U.S. Equity Markets saw notable strength on Wednesday (S&P +1.6%, RUSSELL 2000 +0.5%) led by significant outperformance in the tech-heavy NASDAQ 100 (+3%) amid a myriad of positive semi-conductor news, such as AMD’s (AMD +4%) solid report and raising FY chip sales, US exemptions for ASML and Tokyo Electron in its new sanctions on exports to Chinese chipmaker, and Nvidia (NVDA +13%) being added to Morgan Stanley’s top pick list. As such, sectors were mainly green, but distinct outperformance in Tech, up almost 4%. Indices saw slight two-way action after the FOMC rate decision, but later extended on notable gains through Fed Chair Powell’s dovish press conference where he noted there was a real discussion about the case for reducing rates at this meeting; a strong majority supported not moving at this meeting, and September is the base cut for a rate, albeit data dependant. T-Notes saw gains on Wednesday in choppy trade, extending on its bid during Powell’s dovish presser. Although the curve saw initial weakness after the FOMC held rates, as expected, potentially in the absence of an explicit signal of a September easing, yet, the Central Bank was never going to tie its hands to that. The crude complex saw notable strength on Wednesday amid heightened Middle East tensions and bullish inventory data. In FX, the Dollar saw losses and the Japanese Yen was the distinct outperformer after the Bank of Japan surprise hike early yesterday morning – USD/JPY touched a low of 149.61 on Wednesday in wake of the Powell’s presser and the following geopolitical reports. After Powell’s presser concluded, the New York Times cited Iranian officials, reporting that Iran’s supreme leader issued an order for Iran to strike Israel directly, in retaliation for the killing in Tehran of Hamas’s leader – this saw some risk-off trade, highlighted by the crude complex (already notably bid) and spot gold spiking to session highs, with the Russell 2000 paring notable strength, and safe haven FX (JPY and CHF) seeing a bid. Ahead, the risk events come thick and fast with BoE, ISMs, AAPL/AMZN/INTC earnings (Thurs) followed by NFP on Friday. The Fed left rates unchanged at between 5.25-5.50%, but it made tweaks to its statement that appear to leave the door open to a rate cut in September. The Committee is now attentive to risks on both sides of its mandate, a change from the June Statement, where it said it was ‘highly attentive’ to inflation risks. The Statement says there has been ‘some further progress’ towards its inflation goal, whereas in June it said there had been ‘modest’ progress. And it now says that risks to achieving its employment and inflation goals continue to move into better balance, whereas in June, it said it was moving ‘towards’ better balance. The Fed did however reiterate that it does not expect that it will be appropriate to lower rates until it has gained greater confidence that inflation is moving sustainably towards target, suggesting that the Committee still wants to see favourable data before pivoting to rate cuts. At his post meeting press conference, Chair Powell revealed that there was a real discussion about the case for reducing rates at this meeting; a strong majority supported not moving (he later “overwhelmingly” policymakers felt it was not the time yet). The Fed Chair noted that the policy rate is clearly restrictive, and it is coming to the point where it will be appropriate to start rate cuts and dial back restriction in order to support the continued progress on the economy. He added that the Fed does not need to be 100% focussed on inflation given upside risks to prices have decreased while downside risks to employment mandate are real now, noting that the chances of a hard landing are now as the economy was neither overheating nor sharply weakening. Powell said the Fed is balancing risk of going too soon against going too late and has a very difficult judgement call on rates. When asked about the prospects of a 50bps rate cut (two 25bps moves rolled into one), Powell said it was not something the Fed was thinking about right now. A theme throughout Powell’s Q&A was that he tied any future move on the incoming data. Powell said that the Q2 inflation had added to the Fed’s confidence on inflation; on the labour market, Powell said does not think labour market is currently source of inflation pressures, and that is why Fed does not want to see excess cooling in the labour market. Powell was coy on giving any specific nod to rate cuts, noting that it could reduce rates zero times this year, or even several – it all depended on incoming data. The Fed’s focus is now shifting more towards its dual mandate, rather than just the inflation side of the equation; while policy was positioned to deal with dual mandate risks, the Fed is attentive to risks on both sides of the mandate. In wake of the statement release, markets reacted in a modest hawkish fashion, but Powell unwound any sniff of hawkishness in his post-meeting press conference, where he essentially said that rate cuts were on the horizon, depending on the incoming data, with the Fed more attentive to risks on both sides of its mandate. Pending home sales soared 4.8% in June (exp. +1.5%, prev. -1.9%), outside the upper bound of the forecast range, as it was supported by an increase in the supply of homes for sale and a dip in mortgage rates – sales posted their largest increase since December. Oxford Economics remarked that the rise in Pending Home Sales points to a modest bump up in Existing Home Sales for July. Looking further ahead, Oxford expect lower mortgage rates and increases in supply to support an improvement in home sales later in the year. Although, homebuying is expected to be unaffordable for most households, limiting the upside for sales. Elsewhere, Oil surged 4.23% while Gold ended Wednesday with a further gain of 0.9%
To mark my 3025th 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 was flat yesterday as it closed July with a gain of 1918 points 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 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 1.58% higher at a price of 5522.
The Dow Jones Industrial Average closed 99 points higher for a 0.24% gain at a price of 40,842.
The NASDAQ 100 closed 3.01% higher at a price of 19,362.
The Stoxx Europe 600 Index closed 0.80% higher.
This Morning, the MSCI Asia Pacific closed 0.5% lower.
This Morning, the Nikkei closed 2.40% lower at a price of 38,164.
Currencies
The Bloomberg Dollar Spot Index closed 0.45% lower.
The Euro closed 0.1% higher at $1.0826.
The British Pound closed 0.2% higher at 1.2858.
The Japanese Yen rose 3.2% closing at $149.80.
Bonds
Germany’s 10-year yield closed 3 basis points lower 2.31%.
Britain’s 10-year yield closed 7 basis points lower at 3.97%.
U.S.10 Year Treasury closed 4 basis points lower at 4.10%.
Commodities
West Texas Intermediate crude closed 4.23% higher at $77.89 a barrel.
Gold closed 0.9% higher at $2431 an ounce.
This morning on the Economic Front we already have German, Euro-Zone and U.K. Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by the Bank of England Rate Announcement at 12.00 pm followed by a speech from BoE Governor Bailey at 12.30 pm. Next, we have U.S. Weekly Jobless Claims, Unit Labour Costs and Non-Farm Productivity at 1.30 pm. Finally, we have Manufacturing PMI at 2.45 pm and ISM Manufacturing PMI at 3.00 pm.
Cash S&P 500
One of the most volatile months in a long time ended with a massive rip to the upside. When you see the NDX rally over 900 points in 24 hours you know that these are not normal markets. The S&P hit an overnight high at 5560 which is nearly 170 Handles higher than the post Microsoft earnings low at 9.10 pm on Tuesday night. This move higher has left a massive 60 Handle Gap from Tuesday’s 5434 Tuesday Chicago close to yesterday’s 5494 low. As you know all ‘’Open Gaps’’ get filled – the question is the ‘’When and from Where’’. Although none of my ‘’Calls’’ hit yesterday I am super please how the month ended. If nothing else once Yellen is still Treasury Secretary there are very few times when you can be short the S&P as she will just intervene to protect the market. The Buffet Indicator stands at an all-time 200 percent high, which is two standard deviations above trend: The stock market value of $56 trillion is twice the GDP of $28 trillion. It is a very expensive stock market and is becoming more expensive every day. The yield on the 6-month U.S. T-bill is now 5.14%, the lowest since May 2023, while the yield on the 3-month T-bill is 5.29%, the lowest level since July of last year. The market is pressuring the Fed to lower their Funds Rate to align with market rates, which have already moved away from the Funds Rate to the downside. The longer the Fed resists the more they will have to drop the Funds Rate to play catch up to the market which is signalling economic weakness ahead. In my opinion the Fed should have cut yesterday and not wait another six weeks. The rally over the past 36 hours means all Indexes got saved form a major break lower. The seasonal chart is bullish into August. We just witnessed two forms of intervention. The Bank of Japan targeting the Yen and dropping the Dollar while the Treasury Dept announced a doubling of Treasury buybacks as Yellen further reduced funding requirements resulting in lower yields. The VIX closed 7.5% lower last night at a still high 16.36. If we get a VIX crush from here, then there is no reason why the S&P cannot make a new high. I am not saying it is right, but this is now the backdrop. The S&P will have strong support from 5486/5502 where I will be a strong buyer with a higher 5473 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5525. I still do not want to be short the markets. If this view changes I will be back with a new update for my Platinum Members.
EUR/USD
I am still long the Euro from Monday at a price of 1.0820. The market traded in a narrow range again yesterday despite the wild moves in USD/JPY. I will add to this position at 1.0760 with the same 1.0695 ‘’Closing Stop’’. Meanwhile I will now leave my 1.0865 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
Overnight the Dollar traded lower to my 103.90 initial buy level. As I want to get August off to a positive start, I have now cut this position here at 104.20 and I am now flat. Today, I will again be a buyer of the Dollar on any further dip lower to 103.00/103.70 with a lower 103.35 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 104.10. I still do not want to be short the Dollar at this time.
Cash DAX
The DAX struggled over the past 24 hours, and I am still flat. The chart is getting tighter and tighter between 18300 and 18600 and is begging for a decision to come. With European growth so weak I suppose the ECB can ill afford and policy mistake as the path is getting very narrow. My only interest in buying the DAX is still on a dip lower to 18210/18300 with the same 18145 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 18380.
Cash FTSE
The FTSE surged to new all-time highs shortly after I posted yesterday morning, closing above the top of its Daily Bollinger Band. Normally I would be a seller against this backdrop but not today with the Bank of England rate announcement due at 12.00 pm. I will now raise my buy level slightly to 8230/8300 with a higher 8165 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8345.
Dow Rolling Contract
The Dow hit a high of 41200 last evening before falling 250 points from this high into the close. There is no doubt that with the NDX closing 3% higher we saw a lot of rotation back into tech stocks. Ahead of tomorrow’s NFP data I will not chase the Dow higher leaving my 40300/40550 buy level unchanged with the same 40095 tight ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 40730.
Cash NASDAQ 100
Wow! The NDX hit a high overnight at 19575 – 500 points higher from where I exited my latest long position 24 hours ago. This is insane. Thankfully we had no sell level in this market and are still flat. The NDX has strong resistance from 19800/19950 where I will be a small seller with a 20105 wider ‘’Closing Stop’’. Despite the aggressive reversal over the past 36 hours I do not want to be long the NDX at this time. If this view changes I will be back with a new update for my Platinum Members.
September BUND
Despite the Fed not cutting rates last night, the Bund still tagged on a further 50 points leaving the Yield at a super low rate of 2.3%. I am still flat. Today, I will continue to be a small seller on any further rally to 134.35/134.95 while leaving my 135.45 ‘’Closing Stop’’ unchanged. If I am taken short, I will have a T/P level at 133.70. Given how low the Bund yield I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold continues to build value above $2400 rising a further 0.9% on Wednesday. I am still flat as yesterday’s buy range was never threatened. I will now raise my buy level to 2385/2401 with a higher 2369 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2413.
Silver Rolling Contract
Silver continued to build on Tuesday’s gains, trading higher at 28.97 this morning. I am still long Silver at a price of 29.80. I will continue to have no T/P level or Stop on this position. If Silver continues to make new lows, I will look for a spot to add to my Silver portfolio over the coming days. If this view changes, I will be back with a new update for my Platinum Members.
Please Note: My next Daily Commentary will be on Tuesday August 6 as Monday is a Bank Holiday in Ireland. Any of my calls that are not hit today and are subsequently triggered on either Friday or Monday will see me return with updated emails to my Platinum Members.
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