On Friday, the main focus was the US Non-Farm Payrolls Report. The headline came in above expectations at 206k (exp. 190k), although the prior saw a chunky revision lower to 218k from 272k, while the two-month net revisions were -111k from -15k. Meanwhile, the Unemployment Rate surprised to the upside at 4.1% (exp. 4.0%, prev. 4.0%), rising above the Fed’s median 2024 projection of 4.0%. Earnings were in line with expectations. The chunky downward revisions and rising unemployment rate sparked a dovish reaction with both stocks and bonds firmer on the session while the Dollar was hit. Stocks ground higher throughout the session with equity performance led by gains in Communication names with notable upside in Meta (META) and Google (GOOGL) supporting the sector. T-notes saw two-way price action to the NFP report, initially selling off on the headline beat, but once the details were digested it spiked higher before paring marginally. Nonetheless, T-notes ground higher throughout the rest of the session into settlement with the curve bull steepening. Money markets now fully price in two Fed rate cuts by year-end, with an 80% probability of the first move occurring in September. The Dollar was hit with the dovish data and lower yields weighing on the buck while both cyclical and haven currencies prospered. Elsewhere, focus was on elections with a Labour landslide in the UK seeing the party take an absolute majority as expected. Across the channel, French polls continue to show a hung parliament, but an IFOP poll today saw the RN at 170-210 seats, down from the prior day’s polling for 210-240 seats, which supported French assets. Headline NFP eased in June to 206k from a heavily revised down 218k (initially 272k), while the unemployment rate ticked up to 4.1% from 4.0%, despite expectations for this to be left unchanged. The 4.1% is also above the Fed’s median 2024 projection, and it also came alongside an uptick in the participation rate to 62.6% from 62.5%. Oxford Economics suggests that the increase was led by prime-age workers, whose unemployment rate rose to the highest level since November 2021. Wages meanwhile were in line with expectations at 0.29% (exp. 0.30%), ticking down from the 0.4% prior, while Y/Y eased to 3.86% from 4.1%, in line with the 3.9% forecast. Although the headline beat, the chunky revision lower offset the beat and shows that job growth is continuing to cool within the US while participants will be cognizant of revisions lower to the June report in the next report; the latest two-month net revisions were -111k vs last months -15k. With wages easing in line with expectations, chunky downward revisions, and a rising unemployment rate, the report was a net dovish one. The general tone of analysts is that this report keeps the door open for a September rate cut, but of course data between now and then will also help shape expectations. Markets currently price in a c. 80% probability of a September rate cut and are now fully pricing in two rate cuts in 2024 vs the Fed’s median view of just one rate cut. It is also worth noting that with the Fed’s acknowledgement of further inflation progress, and Powell’s commentary that the disinflation process has begun, while also noting that risks to the dual mandate have come into better balance, the labour market will be of increased attention in regard to the Fed’s reaction function. Nonetheless, Powell has said it would take an unexpected weakening in the labour market, which he defined as more than just a couple of tenths higher in the unemployment rate, for the Fed to react. Meanwhile, the Fed Monetary Policy Report noted modest further progress seen on inflation this year, but still need ‘greater confidence’ before moving to rate cuts, echoing the recent messaging from Fed officials. The report further states that labour supply and demand resemble the period right before the pandemic and when the labour market was relatively tight but not overheated. On housing-related inflation, it expects inflation pressures to gradually decline. Meanwhile, on the job market it notes despite improvements, there are still significant disparities. Lastly, and on the financial system, the report notes it remains ‘sound and resilient’ though parts of banks’ CRE portfolios are ‘facing stress’, before adding that financial conditions appear somewhat restrictive on balance and bank lending pace ‘somewhat tepid’. In other news, Fed Member Williams (voter) stated there is still a way to go to reach the 2% inflation target on a sustained basis. Williams further added they have seen significant progress in bringing inflation back to the 2% target, and the Fed is committed to getting the job done. In some later remarks, the New York Fed President added the US economy is doing remarkably well and some valuations are definitely stretched. Overnight, the French Elections have produced a hung parliament as the Left Wing New Popular Front surprisingly won most seats followed by President Macron’s Centralists and with the far-right National Rally in third place. European Equity Markets are opening lower as a result. Elsewhere, Oil closed lower by 0.69% while Gold spiked a further 1.4% helped by a weaker Dollar.
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 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 110 points on Friday and is now ahead by 243 points for July after closing June with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April 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 to 4 updated emails throughout the trading day to demonstrate this value, a 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 0.54% higher at a price of 5567.
The Dow Jones Industrial Average closed 67 points higher for a 0.17% gain at a price of 39,375.
The NASDAQ 100 closed 1.02% higher at a price of 20,301.
The Stoxx Europe 600 Index closed 0.18% lower.
This Morning, the MSCI Asia Pacific closed 0.2% higher.
This Morning, the Nikkei closed 1.26% higher at a price of 40,580.
Currencies
The Bloomberg Dollar Spot Index closed 0.24% lower.
The Euro closed 0.4% higher at $1.0840.
The British Pound closed 0.5% higher at 1.2813.
The Japanese Yen rose 0.7% 0.2% closing at $160.71.
Bonds
Germany’s 10-year yield closed 2 basis points lower 2.54%.
Britain’s 10-year yield closed 5 basis points lower at 4.13%.
U.S.10 Year Treasury closed 7 basis points lower at 4.28%.
Commodities
West Texas Intermediate crude closed 0.86% lower at $83.16 a barrel.
Gold closed 1.4% higher at $2391 an ounce.
This morning on the Economic Front we have Euro-Zone Sentix Investor Confidence at 9.30 am. The only other data of note is U.S. Consumer Credit which will not be released until 8.00 pm.
Cash S&P 500
Peak optimism leads to peak prices. The very reason that prices are at new highs is because everyone is bullish. Optimism in the aggregate, like pessimism, is internally regulated and progresses like any other technical model. When extreme optimism changes, so will prices. That change is drawing ever closer. In last week’s Daily Commentary, I wrote about the optimistic extreme in Market Vane’s Bullish Consensus. Since then, the daily reading has ticked even higher, from 71 to 72, which nearly matches the extreme in January 2018 (73), days before the start of “Volmaggedon” and some wild and volatile market swings that eventually led to a strong market decline to March 2020. Meanwhile, the percentage of bulls in the weekly Investors Intelligence Advisors’ Survey has popped to 63.1, the most optimistic extreme in over three years. It is rare that the percentage of bullish advisors exceeds 63, with the last time occurring in April 2021 (63.7). This period of time attended a peak in the most speculative aspects of the market such as SPACs, meme stocks and IPOs. None of these assets has even approached their 2021 tops but U.S. stock indexes have taken the mantle as the main speculative asset now, specifically tech stocks and AI. They are at new highs and investment advisors are likewise super optimistic. At the same time, active investment managers are leveraged long again. The Exposure Index compiled by the National Association of Active Investment Managers shot up to 103.66. At 100, active managers are fully invested in stocks. Anything above 100 means they are so bullish that they are using leverage to try to further enhance returns. At the same time extreme level reached by the Goldman Sachs Bull/Bear indicator has also coincided with past market tops. A wide swath of market indicators is aligned, implying a high level of risk for stock market bulls. The positive seasonal bias of early July has held sway so far but with the 14 Day RSI closing at 77 for the S&P on Friday night, it is a breve person who buys stocks against this background. However, like any ‘’TOP’’ in the market it takes time. The S&P is fried to the upside trading outside the top of its Daily Bollinger Band. Since Thursday’s commentary, the S&P has traded the whole of my sell range for a now 5550 average short position. I am now short with no stop. I will raise my T/P level to 5537. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
I am still flat the Euro as the market never came close to Thursday’s buy range. Today, I will again raise my buy level to 1.0710/1.0780 with a higher 1.0645 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
Dollar Index
The weaker than expected NFP Report on Friday sess the Dollar trading 40-points lower from where I marked prices on Thursday morning. I am still flat. I will now lower my sell level to 105.30/106.00 with a 106.65 ‘’Closing Stop’’.
Cash DAX
No matter what the news but the DAX keeps moving higher. The DAX hit a high above 18600 on Friday morning before falling over 120 points on nervousness ahead of the French Elections. This morning, the DAX is trading at a price of 18470 as I go to press. We have strong resistance from 18650/18750 where I will be a small seller with a 18855 ‘’Closing Stop’’. Despite the positive price action over the past few weeks, I no longer want to be a buyer of the DAX at this time. If this view changes I will be back with a new update for my Platinum Members.
Cash FTSE
My 8120 long FTSE position worked well as the market rallied to my 8230 T/P level. Subsequently, I emailed my Platinum Members to buy the FTSE again and I am now long at price of 8190. I will add to this position on any further move lower to 8080. I will have no stop on this position given the massive support below in 7900/8100 area. In this range we have the 2023 highs, the 100 Day Moving Average and close to the .382 fin retracement. I will have a T/P level on this latest long position at 8260. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
I am still flat the Dow. The Dow has not confirmed the S&P’s new highs since May 20, when the Dow made its intraday extreme of 40,077.40. Even though the Dow is underperforming both the S&P and NDX, I still do not want to be short the Dow at this time. Neither will I chase the market higher as I continue to be a buyer on any dip lower to 38830/39080 with the same 38695 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 39230.
Cash NASDAQ 100
On Friday, the 14 Day RSI closed with a negative divergence just as the S&P above, closing outside the top of its Daily Bollinger Band. History tells us that buying against an extended background like this does not end well. The NDX has now rallied over 800 points since last Tuesday morning’s low print following its recent downside Key Day Reversal. Yet again no KDR has worked since last October. The madness is reflected by the 30% rally in Tesla shares despite reporting negative sales but not as weak as expected. This move higher has driven the NDX to an even more overbought condition. I hate trying to short the NDX but with the RSI closing over 78 I have to try the short side. The NDX hit my sell range on Friday, and I am now short at 20320. I will add to this position on any further move higher to 20460 while leaving my 20555 ‘’Closing Stop’’ unchanged. I will now raise my T/P level to 20180. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September BUND
Post Friday’s NFP release the Bund hit a low at 130.48 – just missing my 130.40 buy level and I am still flat. This morning, the Bund is trading at a price of 130.95. I am reluctant to chase the Bund higher given its low 2.50% yield. Therefore, I will continue to be a buyer on any dip lower to 129.70/130.40 with the same 129.15 ‘’Closing Stop’’. If triggered, I will have a T/P level at 130.95.
Gold Rolling Contract
Thankfully we have had no sell level in Gold with the market trading over $40 higher from where I last marked prices. Gold has support from 2340/2346. I will now raise my buy level to this area with a higher 2325 tight ‘’Closing Stop’’.
Silver Rolling Contract
I am still flat as Silver has continued to play catch-up with Gold over the past few trading sessions. I will now raise my buy level to 29.50/30.30 with a higher 28.25 ‘’Closing Stop’’. If triggered, I will have a T/P level at 31.10.
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