U.S. Indices pared from record highs seen during US trade on Friday as US President Trump terminated trade discussions with Canada over their Digital Services Tax on US tech. This announcement saw stocks trim earlier gains but still finished the Friday session in the green. Sectors were mixed, with Consumer Discretionary outperforming while Energy lagged. Upside in discretionary was led by Nike (NKE) after earnings and revenue guidance topped expectations, and signalled a plan to reduce exposure to China amid the trade tensions. Crude prices settled flat/up, but well off the earlier peaks on reports that OPEC+ are set to consider another 411k BPD in August, matching the production increase announced for July. Elsewhere, T-notes were choppy but ultimately bear steepened amid US data, the aforementioned trade update and OPEC+ sources, while attention turns to the Senate, who look set to vote on Trump’s bill on Saturday. On US data, headline PCE numbers were in line, but the core metrics were slightly hotter than expected, bolstering the “wait-and-see” approach the majority of the Fed are taking, other than Governors Waller and Bowman. Fed’s Kashkari spoke, he still sees two cuts this year, with the first possibly seen in September, but they could pause after the first cut if tariff effects appear later. The Final University of Michigan Consumer Sentiment saw little revisions to sentiment, while the 1 Year and 5 Year inflation expectations were revised down a touch. In FX, the Canadian Dollar was a clear laggard given the Trump trade talk termination, while the Dollar was flat with weakness also seen in the Australian Dollar, with marginal outperformance in the Euro. Attention this week lies on Canada’s response to Trump, Trump’s tariff figure to be announced on Canada, US NFP and ISM PMIs ahead of Independence Day. Core PCE rose by 0.2%, above the 0.1% forecast and accelerating from the prior 0.1%. Note, unrounded Core PCE rose by 0.1788% vs the prior 0.1159%. The Y/Y print rose to 2.7%, above the 2.6% forecast, while the prior was revised up to 2.6% from 2.5%. The headline numbers were in line, rising 0.1% M/M, matching the prior pace, with the Y/Y rising 2.3% Y/Y, accelerating from the upwardly revised 2.2% (initially 2.1%). The hotter-than-expected Core PCE print is worth watching as it is the Fed’s preferred gauge of inflation, and it clearly is remaining sticky above the Fed’s 2% target around these levels. There are concerns ahead that the impacts of tariffs will start to boost price pressures. Fed Chair Powell said they would expect to see meaningful tariff inflation effects in June, July, and August; If they not see that, that would lead to cutting earlier. Some on the Fed, namely Governor Waller and Bowman, have suggested cutting rates as early as July. However, this view is not shared among others on the FOMC (at least from those whom we have heard from). However, given sticky inflation above the Fed’s target, and no sign of a deteriorating labour market yet, the Fed will likely continue to argue for a wait-and-see approach, versus the dovish argument for acting now as tariffs are set to result in a one-time price increase and thus should be looked through. Meanwhile, Wall Street Journalist Timriaos highlights how goods prices are no longer helping and have started to contribute to inflation, as measured on a 12-month basis. Elsewhere in the report, Personal Income fell 0.4%, beneath the expected 0.3% rise, with prior revised down to 0.7% from 0.8%. Consumption (adj.) fell by 0.1%, beneath the +0.1% forecast. Real consumption fell by 0.3%, down from the prior 0.1% gain. The Final UoM for June saw sentiment little changed, moving slightly higher to 60.7 from 60.5, versus the consensus for an unchanged print. Expectations tilted slightly lower to 58.1 from 58.4, while conditions lifted to 64.8 from 63.7. Inflation expectations ticked lower across both time horizons, with the 1 Year printing 5.0% (prev. 5.1%) and the 5 Year 4.0% (prev. 4.1%). Within the report, it notes consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come. Consumers continue to be concerned about the potential impact of tariffs, but at this time they do not appear to be connecting developments in the Middle East with the economy. Fed Member Kashkari continues to expect two rate cuts in 2025, with possible first cut in September, and if the Fed cuts in September and tariff effect shows up later, the Fed could pause rate cuts. The Minneapolis President added official data so far reveals only modest impact of tariffs on prices, activity and labour market, and more time is needed to determine if effects of trade war are delayed, or if it will be smaller than thought. Kashkari added that emphasis must be on actual inflation and real economic data without committing to an easier policy path in case tariff effects are delayed. Overall, and while Kashkari has already spoken this week, he continued to toe a very similar line to Chair Powell and the wider majority of Committee members, continuing to leave Waller and Bowman as the dovish outliers, who have been touting a July reduction. Elsewhere, Oil ended Friday with a small 0.43% gain while Gold was soft, ending the week with a loss of 1.5%.
To mark my 3200th 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 lost 270 points yesterday, closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 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 0.52% higher at a price of 6204.
The Dow Jones Industrial Average closed 275 points higher for a 0.63% gain at a price of 44,094.
The NASDAQ 100 closed 0.64% higher at a price of 22,679.
The Stoxx Europe 600 Index closed 0.42% lower.
This Morning, the MSCI Asia Pacific closed 0.4% higher.
This Morning, the Nikkei closed 1.31% lower at a price of 39,958.
Currencies
The Bloomberg Dollar Spot Index closed 0.57% lower.
The Euro closed 0.28% higher at $1.1751.
The British Pound closed 0.07% lower at $1.3701.
The Japanese Yen rose 0.19% closing at $144.36.
Bonds
U.K.’s 10-Year Gilt closed 2 basis points lower at 4.49%.
Germany’s 10-Year Bund Yield closed 2 basis points higher at 2.59%
U.S.10 Year Treasury closed 4 basis points lower at 4.23%.
Commodities
West Texas Intermediate crude closed 0.66% lower at $65.09 a barrel.
Gold closed 0.72% higher at $3297.10 an ounce.
Today on the Economic Front we have German, Euro-Zone and U.K. Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. Next, we have Euro-Zone CPI at 10.00 am and U.S. Manufacturing PMI at 2.45 pm. This is followed by ISM Manufacturing PMI and JOLTS Job Openings at 3.00 pm. Finally, we have the Dallas Fed Manufacturing Index at 3.30 pm.
Cash S&P 500
Wrong! It seems President Trump has nominated himself as the Shadow Fed chair. He also appears to believe the overnight rate should be at 1%. It will be interesting to see how this plays out for the market. Clearly, DOGE was not successful in bringing rates down, and the new tax bill certainly won’t help either. That leaves jawboning as the only remaining option. The issue, however, is that unless the Fed initiates QE or Yield Curve Control, the long end of the yield curve is not bothered about what the Fed does with the overnight rate. Trump calling for 1% rates means 325 basis point cut in Interest Rates and says he will only pick a Fed Chair committed to cutting rates. That is a straight out litmus test and goodbye to Fed Independence. Core inflation is still above 3.25%. This administration is all about money and frankly smells of full MMT. Cut rates significantly to refinance the debt. The dark theory implies they want printing for personal gain in all their ventures. For now, the jawboning appears effective, as rates and the Dollar move lower. This shift is also causing the typical correlation between bonds and stocks to break down. It is fascinating how this relationship evolves: when both stocks and rates rise, it is attributed to economic strength; when rates decline but stocks rise, it is seen positively because lower rates help expand valuation multiples. To me, this seems more like a friendship of convenience. Another interesting factor is the Dollar, which is also declining. One has to wonder what the bond market and the Dollar are aware of that the stock market is not. They appear to be signalling slowing growth. This week’s economic data will be crucial in shaping this theme and determining the next steps. This can be seen quite clearly when examining the US and Japanese 5-year rates, both of which are now back at the neckline. Weak US data this week could easily trigger a breakdown here. If this happens, it will likely disrupt the remainder of the Japanese Yen carry trade and drag USDJPY below 140. The S&P 500 has now reached the 50% extension level of wave 3 and has traded above its upper Bollinger Band for three consecutive days, with an RSI of 72. While it is possible the Index could become even more extended, conditions like these typically result in at least a period of sideways consolidation or a pullback. Anyway, yesterday we saw the average overnight repo rate rise to 4.57% for quarter-end—the highest since December. This rate should begin to ease today, although I would guess SOFR will likely come in above 4.5%. Meanwhile, reverse repo volumes spiked by around $175 billion on Monday, reaching $461 billion. Still, at least for now, the stock market has remained largely unaffected. Even the Standing Repo Facility saw $11 billion pass through it yesterday, as the overnight rate traded above 4.5%. We have not observed this level of activity in the SRF for quite some time, highlighting just how tight conditions were in overnight markets. The Fed was a liquidity provider in this case. It seems remarkable to me that this kind of liquidity tightening occurred without even causing a ripple on the surface. However, as I have mentioned numerous times before, liquidity impacts often involve a delayed reaction. Monday’s late surge saw my latest 6164 short position stopped at 6191 and I am now flat. Given all of the above I cannot justify any long positions at this time and with an RSI above 72 I have to be a seller. Today, my sell level will be from 6205/6225 with a higher 6241 ‘Closing Stop’. If I am taken short, I will have a T/P level at 6171.
EUR/USD
I am still short the Euro from last week at a price of 1.1730 with the same 1.1630 T/P level. I will continue to look to add to this position at 1.1810 while leaving my 1.1865 ‘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
There remains zero confidence in the Dollar which made a new year-to-date low at 96.62 overnight. If we get clarity on tariffs then we should get some confidence and the Dollar should rally. The Daily Chart is certainly set up for that given how oversold the market is. I am still long at an average rate of 97.40 with a now lower 98.10 T/P level. I will leave my 96.35 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Russell 2000
I am still flat. Today, I will continue to be a buyer on any dip lower to 2060/2140 with the same 1995 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2190.
FTSE 100
The FTSE just missed Monday’s sell range before selling off 50 points into the close. Today, I will continue to be a seller on any further rally to 8830/8900 with the same 8965 ‘Closing Stop’. If I am taken short, I will have a T/P level at 8770.
Dow Rolling Contract
No Change! Given how severely overbought the American Indexes are at this time I am going to stay flat the Dow until I get a better edge. Traditionally this is one of the strongest weeks of the year. I cannot be a buyer here and I have learnt my lesson from last week not to be short. If this view changes I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
It may be hard to believe, but the NASDAQ has now traded above its upper Bollinger Band for five consecutive days and has an RSI of 72.6. You can add Meta to the list of mega-cap stocks that are now overbought, with it too trading above its upper Bollinger band, with an RSI over 70. It took a while but just before the close the NDX rallied to my 22710 sell level. I am still short with a now higher 22550 T/P level which is just above the 22534 ‘Open Gap’ left from last Friday’s Chicago close. I will add to this position at 22900 while leaving my tight 23005 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
I am still long the Bund from last week at 130.20 with the same 128.75 ‘Closing Stop’ unchanged. I will continue to look to add to this position on any further move lower to 129.40. I will now lower my T/P level to 132.80. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold hit a low at 3247 before bouncing $50 of this low into the New York close and I am still flat. To confirm this triple-top that I mentioned in yesterday’s commentary, Gold would need to break below neckline support at $3,170. If that happens, it could fall back to roughly $2,890. Gold has support from 3170/3190 where I will continue to be an aggressive buyer with the same 3155 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3225. I have no interest in chasing the price of Gold higher or neither do I want to be a seller despite how severely overpriced Gold is at this time.
Silver Rolling Contract
No Change: Silver has support below from 33.80/34.80. As I do not want to chase the market higher this is the only level that I will be comfortable in buying Silver. We have had a nice run in this market over the past three years so from here patience will now be the key. If I am taken long, I will have a T/P level at 35.60.
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