U.S. Indices closed firmer on Friday following a holiday shortened half-day session that witnessed little or no two-way price action. Earlier Futures Markets were halted by a CME ‘’Cooling Issue’’ glitch. The major averages have cleared their 50-Day Trendlines in this latest rebound, ending November unchanged after being down as much as 5% the previous Friday. European Markets closed flat while Japan was helped by an encouraging acceleration in October Retail Sales and CPI Inflation steady at +2.8% Y/Y. Bond Markets were again quiet with a slight upward bias in Yields to end the week. The Dollar Index closed flat having being directionless for all of November while Silver surged, closing at a new all-time high above $56. Elsewhere, Gold closed higher by 1.4% while Oild ended Friday’s session with a 0.6% gain.
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For anyone following my Platinum Service it was flat on Friday, ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after 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 0.54% higher at a price of 6849.
The Dow Jones Industrial Average closed 289 points higher for a 0.61% gain at a price of 47,716.
The NASDAQ 100 closed 078% higher at a price of 25,434.
The Stoxx Europe 600 Index closed 0.23% higher.
Last Friday, the MSCI Asia Pacific closed 0.7% higher.
Last Friday, the Nikkei closed 0.17% higher at a price of 50,253.
Currencies
The Bloomberg Dollar Spot Index closed 0.12% lower.
The Euro closed 0.02% higher at $1.1596.
The British Pound closed 0.01% higher at $1.3235.
The Japanese Yen rose 0.08% closing at $156.20
Bonds
U.K.’s 10-Year Gilt closed 2 basis points higher at 4.45%.
Germany’s 10-Year Bund Yield closed 3 basis points higher at 2.69%
U.S.10 Year Treasury closed 3 basis points higher at 4.02%.
Commodities
West Texas Intermediate crude closed 0.61% higher at $59.01 a barrel.
Gold closed 1.41% higher at $4215.10 an ounce.
This morning 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. This is followed by U.S. Chicago PMI and Manufacturing PMI at 2.45 pm. Next, we have Construction Spending and ISM Manufacturing PMI at 3.00 pm. Finally, we have the Atlanta Fed GDP Now at 5.00 pm.
Cash S&P 500
Last week’s analysis has not gone according to plan as the S&P rallied further than I thought possible. The main issue is that most of the meaningful Treasury settlements were scheduled for Friday and the upcoming Monday, December 1, which has not occurred yet. The settlement we saw on Tuesday was relatively small at only $14 billion. It is possible that this was simply not a large enough amount to matter, although in the prior week we observed similarly sized settlements and the market declined notably. It is therefore difficult to determine exactly what happened. Looking at the week’s price action, the market showed many characteristics of volatility selling during a shortened holiday week. What made this week particularly interesting was the sharp drop early Tuesday morning—almost exactly as I would have expected—which may have flushed out some early selling. The market fell nearly 0.7% within the first ten minutes of trading before quickly rebounding, and from that point forward, volatility selling dominated the session. Wednesday was not a settlement date, so there was no reason to expect downside that day. Friday was a settlement date, but despite that, the market climbed higher—although most of the move came in the final minutes of trading. Around 12:40 p.m., the market was up only 0.2%, which is typical for a settlement day, before pushing higher into the close. Stepping back, last week featured only three and a half trading days, which makes it an ideal environment for volatility selling. The VIX fell sharply—from about 26.4 on Thursday the 20th to just 16 by Friday. Even comparing Friday closes, it fell from 23.5 on the 21st to 16.3 a week later. This marked one of the largest five-day percentage declines in the VIX since 2020, with only a handful of similar episodes. That gives you a sense of how intense the volatility selling was. Another notable point: while the VIX made a lower low, the S&P 500 closed essentially unchanged relative to its level on November 12. The VIX closed at 17.5 on that day, compared with 16.3 last week, yet the S&P is at the same price. This underscores how outsized the volatility selling has been. Other cross-asset indicators confirm this. Three-month implied correlations fell; one-month implied correlations fell; and dispersion also fell. Typically, when implied correlations decline, dispersion rises—but that did not happen. Both the VIX and the VIX constituent volatility index fell meaningfully. Volatility declined across the board, but index-level volatility fell more sharply than constituent-level volatility. Even though dispersion fell, the index VIX fell faster. When looking at dispersion minus three-month implied correlation, the spread rose into Tuesday and then declined Wednesday and Thursday. The S&P 500 typically trades in line with this spread. Liquidity also tightened considerably last week, making the week’s upside even more surprising and reinforcing the idea that Friday’s rally does not necessarily invalidate the liquidity-strain thesis. On Friday, the overnight general collateral repo rate rose to 4.09%, the highest level since early November, when rates eased following month-end. This implies that SOFR will likely print higher on Monday. It’s also possible that overnight funding costs remain high on Monday due to the upcoming $80–85 billion settlement. We also saw the Standing Repo Facility used again on Friday, with about $24.5 billion borrowed. This likely means usage will rise again on Monday. Importantly, the Standing Repo Facility is not the Fed injecting liquidity willingly. Institutions go to the facility because they lack cash but have acceptable collateral; they provide collateral to the Fed in exchange for cash and pay interest on that borrowing. It is the opposite of the Reverse Repo Facility, where institutions voluntarily park excess cash at the Fed in exchange for collateral and interest. So the idea that the Fed is “saving the market” by injecting liquidity is misguided. Institutions are simply choosing to borrow from the Fed at around 4.0% rather than borrowing in the market at 4.09%. The facility exists to keep repo rates contained and avoid a repeat of the September 2019 funding spike. Given this backdrop, it is quite possible that repo facility usage rises due to liquidity needs tied to Treasury settlements. More broadly, overnight funding conditions have tightened significantly relative to earlier in the week. I expect the next two days to be particularly strained. I would not dismiss the idea that Treasury settlement dates are affecting markets. I think they are having a real impact, especially in funding markets, although last week’s holiday-driven volatility selling may have masked the expected equity impact. By the end of the coming week, we should have clearer evidence. The Treasury General Account (TGA) remains around $900 billion—down from just over $1 trillion on November 30—but that $100 billion drop has only modestly eased reserve pressure. Reserves are still around $2.9 trillion and are unlikely to rise meaningfully unless the TGA declines further, especially since QT has effectively ended and the reverse repo facility has already drained. There is also a balance-sheet category labeled “Other,” which is not well defined but represents a significant amount. It has risen from about $158 billion to $223 billion and appears to have shifted upward starting in February. It likely includes government-sponsored entities and other institutions. If this category were to decline, it could free up reserves, but it has been trending higher and is unpredictable. Finally, I noted in the Advanced Topics group that DTC transaction volume has increased over the last few days, which aligns with settlement activity. There appears to be some relationship between DTC volume changes and movements in the S&P 500. Historically, spikes in DTC activity often coincide with S&P declines. It is not a perfect relationship, but the patterns suggest a slight lag between funding-market frictions and equity market reactions—possibly tied to equity-repo financing, which declined in the week of the 19th. Overall, I still believe Treasury settlement dates matter. Last week’s dynamics may have been overridden by holiday-week volatility selling and prior low-volume tailwinds. I am not entirely certain yet, but I plan to give it a couple more days to see whether Treasury settlements are affecting equity prices. They are clearly affecting funding markets. If equity repo financing has been a major driver of recent equity strength, then liquidity demands around settlement dates could explain the market’s recent behavior. I could be wrong, but despite last week’s unexpected outcome, I do not think it’s time to abandon the thesis. So far for now the S&P’s post April rally is holding. The key support level is last week’s 6550 pivot which was tested but managed to close above and rally over 300 Handles into Friday’s Chicago close. I am short the S&P at an average rate of 6812 with no stop for now. I will leave my T/P level unchanged at 6792. If this view changes, I will be back with a new update for my Platinum Members.
EUR/USD
I am still flat. Today, I will continue to be a buyer on any dip lower to 1.1440/1.1510 with the same 1.1375 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1570.
Dollar Index
I am still flat. Today, I will leave my Dollar buy level unchanged at 98.50/99.30 with the same 97.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 99.90.
Russell 2000
I am still short the Russell from last Wednesday’s at a price of 2500. I will add to this position at 2560 while leaving my 2605 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
FTSE 100
I am still flat the FTSE as the market has continued to trade in a narrow range despite Wednesday’s Budget. Today, I will continue to be a buyer on any dip lower to 9480/9550 with the same 9415 ‘Closing Stop’. If I am taken long, I will have a T/P level at 9610. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow is short-term overbought following last week’s surge and I am still flat. The Dow has resistance from 48000/48300 where I will be a seller with a tight 48505 ‘Closing Stop’. If I am taken short, I will have a T/P level at 47710. I no longer want to be long the Dow at this time.
Cash NASDAQ 100
I am still short the NDX at an average rate of 25230 with the same tight 25455 ‘Closing Stop’. I will now raise my T/P level to 25200. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
No Change: The Bund has literally not moved more than 60 points in a daily session over the past two months. I am still long the Bund at an average rate of 129.50 with the same 129.80 T/P level. Meanwhile, I will leave my 128.35 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am still flat. I have no interest in chasing the price of Gold higher as I continue to be a buyer from 4010/4030 with the same 3988 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4064.
Silver Rolling Contract
Incredible end to the month for Silver, rallying over 5% on Friday, to close at a new all-time high at 56.42. Silver is overbought but I have no interest in shorting the market. Silver will have strong support from 53.50/54.50 on any tag. I will now raise my buy level to this area with a higher 51.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 55.70.
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