U.S. Equity Markets closed lower for the second consecutive trading session led by the 1.15% fall in the Dow. Markets continued to give back their gains from earlier in the week, as investors try to digest the latest economic data. Fed speak this week continues to focus on a pushback of the rate-policy pivot narrative. Despite the Fed’s messaging, multiple labour-market indicators are starting to suggest easing conditions. Today’s job-cut report by Challenger, Gray & Christmas showed 67% year-over-year growth in job cuts. Attention will soon turn to third-quarter earnings season, with anticipation that markets could begin to fully reflect the effects of this year’s rate hikes on consumer demand. Inflationary pressures in the energy sector were renewed following the decision by OPEC+ to cut oil production. Recent economic data shows interest-rate hikes are weighing on growth. Yesterday I noted recent shifts in economic data. I discussed the Reserve Bank of Australia’s decision to raise rates at a slower pace and the drop in domestic job openings. The Australian central bank told us the global economic growth outlook is becoming more uncertain, so it does not want to go too far in tightening interest rates. The U.S. Bureau of Labour Statistics’ (“BLS”) Job Openings and Labour Turnover Survey showed labour market tightness is fading. But, as rates have risen – and stocks and bonds have dropped – investors have wondered when the cycle might end. That is because when they get a sense it has turned, they will want to do two things: lock in the highest yields we have seen on U.S. sovereign debt in over a decade and buy cheaper equities. Tuesday’s data signals that this time horizon is approaching, which supports the long-term outlook for the S&P 500 Index. The prospect of the Fed getting closer to ending rate hikes is weighing on the greenback. In other words, the worst-case scenario that can happen to them is if the Dollar tanks and stocks rally. That would mean those speculators would have to chase, selling the Dollar and buying back stocks. Since 2011, we have seen three other instances when investors’ positioning in S&P 500 futures has been this cautious: October 25, 2011, October 6, 2015, and June 16, 2020. Within 12 months the average return off these lows has been 22%. There is no doubt inflation remains an issue for the global economy. In the U.S., we need look no further than the BLS’s Consumer Price Index growth of 8.3% in August. It’s below the 9.1% number experienced in June, but it still has a long way to go before reaching the Fed’s 2% target. But remember, we are seeing signs that central-bank policies are starting to weigh on cost growth. And as that situation plays out, it should allow these institutions – especially the Fed – room to back down on aggressive rate-hike policies moving forward. Momentum is building for a buying opportunity that will create tremendous long-term gains. So, we will have to pay close attention to the Dollar’s direction for our signals. Because once Money managers sense that U.S. yields have peaked, they will all clamour to buy U.S. Treasurys in a last-gasp effort. The change will begin to cap bond yields, ultimately driving them lower. Eventually, that will diminish the appeal of U.S. sovereign debt and increase that of other countries. Advantageous Money managers will start to seek out another more attractive opportunity elsewhere. That will hurt the Dollar and boost the long-term outlook for risk assets like stocks and the S&P 500. Within the S&P 500 Index, 10 of 11 sectors finished lower. European Markets closed lower. Markets encountered a relatively lacklustre day, slightly giving back marginal gains from earlier in the week. Investor concerns about inflation and stagnant growth were amplified following the OPEC+ production cut. Currencies also reacted to the recent Fed speak that pushed back against a rate-policy pivot and possible rate cuts in 2023. Minutes from the European Central Bank’s September meeting show that many members believe the current interest rate is well below a neutral level, suggesting that further rate hikes are imminent. Provisional figures from the German government’s economic forecasts show that the region’s largest economy is expecting a recession in 2023 and inflation to top 8%. And German Factory Orders missed by a wide margin. In Asia, Equity markets in mainland China and Hong Kong were closed for holidays. China’s markets will remain shut through Friday for the Golden Week holiday. The markets that were open continued the week’s strong performance on Thursday. Regional currencies continued to bounce back from last week’s lows, providing an equity tailwind. North Korea fired two short-range ballistic missiles into its eastern sea Thursday, adding to the barrage of tests in recent days. China’s new COVID-19 case count climbed above 1,000 for the first time in almost a month, as travel picked up during the weeklong holiday. The Bank of Japan’s quarterly regional economic report showed nearly all regions unchanged or positive, with easing supply-chain constraints leading the way forward. And South Korea’s foreign exchange reserves fell $19.7 billion in September, marking the largest reduction since October 2008. Elsewhere, Oil rose 1.45% while Gold closed with a loss of 0.30%.
To mark my 2625th 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 635 points yesterday and is now ahead by 2355 points for October, after finishing September with an incredible gain of 6660 points, 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 1.03% lower at a price of 3744.
The Dow Jones Industrial Average closed 346 points lower for a 1.15% loss at a price of 29,926.
The NASDAQ 100 closed 0.76% lower at a price of 11,485.
The Stoxx Europe 600 Index closed 0.51% lower.
This morning, the MSCI Asia Pacific Index fell 0.3%.
This morning, the Nikkei closed 0.71% lower at a price of 27,116.
Currencies
The Bloomberg Dollar Spot Index closed 0.7% higher.
The Euro closed 0.8% lower at $0.9801.
The British Pound closed 1.4% lower at 1.1166.
The Japanese Yen fell 0.4% closing at $145.09.
Bonds
Germany’s 10-year yield closed 7 basis points higher at 2.09%.
Britain’s 10-year yield closed 16 basis points higher at 4.19%.
US 10 Year Treasury closed 7 basis points higher at 3.82%.
Commodities
West Texas Intermediate crude closed 1.45% higher at $89.19 a barrel.
Gold closed 0.30% lower at $1714.10 an ounce.
This morning on the Economic Front we already had the release of German Industrial Production which fell 0.8% versus -0.5% expected, and Retail Sales which fell 1.3% versus -1.2% expected. At 11.30 am we have the U.K. Quarterly Budget, followed by the U.S. Non-Farm Payrolls including the Unemployment Rate and Average Earnings. Finally, we have Wholesale Inventories and a speech from Fed Member Williams at 3.00 pm.
Cash S&P 500
The barrage of Fed speakers continued yesterday. They are all doing their best to raise rate expectations with rate hike odds for a 75 Basis Point hike in November surging to 75%. As a result, both the Dollar and Bond Yields rose. I am actually surprised that given the Dollar’s rise, the S&P did not break Wednesday’s low. We saw plenty of two-way price action with the risk as mentioned yesterday that we fill the still large ‘’Open Gap’ from Tuesday. We are now in a bad news is good news and good news is bad news environment. If the labour market does not weaken this afternoon then we will see a fair chunk of Tuesday’s gap filled. Earlier in yesterday’s session all markets sold off. It is clear that the Fed are listening to no one as they focus entirely on inflation and nothing else. Yesterday my S&P plan worked well as after the market hit my 3765 buy level we rallied to my 3780 T/P level. Subsequently, I emailed my Platinum Members to buy the S&P again at 3753 before rallying to my 3773 T/P level and I am now flat. This morning the S&P is trading lower at 3730 after weaker Retail Sales data from Germany. We have support from 3685/3705 where I will be an aggressive buyer with a 3669 ‘’Closing Stop’’. Ahead of the weekend I do not want to be short the S&P.
EUR/USD
The Euro hit my second buy level at .9810 for a now .9840 average long position. I will leave my .9745 stop unchanged while lowering my T/P level to .9890.
March Dollar Index
No Change. I am still short at 108.90 with the same 109.60 exit level. If this level is triggered, I will be back with a new update for my Platinum Members.
Cash DAX
The DAX traded heavy all-day yesterday. After the market dropped to my 12470 buy level we rallied to my revised 12515 T/P level and I am still flat. This morning, the DAX is opening lower at 12400. We have short-term support from 12200/12300 where I will again be a buyer with a 12095 ‘’Closing Stop’’. I still do not want to be short the DAX at this time.
Cash FTSE
The FTSE spent all of yesterday’s trading session selling off as the market never came close to my 7120 sell range and I am still flat. This morning, the FTSE is trading at 6980. We have support from 6840/6920 where I will be a buyer with a 6775 stop. Ahead of the weekend I do not want to be short the FTSE.
Dow Rolling Contract
After the Dow traded lower to my 30080 buy level we saw an initial rally to my revised 30220 T/P level and I still flat. This morning, the Dow is getting hit hard, trading lower at 29800. We have support from 29420/29670 where I will be an aggressive buyer with a 29195 ‘’Closing Stop’’. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
My NDX call worked well with the market trading lower to my 11470 buy level before rallying to my 11580 T/P level and I am now flat. The rest of the session saw plenty of two-way price action which I did not get involved. Despite the stronger Dollar and higher Bond Yields, the NDX performed best of the American Indexes. The NDX has support from 11210/11360 where I will again be a buyer with the same 10995 wider stop.
December BUND
Yesterday’s sell-off saw the Bund hit my 138.70 buy level. I am still long and I will add to this position at 137.80 with the same 136.95 wider ‘’Closing Stop’’. I will now lower my T/P level to 139.10 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
No Change. I am reluctant to chase the price of Gold higher. Therefore, I will leave 1680/1695 buy level unchanged with the same 1669 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still long Silver at 20.40. I will add to this position at 19.70 with no stop. I will now lower my T/P level to 20.95.
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