Equity Markets closed green on Friday with outperformance in the NASDAQ 100 with sectoral gains most seen in Communication and Tech names although most sectors closed green (ex health care) with broad-based gains (equal-weighted SPX +0.7%). Stocks generally were bid throughout the U.S. afternoon with a rally ensuing from the better-than-expected University of Michigan data which saw inflation expectations ease from the sharp gains seen in the Preliminary Survey. Elsewhere, T-Notes were flat across the curve but with a slightly flatter bias. Note that Fed Governor Waller spoke on R*, noting he has not changed his view that the neutral rate is relatively low. The Dollar was lower in wake of the UoM data while the stronger-than-expected Durable Goods data ultimately had little impact. The Japanese Yen was flat vs the softer Dollar following mixed inflation data on Friday morning and fresh jawboning from officials after USD/JPY rose above 157.00 on Thursday. The Canadian Dollar outperformed on the weaker Dollar, risk environment and higher oil prices, despite weak retail sales data. The upside in crude prices was buoyed by the aforementioned Greenback selling but it was not enough to pare the crude weakness seen throughout the week. Note that today, US and UK markets are shut on Monday on account of Memorial Day in the US and Spring Bank holiday in the UK. However, it is an action packed week with focus on the US Core PCE data, the 2nd estimate of US GDP, and a plethora of Fed speak. The Final UoM Consumer Sentiment survey for May saw headline Sentiment rise to 69.1, up from the prelim 67.4 with both current Conditions and forward-looking Expectations rising. Conditions rose to 69.6 from 68.8, while Expectations rose to 68.8 from 66.5. Although a welcome improvement from the preliminary survey earlier in the month, all three components still remain down M/M from April. The market highlight however was on the inflation expectations which saw a welcome easing. The 1-year-ahead eased to 3.3% from 3.5% while the 5 Year eased back to 3.0% (exp. 3.1%). Note, the April inflation expectations were at 3.2% and 3.0%, respectively. Given the 5 Year inflation expectation has eased back to unchanged, it has helped soften some inflationary fears seen after the pickup at the start of the month in the preliminary survey. Durable Goods rose 0.7% in April, way above the expected -0.8% and the prior 0.8%. Ex-transport rose 0.4% (exp. 0.1%, prev. 0.0%) and ex-Air lifted 0.3% (exp. 0.1%, prev. -0.1%). As Pantheon Macroeconomics states, “they had expected a much weaker number for headline orders, but the 11.2% drop in aircraft orders was much smaller than implied by Boeing orders data.” Overall, the consultancy adds, “Orders ex-transportation was merely unchanged in March this year, but it is impossible to know whether that reflected a weaker Easter effect or an offsetting improvement to underlying orders. The truth probably lies somewhere in the middle and, with that in mind, caution against reading the gain in orders ex-transportation as an improvement in the underlying trend.” Meanwhile, Fed Member Waller (voter) spoke on the R, or neutral rate, he primarily provided an academic speech and did not speak on monetary policy or the economic outlook. However, he did provide potential reasons which could see a rise in R, and what has driven it lower for the past forty years. Nonetheless, one thing Waller did acknowledge was that he believes the 10-year Treasury yield is a good, real-world proxy for the theoretical value of the neutral rate. On reasons for why the neutral rate may rise, he suggested such as that US financing pressures may contribute to a climb in the longer-run neutral rate in the coming years, but only time will tell how large a factor the US fiscal position will be in affecting the neutral rate. He also noted if US Treasury supply begins to outstrip demand, this will put upward pressure on the neutral rate. On the flipside, he stated that demographics will continue to put downward pressure on the neutral rate, while over the last forty years, demand for US safe, liquid assets outpacing supply has pushed Treasury yields and the neutral rate lower. Waller did not specifically say whether he personally thinks it has risen or decreased, but earlier in the week he said it is hard to accurately estimate. Also, the latest Fed SEPs (released in March, to be updated in June) saw a rise in the longer run rate median, implying the FOMC do believe the neutral rate has shifted higher somewhat, in fitting with some recent Fed speakers, such as Governor Bowman. On Thursday we had the release of PMI data. The S&P Global Flash PMI data for May was hotter than expected, led by an upside in services. The manufacturing PMI rose to 50.9 from 50.0, while the Services PMI surged to 54.8 from 51.3, taking it to the highest level in 12 months. Overall, this lifted the composite to 54.4 from 51.1. The report highlighted that “The US economic upturn has accelerated again after two months of slower growth, with the early PMI data signalling the fastest expansion for just over two years in May. The data put the US economy back on course for another solid GDP gain in the second quarter.” On prices however, it notes that “Selling price inflation has meanwhile ticked higher and continues to signal modestly above-target inflation”. S&P also note that the main inflationary impetus is now coming from manufacturing rather than services, “meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive”. On the labour market, overall it notes that “Although companies continued to report lower employment, the rate of job losses moderated amid improved business confidence for the year ahead and higher order book intakes.” Elsewhere, Oil rose 1.77% while Gold continued Thursday’s aggressive sell-off, ending Friday with a further fall of 1.5% at a price of $2335.
To mark my 3000th 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 45 points on Friday and is now ahead by 1536 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 0.70% higher at a price of 5304.
The Dow Jones Industrial Average closed 4 points higher for a 0.01% gain at a price of 39,069.
The NASDAQ 100 closed 0.99% higher at a price of 18,808.
The Stoxx Europe 600 Index closed 0.19% lower.
Last Friday, the MSCI Asia Pacific closed 0.7% lower.
Last Friday, the Nikkei closed 1.17% lower at a price of 38,646.
Currencies
The Bloomberg Dollar Spot Index closed 0.34% lower.
The Euro closed 0.2% higher at $1.0846.
The British Pound closed 0.1% higher at 1.2735.
The Japanese Yen fell 0.2% closing at $157.01.
Bonds
Germany’s 10-year yield closed 4 basis points higher at 2.58%.
Britain’s 10-year yield closed 3 basis points higher at 4.27%.
U.S.10 Year Treasury closed 5 basis points higher at 4.47%.
Commodities
West Texas Intermediate crude closed 1.11% higher at $77.72 a barrel.
Gold closed 1.5% lower at $2335.10 an ounce.
With both the U.K and U.S closed for Bank Holidays, the other economic data of note due today is the German IFO Survey which will be released at 9.00 am.
Cash S&P 500
As you know I have not liked the recent rally in the S&P given the number of negative divergences. But nothing mattered until Thursday when out of the blue the S&P falls from a high of 5350 to a low at 5257. The initial sell-off saw my revised 5328 T/P level triggered on my 5340 short position. The late aggressive sell-off saw the S&P trade the whole of Thursday’s buy range for a 5276 average long position. The size of Thursday’s sell-off resulted in a nasty bearish engulfing reversal candle that may have consequences going forward. No doubt bulls are trying to defend this sell-off as we saw on Friday but this sell-off is happening against a backdrop of a large weekly divergence. This leads me to ponder if we are actually in the process of making a larger top consider how similar the price action looks to the last larger tops witnessed last year. I know every downside Key Day Reversal since the October 2023 lows have been aggressively bought but Thursday’s sell-off feels different to me. For this reason, I covered my 5276 long position at my revised 5282 T/P level and I am now flat. The 1% rally in the NDX on Friday, helped the S&P to close over 5300. The S&P has resistance from 5325/5341 where I will again be a seller with a 5357 ‘’Closing Stop’’. The S&P has short-term support from 5244/5260 where I will be an aggressive buyer with a 5229 ‘’Closing Stop’’.
EUR/USD
Shortly after I posted on Thursday the Euro rallied to my revised 1.0860 T/P level as emailed to my Platinum Members and I am now flat. As long the Euro does not close below 1.0750, I will continue to be a buyer of dips. Today, my Euro buy level will be from 1.0740/1.0810 with a tight 1.0695 ‘’Closing Stop’’. If triggered, I will have a T/P level at 1.0860.
Dollar Index
I am still flat the Dollar. This morning the Dollar is trading slightly lower at 104.75. I will continue to be a small buyer on any dip lower to 103.60/104.30 with the same 103.15 tight ‘’Closing Stop’’. I still do not want to be short the Dollar at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash DAX
My DAX plan worked well as the market traded lower to my 18520 -buy level before rallying to my 18620 T/P level on Friday morning and I am still flat. This morning the DAX is trading higher at 18680. It is so difficult to be short the DAX as every dip attracts buying despite German Inflation remaining high and Retail Sales which are soft. The DAX has support from 18490/18580 where I will again be a buyer with a higher 18395 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 18660. 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
My FTSE plan worked well as the market traded lower to my 8260-buy level before rallying to my 8310 T/P level and I am now flat. With the London Markets closed today, I will stay flat the FTSE until tomorrow’s Daily Commentary.
Dow Rolling Contract
The Dow ended last week with a loss of 2.33%. This is the first down week for the Dow in six weeks. On Thursday, I discussed short, intermediate and long-term non-confirmations between the Dow Industrials and the Dow Transports. Last week’s closing price in the Transports is the lowest weekly close since Mid-November of last year, 27 weeks ago. The September 2022 closing low were confirmed by both Indexes, which at the time constituted a Dow Theory Bear Market Signal. The new high in the Dow Industrials since then has not been confirmed by the Transportation Average, keeping intact that key signal. This does not convey a healthy and long-lasting uptrend despite the new highs been made in the NASDAQ 100. Thursday’s 800-point fall in the Dow was the largest one-day fall since March 2023. I am still flat as the Dow never came close to my sell range as thankfully, I had no buy level in the Dow. The Dow has strong support from 38600/38850 where I will be a buyer with a 38395 ‘’Closing Stop’’. Given the fact that I am still short the NDX, I will have no sell level in the Dow today despite the number of negative divergences in the Industrials. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
No Change. Despite the aggressive sell-off in the Dow, the NDX reversed Thursday’s sell-off, by closing 1% higher on Friday at a price of 18808. With the NDX having rallied almost 11% in just three weeks I just cannot be a buyer of the market at these levels. I am still short at an average rate of 18385. I don’t normally add to a position that is ‘’offside’’ but I will look to sell the NDX again on any further move higher to 18980 with the same no stop policy for now. I will leave my T/P level on this position unchanged at 18320. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
March BUND
No Change: I am still long the Bund at an average rate of 130.95. I will now lower my T/P level to 131.10 while leaving my 129.85 ‘’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
Wrong! Gold got hammered on Thursday and Friday. This further move lower saw my 2389 average long position stopped at 2356 and I am still flat. Gold has short-term support from 2298/2314 where I will be an aggressive buyer with a tight 2283 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2331
Silver Rolling Contract
I am still long Silver from last Wednesday at an average price of 30.85. Silver outperformed Gold and is trading at 30.40 this morning as I go to press. I will leave my 29.75 ‘’Closing Stop’’ unchanged while lowering my T/P level to 31.30. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Recent Comments