U.S. equity markets finished Thursday lower led by the 1.41% fall in the NASDAQ 100. Markets ended lower as investors continue to focus on the tight labour market conditions and the potential ramifications of the Fed’s rate policy for 2023. ADP payrolls surprised to the upside in December while Jobless Claims fell to a 14-week low and Challenger layoffs showed signs of slowing layoffs. Fed officials continue to reiterate their stance that a terminal target rate will be above 5%. In contrast, the tech and cloud services sectors continue to see substantial layoffs, including recent cuts from Salesforce (CRM) and Amazon (AMZN). Investors look ahead to this afternoon’s Unemployment rate for any signs that could provide cementing evidence of the direction of the labour market. Labour-market tightness is slowly easing. Since early last year, when the Federal Reserve began its fight against inflation, the central bank has targeted the supply and demand dynamics in two key markets: housing and labour. Housing is a major component of consumer inflation. By driving up the cost of a home loan, the central bank is expecting demand to fall, supply to rise, and prices to drop, which would bring down overall inflation growth. That scenario is starting to play out. According to S&P CoreLogic Case-Shiller data, home prices have contracted for four straight months. As we keep going up against more difficult growth comparisons heading into the spring, due to the high costs of houses just a year ago, prices are likely to show further declines. The central bank has a similar outlook for the job market. Labour costs are an important component of inflation for businesses. When there are fewer workers available, companies have to raise salaries to attract new employees. Then they will try and offset those costs by raising prices for their goods, which hurts the consumer. By increasing the pool of available workers, the Fed is looking for wages to drop and business costs to come down. On Wednesday, we received a sign that supply and demand in the labour market are coming back into balance, which could finally be a major tailwind for the S&P 500 Index. The U.S. Bureau of labour Statistics released its Job Openings and labour Turnover Survey for November. The data showed companies are seeking to fill roughly 10.4 million positions – more than the expected 10 million positions. At the same time, October’s figures were revised higher from 10.3 million to 10.5 million. November’s data is well below March’s peak of roughly 11.9 million job openings. This shows that available employment opportunities are shrinking. That is a trend we want to see. The Job Openings and labour Turnover Survey tells us the number of hires, quits, and job openings each month. To generate this survey, the Bureau of labour Statistics collects data from 20,700 nonfarm and government businesses and estimates changes on a national basis. So, it helps the Federal Reserve and money managers gauge the job market’s relative tightness. In other words, they can see how easy or difficult it is for an individual to find work. We can also see this by comparing the survey’s metrics with the number of people out of work and looking for new jobs. The November number showed a total of roughly 6 million unemployed individuals, slightly lower than the October number of about 6.1 million. In other words, with 10.4 million job openings, there are roughly 1.7 available jobs for every unemployed person. Fed Chairman Jerome Powell has said that he wants to see the ratio between the number of job openings and the total number of unemployed folks move lower. Prior to the COVID-19 pandemic, the ratio averaged around 1.0. The current average is around 1.2. Even though the current ratio of 1.7 has mostly remained flat over the past month, it is far better than the 2.0 available jobs per unemployed individual we saw in March of last year. Remember, the November tally is despite a drop in the number of individuals seeking employment, which would typically signal an increase. While it may not be the destruction of employment opportunities that the central bank seeks, there is a silver lining to these results. The numbers are backward-looking, which means it is unlikely they are representative of the current labour market. So, let’s consider the results from a monetary-policy perspective. Wednesday’s numbers may have been a bit higher than Wall Street had hoped, but the trend is still headed in the right direction. Again, we will want to see this ratio continue to move lower. In fact, a sharp drop would be ideal. Either way, a slide in the number of available jobs will be a sign the labour market is cooling once more. That would give the Fed more room to slow its pace of rate hikes, or even pause them altogether. Within the S&P 500 Index, 10 of the 11 sectors finished lower. European Markets closed mixed. Euro-Zone markets finished mixed with investors refocusing on the Fed’s rate-hike plans. The week’s positive narrative of easing pricing pressures received a major boost as the Euro-Zone Producer Price data for November showed further signs of decrease suggesting that it is past its peak. Meanwhile, the Bank of England said business leaders see inflation accelerating in the years ahead and wage growth strengthening. Subsequently, U.K. business leaders’ confidence continues to fall with a moderate recession expected for most of 2023. In Asia, Markets gained on Thursday as Japan markets recovered slightly from Wednesday’s losses. China markets continue their strong start to the year as policy support from Beijing and demand expectations for 2023 continue to boost optimism from investors. To add, China Caixin services PMI unexpectedly rose with the business outlook rising to a 17-month high. Optimism also comes on the heels of the World Health Organization saying internal data showed no new coronavirus variants in China. Meanwhile, the Bank of Japan is likely to raise inflation projections in its next outlook report later this month. Elsewhere, Oil rose 1.29%, while Gold fell 1.1% after a volatile session.
To mark my 2700th 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 90 points yesterday and is now ahead by 643 points for January, after finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 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 1.16% lower at a price of 3808
The Dow Jones Industrial Average closed 339 points lower for a 1.02% loss at a price of 32,930.
The NASDAQ 100 closed 1.41% lower at a price of 10,760.
The Stoxx Europe 600 Index closed 0.2% lower.
This morning, the MSCI Asia Pacific rose 0.6%.
This morning, the Nikkei closed 0.59% higher at a price of 25,973
Currencies
The Bloomberg Dollar Spot Index closed 0.9% higher.
The Euro closed 0.7% lower at $1.0526.
The British Pound closed 0.8% lower at 1.1925.
The Japanese Yen fell 1.1% closing at $133.51.
Bonds
Germany’s 10-year yield closed 1 basis points higher at 2.29%.
Britain’s 10-year yield closed 6 basis points higher at 3.55%.
U.S.10 Year Treasury closed 2 basis points higher at 3.72%.
Commodities
West Texas Intermediate crude closed 1.29% higher at $73.88 a barrel.
Gold closed 1.1% lower at $1832.10 an ounce.
This morning on the economic front we already had the release of German Industrial Orders for November which fell 5.3% versus -0.3% expected. At 10.00 am , we have Euro-Zone CPI, Economic Sentiment Indicator and Retail Sales. This is followed by U.S. Non-Farm Payrolls including the Unemployment Rate and Average Earnings at 1.30 pm. Finally, at 3.00 pm we have ISM Services and Factory Orders.
Cash S&P 500
Yesterday’s weakness was led by the double whammy of a stubborn positive lagging labour market data while on the other hand we are seeing massive lay off announcements in tech companies. Multiple Fed speakers came out yesterday insisting on no rate cuts this year no matter what the circumstances. This combination adds to the nervousness and is raising rate hike expectations this year. On the other hand the market does not really believe the Fed as there are now record bets in place that they will flip flop later this year. For a flip flop to occur we need something to break i.e. a recession of size which is what the Bond Markets are telling us. The S&P has massive resistance from 3870/3900. This resistance area is where the Weekly 5 EMA (3870), Quarterly 5 EMA (3897) and Monthly 5 EMA (3896) so it is no wonder we are seeing plenty of selling on any test. If the S&P does break and close below my 3790 support area, there is risk to 3673 which is the Weekly 200 EMA. This support line held every test last year and were this break to occur I would be a very aggressive buyer at this level with no stop. Ahead of all of this we have the NFP at 1.30 pm. There is every chance this data will be strong which gives the Fed every excuse to stay hawkish in language. Yesterday’s move lower saw the whole of my buy range filled for a now 3817 average long position. The S&P fell shy of my 3831 T/P level with a 3830 rebound high. I want to try and be flat ahead of NFP. I will now lower my T/P level on this position to 3826. If I manage to exit at my T/P level I will look to buy the S&P again from 3775/3795 with a 3759 ‘’Closing Stop’’. If I am taken long at this area I will have a T/P level at 3818.
EUR/USD
The hawkish comments from Fed Officials saw the Euro sell-off to my 1.0550 buy level. I am still long and I will add to this position at 1.0470 while leaving my 1.0395 ‘’Closing Stop’’ unchanged. I will now lower my T/P level on this position to 1.0595
March Dollar Index
The Dollar never came close to yesterday’s buy range. The rally in $Yen saw the Dollar close higher by almost 1%. The Dollar has resistance from 105.70/106.50 where I will be a seller with a 107.25 ‘’Closing Stop’’.
Cash DAX
Despite the much weaker than expected German Industrial Orders this morning, the DAX does not care as the bull market for the DAX shows no sign of ending. The DAX is now trading over 2000 points higher from the post Russian Invasion of Ukraine low last March. Ahead of the NFP I will not chase the market higher leaving my 14280/14360 buy range unchanged with the same 14195 ‘’Closing Stop’’.
Cash FTSE
The FTSE never came close to yesterday’s buy range, and I am still flat. Weaker Sterling is helping the FTSE to stay short-term bullish. Today, I will raise my buy level to 7520/7580 with a higher 7465 ‘’Closing Stop’’.
Dow Rolling Contract
Although the Dow was again the strongest of the American Indexes, the market still fell over 1% yesterday. This move lower saw my 32990-buy level triggered. I am still long with a now lower 33090 T/P level. I will add to this position at 32750 while leaving my 32595 ‘’Closing Stop’’ unchanged
Cash NASDAQ 100
I mentioned yesterday that the $NYSI is max oversold. Another reason why I keep buy the NDX is the $NAAD. This is a chart of the NASDAQ Advance/Decline Issues. I am seeing huge positive divergence in this chart despite the brutal chop. This combination will continue to see me buy the dips with tight stops. Yesterday’s aggressive NDX sell-off saw my second buy level at 10780 triggered for a now 10855 average long position. I will now lower my T/P level to 10980 while leaving my 10595 ‘’Closing Stop’’ unchanged. 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 a buyer on any dip lower to 134.50/135.30 with the same tight 133.85 ‘’Closing Stop’’.
Gold Rolling Contract
My Gold plan worked well as the market traded lower to my 1829 buy level before rallying to my revised 1838 T/P level this morning and I am now flat. Gold has support from 1805/1820 where I will again be a buyer with a 1793 ‘’Closing Stop’’.
Silver Rolling Contract
Silver got slammed yesterday as for now the 24.00/25.50 resistance area is proving to be a tough nut to break. I am still long at 24.00. I will add to this position at 22.80 while leaving my 24.60 T/P level unchanged.
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