead of refunding auctions; note Japan and UK were both absent on Monday. The Dollar pared initial weakness, choppy with yields. Fed voters Williams and Barkin gave familiar rhetoric, while the Fed’s SLOOS survey showed a continued tightening in bank lending, but not at an alarming rate. Oil prices were choppy after the ceasefire agreement statement from Hamas was refuted by Israel, but there appears to be at least something new to work with for the two sides after the breakdown from the weekend, whilst in the meantime, Israel has reaffirmed it will go ahead with the Rafah invasion if it does not get its hostages. Meanwhile Fed Member Barker (2024 voter, hawkish) said that inflation data this year is “disappointing…job is not yet done”; he is confident that the current restrictive level of rates can curb demand enough to bring inflation to target. He does not see the economy overheating, but the Fed knows how to respond if it does. The data “whiplash” confirms the value of the Fed being deliberate. Given the strong labour market, the Fed has time to gain confidence it needs to be sure inflation will fall. Businesses are still looking to raise prices if they can; noting there is a risk that shelter, and services keeps the headline index above target. Barkin said that he still feels like the weight of risks is towards inflation, noting the recent data makes you think less optimistically about how quickly inflation gets under control; “it is a stubborn road”. He has not yet seen evidence that inflation is on track. He tends to imagine the Fed will need to take some edge off demand to finish the inflation fight, though some help from supply is still possible. He added that metrics of where the neutral rate is have moved up, but it feels like current policy is restrictive and he is at this point willing to believe rates are restrictive enough. Barkin also noted that GDP growth still seems strong, but there is focused attention now on the job market. Last Friday we had the U.S. Jobs Report for April and it was a dovish one, confirming the weakening survey data. Headline NFP eased to 175k from the 315k prior, falling short of the 243k estimate with -22k two-month net revisions. The 175k jobs added is the lowest since October 2023’s 150k, and also the first time since then that NFP fell short of expectations. The Unemployment Rate ticked up to 3.9% from 3.8%, despite expectations for an unchanged print while the labour force participation rate remained steady at 62.7%. Earnings were also soft, M/M rose 0.20% despite expectations for a 0.3% print again while the Y/Y dipped to 3.9% from 4.1%, deeper than the 4.0% consensus and the first time under 4% since June 2021. The Wall Street Journal’s Timiraos says this will not change much for the Fed as there is another jobs report before their next meeting, the Fed is more focused on inflation data, and it does not show an “unexpected” weakness in the labour market. Fed Chair Powell said on Wednesday that “A couple tenths” of an increase in the unemployment rate does not count as an “unexpected weakening” in the labour market that would justify cuts. This implies a further weakening of the labour market is needed for the Fed to cut rates, unless inflation starts to sustainably return to 2%, but after the Q1 inflation data, the Fed does not yet have that confidence. Nonetheless, this report does add support to the case for rate cuts this year, with markets now pricing in almost two rate cuts this year; almost fully priced in for September and December. By itself, a slightly softer NFP is not a cause for concern, particularly after some of the massive strength seen recently, but given some of the red flags seen in the survey data, it will open up the question of whether this may be the start of a string of downside numbers. At the same time, the timelier weekly jobless claims figures are running particularly low still in the low 200k’s, indicative of no material slowdown. Elsewhere, Oil rose 0.68% while a weaker Dollar saw Gold end Monday with a small 0.5% rise.
To mark my 2975th 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 427 points last Friday and is now ahead by 922 points for May, having finished April with a gain of 4010 points after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. 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 1.03% higher at a price of 5180.
The Dow Jones Industrial Average closed 176 points higher for a 0.46% gain at a price of 38,852.
The NASDAQ 100 closed 1.13% higher at a price of 18,093.
The Stoxx Europe 600 Index closed 0.53% higher.
This Morning, the MSCI Asia Pacific closed 0.8% higher.
This Morning, the Nikkei closed 1.57% higher at a price of 38,835.
Currencies
The Bloomberg Dollar Spot Index closed 0.3% lower.
The Euro closed 0.3% higher at $1.0769.
The British Pound closed 0.2% higher at 1.2562.
The Japanese Yen rose 0.6% closing at $153.86.
Bonds
Germany’s 10-year yield closed 11basis points lower at 2.48%.
Britain’s 10-year yield closed 15 basis points lower at 4.22%.
U.S.10 Year Treasury closed 15 basis points lower at 4.48%.
Commodities
West Texas Intermediate crude closed 0.68% higher at $78.64 a barrel.
Gold closed 0.5% higher at $2325.10 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders which fell0.4% versus +0.4% expected. Next, we have Euro-Zone Retail Sales at 10.00 am, followed at 3.00 pm by U.S. ‘’RealClearMarkets’’ Economic Optimism for May. Finally, we have a speech from Fed Member Kashkari at 4.30 pm and a three-year Treasury Auction at 6.00 pm.
Cash S&P 500
Massive two-way chop over the past few days before a combination of better-than-expected earnings from Apple while announcing a $110billion buyback and a weaker NFP release saw the S&P rally over 170 Handles from the lows of Thursday afternoon. As noted on Thursday that both Yellen and Powell want lower Bond Yields to help refinance their massive debt, the added liquidity saw a trend break and recovery of many of the key Moving Averages on Friday and suddenly we are now trading above 5170. The S&P is now well above its 20-Day MA at 5093 and 50-Day at 5131. Both of these key averages will act as strong support on any test. Yet again bears are left with nothing. Seasonally the next two weeks are weak before we hit the strong summer seasonality, leading to a possible melt-up in the market. This melt-up is a strong possibility in my opinion give how undervalued asset managers are at this time. Over the weekend Berkshire Hathway announced that they have close to $200bn in cash as they do not see any viable buying opportunities at this time. Some of the key technical signals that I follow are still oversold, meaning I have no interest in pressing the short side of the ledger. On Thursday, the S&P hit my 5019-buy level before rallying to my 5038 T/P level and I am still flat. This morning, I will be an aggressive buyer on any dip lower to 5130/5146 with a 5016 wider ‘’Closing Stop’’. Below here the S&P will have strong support at Thursday’s 5065 Chicago close. Friday’s low was 5101 so we have a large ‘’Open Gap’’ that may get tested over the coming days. If it does, I will be an aggressive buyer. Although bank reserves fell last week, it is impressive that the S&P ended the week higher. Internally the market is strong as shown by the McClellan Oscillator which closed at +184 last night.
EUR/USD
My Euro call worked well as the market traded lower to my 1.0680 buy level before rallying to my 1.0727 T/P level and I am now flat. As long as the Euro does not break and close below 1.0600, I will continue to be a buyer on dips. This morning, the Euro has support from 1.0660/1.0740 where I will be a buyer with a higher 1.0595 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
Dollar Index
The Dollar rallied over 1% since the Fed Meeting on Wednesday. I am still flat. I will now lower my sell level to 105.60/106.20 with a lower 106.85 ‘’Closing Stop’’.
Cash DAX
Thankfully we have had no sell levels in the DAX as every dip is relentlessly bought by traders. This morning the DAX is trading at 18200. We have support from 17980/18060. I will now raise my buy level to this area with a higher 17895 ‘’Closing Stop’’. I still do not want to be short the market at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE continues to make new all-time highs, trading at 8290 this morning. The FTSE has resistance from 8340/8400 where I will be a small seller with a 8455 ‘’Closing Stop’’. Given how overbought the FTSE is now, I have no interest in being a buyer of the market at this time.
Dow Rolling Contract
Frustratingly the Dow again missed Thursday’s buy range by surging almost 1000 since my last Daily Commentary. Thankfully, we had no sell level in this market as bears have again been fried. The Dow has short-term resistance from 39050/39300 where I will be a small buyer with a 39505 wider ‘’Closing Stop’’. The Dow is now severely overbought on the 15-minute chart. I no longer want to be a buyer of the Dow at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX never came close to Thursday’s buy range, spiking on Apple and its $110 billion buy back announcement. This morning the NDX is trading 700 points higher from where I last marked prices. This is a massive move in such a short timeframe. The NDX is now overbought. We have resistance from 18170/18320 where I will be a small seller with a 18425 tight ‘’Closing Stop’’. With the MO closing at +184 last night, I no longer want to be a buyer of the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members.
March BUND
The Bund rallied to my 130.80 T/P level on my latest 130.30 long position, and I am now flat. This morning, the Bund is trading at 131.50. We have support from 130.10/130.90 where I will again be a buyer with a higher 129.55 ‘’Closing Stop’’. I still do not want to be short the Bund at this time.
Gold Rolling Contract
My Gold plan worked well as the market sold off on Thursday to my 2287 buy level before rallying to my 2301 T/P level and I am now flat. The past few days have seen plenty of two-way price action for the Precious Metals. Gold hit a low on Friday at 2278 before rallying to sit at 2321 this morning. Gold has support from 2288/2303 where I will again be a buyer with a wider 2275 ‘’Closing Stop’’ which is just below last week’s spike low print. If I am taken long, I will have a T/P level at 2314.
Silver Rolling Contract
I am still long Silver at an average rate of 27.30. This morning, Silver is trading higher at 27.40. I will continue to have no stop on this position while leaving my 27.70 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Recent Comments