U.S. Indexes closed higher on Friday, with the NASDAQ 100 leading gains, although the advance was broad-based, with the equal-weight S&P 500 (RSP) also firmer, highlighting positive underlying breadth. Sectors were predominantly higher, led by Materials, Consumer Discretionary and Technology, while Energy was the clear laggard. Financials and Communication Services also finished modestly lower. The US Non-Farm Payrolls report was the primary driver of market action, with the surprisingly soft release prompting participants to pare Fed rate hike expectations. The dovish repricing supported equities, Treasuries and precious metals, while weighing on the Dollar. The Treasury curve bull steepened following the report, which showed the US economy unexpectedly shed 23k jobs in July, versus expectations for a 91k increase. Prior readings were also revised sharply lower, with June cut by 37k and May by 66k, leaving the two-month net revision at -103k. However, the Unemployment Rate unexpectedly fell to 4.1% from 4.2%, moving further below the Fed’s 4.3% year-end projection, although the decline was accompanied by a lower participation rate. Money markets now see a September rate hike as roughly a coin toss, placing significant focus on next week’s CPI report to further shape Fed tightening expectations. Gold had already been advancing overnight before accelerating to fresh highs following the payrolls report, trading comfortably above USD 4,300/oz, while silver rose above USD 63/oz, supported by the decline in Treasury yields and softer Dollar. In FX, the Dollar underperformed following the weak jobs report, while improved risk sentiment supported the Australian Dollar. The Japanese Yen also strengthened amid narrowing UST-JGB yield differentials and further intervention rhetoric from Japanese officials. Finance Minister Katayama said recent FX moves have not been backed by real demand and reiterated that authorities would not hesitate to intervene. Crude prices settled higher as reported details of the proposed Iran-Oman arrangement appeared unlikely to satisfy the US. However, prices came under pressure after settlement following official commentary that progress is being made with Iran and Oman over the Strait of Hormuz, with the US indicating that it would lift its blockade on Iran if the Strait is reopened without restrictions. Fed Member Barkin said the jobs market is more low hire, low fire and job data does not feel very good, but it is where it is. Barkin added that the best measure of job market health is the unemployment rate. He reiterated commitment to price stability, and he still hears a lot about inflation and cost pressures. Barkin noted that pricing power is evident in business-to-business, but not business-to-consumer, and said he does not think there is wage inflation right now. Lastly, he said that corporate earnings are quite strong; watching them for linkages to the job market. Finally, Fed Member Muslalem said inflation remains too high, with risks tilted toward further price pressures, and argued that monetary policy needs to maintain meaningful restraint. He revealed that he favoured raising rates at the latest FOMC meeting and sees a greater risk of inflation remaining above target, estimating underlying inflation at around 2.5–3% and noting that gradual rate increases would be preferable to more abrupt moves later. Musalem said the labour market has stabilised and is not a source of inflationary pressure, while the economy remains resilient. He also highlighted accommodative financial conditions and elevated asset prices as potential concerns but noted that inflation expectations remain anchored and consistent with the Fed’s 2% target. Elsewhere, Oil closed higher by 1% while Gold surged, ending Friday’s session with a gain of 2.3%.
To mark my 3425th 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 20 points last week after closing July with a gain of 8031 points, after ending June with a new record of 10527 points after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after 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 previous 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 0.62% higher at a price of 7757.
The Dow Jones Industrial Average closed 151 points higher for a 0.28% gain at a price of 54,036.
The NASDAQ 100 closed 1.19% higher at a price of 29,722.
The Stoxx Europe 600 Index closed 0.31% higher.
Last Friday, the MSCI Asia Pacific closed 0.3% higher.
Last Friday, the Nikkei closed 0.12% lower at 65,606.
Currencies
The Bloomberg Dollar Spot Index closed 0.33% lower.
The Euro closed 0.31% higher at $1.1558.
The British Pound closed 0.38% higher at $1.3491.
The Japanese Yen rose 0.75% closing at $157.75.
Bonds
U.K.’s 10-Year Gilt closed 5 basis points lower at 4.93%.
Germany’s 10-Year Bund Yield closed 3 basis points lower at 3.13%
U.S.10 Year Treasury closed 2 basis points lower at 4.65%.
Commodities
West Texas Intermediate crude closed 1.15% higher at $78.18 a barrel.
Gold closed 2.3% higher at $4342.10 an ounce.
Today on the Economic front the only data of note on either side of the Atlantic is the Euro-Zone Sentix Investor Confidence which will be released at 9.30 am.
Cash S&P 500
It was good timing to have last week off given the dramatic rise in U.S. Indexes leading to new all-time highs in both the Dow and S&P. Since my last Daily Commentary was posted the S&P rose almost 500 Handles. I certainly did not see this move happening. The market rally extended last week, with the S&P rising on Monday and Tuesday and finishing just above Tuesday’s close, though below Wednesday’s intraday highs. Much of what we saw was heavy call volume driving the market higher, especially on Monday and Tuesday, a gamma squeeze in essence. When that volume came off on Thursday, the market stalled. The other component was implied volatility coming down, not just on the VIX but on the VIX 1-Day as well, a clear volatility crush. Following the Fed meeting on the 29th, implied vol on the VIX 1-Day was around 19.5, and it has come down sharply since. That framing matters because we entered the weekend in a negative gamma environment (a state where dealer hedging can amplify market moves). Coming out of it with volatility falling and call volume surging to the upside created an environment ripe for a big move. As of Friday, the ‘’Call Wall’’ sits around 7,800, with plenty of gamma built up at 7,750 and 7,800, while the ‘’Put Wall’’ is all the way down at 7,400. That tells me that if the market starts to drift lower, there is a big air pocket, with not much support from an options perspective until 7,400. That can obviously change, since we do not know where volumes and open interest will settle out on Monday morning, but as of Friday that is the information we have to work with. The other important point is that we are entering the part of the year when the dispersion trade unwinds. Single-stock implied volatility rises sharply heading into earnings, and once results pass and that volatility comes off, the spread between single-stock vol and index vol naturally shrinks, as it has after reaching record highs. As that spread narrows, dispersion should come down and correlations should begin to rise. To this point, they have, as three-month correlations reached record lows just a couple of weeks ago. I like to look at the spread between dispersion and three-month implied correlations because it offers a good proxy for the direction of the S&P. It does not tell us how much the Index will rise or fall, but it gives a good sense of which way it is likely to move. By the end of the week, that spread was clearly heading lower. Nothing is a perfect indicator, and there have been times when the market’s reaction was delayed. It is also quite possible dispersion picks back up as we get closer to NVIDIA’s earnings in late August, with Broadcom right around the same time, since those are two heavily weighted index components. But if the spread continues to come down, mechanically it is telling us the market should continue to unwind as well. The gamma squeeze distorted things, though I think that has largely worked itself off at this point. The NASDAQ 100, clearly, has not recovered to the same degree, retracing to between the 61.8% and 78.6% levels on a closing basis. If the Nasdaq is not going to make a new high, this is really where it should stop; usually, getting through the 78.6% level means you have probably going back to the highs. If it stalls here and turns lower, I would think the dispersion unwind continues to weigh. Perhaps more importantly, 10-year rates gave back very little of Thursday’s rise despite the big jobs report miss. Ten-year real yields are moving higher, now at 2.43%, up about 70 basis points since early March. That is not as large as the nearly 1.5% rise from April 2023 into October, which eventually led to a sharp decline in the S&P, but it is beginning to get on that scale, and history suggests the market reacts with a delay. It may only take another 10 or 20 basis points, to roughly a 90-basis point move, before impacts start showing up. The 10-year real yield is also now trading above the 10-year breakeven inflation expectation, something that has not happened since 2007, which suggests that for the first time in two decades the market is doing some of the work for the Fed in tightening policy. That preceded the housing bubble popping in July of 2007, right before the market ultimately peaked. I am not saying we are due for some big top, but rate policy may finally be getting to a point where it starts to matter a little more, and if real rates separate further from inflation expectations, that would be a dynamic worth monitoring closely. Inflation takes centre stage this week. The July CPI drops on Wednesday and July PPI follows on Thursday — both critical benchmarks for how the Fed reads its next move after last week’s dovish hold and Friday’s payroll shock. Fed Vice Chair for Supervision Michelle Bowman opens the week with remarks on Saturday, and Cleveland Fed President Beth Hammack and Richmond Fed President Tom Barkin both speak Thursday. Tuesday brings the NFIB Small Business Survey and Existing Home Sales; Friday closes with July Retail Sales and the preliminary August University of Michigan Consumer Sentiment reading. Canada delivers Building Permits (Wednesday) and Manufacturing Sales (Friday). After the S&P made new all-time highs last week I went short the market at an average rate of 7655 before getting stopped out of this position at 7691. Subsequently, I went short the S&P again at price of 7780 before covering this position at a price of 7737 and I am now flat. Today, I will again be a seller of the S&P from 7765/7790 with a higher 7821 ‘Closing Stop’. If I am taken short, I will have a T/P level at 7728. The S&P will have strong support from 7610/7635 where I will be an aggressive buyer on any tag with a 7589 ‘Closing Stop’. If I am taken long, I will have a T/P level at 7680.
EUR/USD
The Euro never came close to my buy range all-week before accelerating higher towards the end of the week and I am still flat. Today, I will raise my buy level to 1.1400/1.1480 with a higher 1.1355 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1550. I still do not want to be short the Euro at this time.
Dollar Index
The Dollar weakened over the past week driven by the joint Fed/BOJ intervention in Dollar Yen. This move lower saw the Dollar hit my second buy level at 100.10 for a now 100.45 average long position. I will leave my 99.35 ‘Closing Stop’ unchanged while lowering my T/P level to 100.60. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Russell 2000
The Russell traded the whole of my sell range for a now 3020 average short position. I will leave my 3105 ‘Closing Stop’ unchanged while raising my T/P level to 2980. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
FTSE 100
My FTSE plan worked well as the market traded the whole of my sell range for a 10950 average short position before selling off to my revised 10900 T/P level and I am now flat. The FTSE has short-term resistance from 10950/10030 where I will be a small seller with a higher 10125 ‘Closing Stop’. If I am taken short, I will have a T/P level at 10870. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow rallying to new all-time highs last week meant it was a good time to be away and flat the Dow. Just like the S&P above I did not see this move happen and it was good to be flat. The 14-Day RSI closed at 67 last Friday. The Dow has short-term resistance from 54150/54450 where I will be an aggressive seller with a 54705 ‘Closing Stop’. If I am taken short, I will have a T/P level at 53780. I no longer want to be a buyer of the Dow at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX never came close to last week’s buy range by turning around and rallying a massive 3000 points over the past five trading sessions. Thankfully we had no sell level in this market as any short positions were obliterated as my ‘Nothing Matters’ theme still shows no sign of ending. The 14-Day RSI closed at 57 on Friday meaning there is plenty of room for the NDX to move higher before becoming overbought. However, I have no interest in being a buyer of the market at this time. The NDX has short-term resistance from 29900/30100 where I will be a small seller with a tight 30305 ‘Closing Stop’. If I am taken short, I will have a T/P level at 29620. If this view changes, I will be back with a new update for my Platinum Members.
December BUND
The Bund traded in a narrow range over the past week with little or no volatility and I am still flat. Today, I will raise my buy level to 123.50/124.30 with a higher 122.85 ‘Closing Stop’. If I am taken long, I will have a T/P level at 124.95. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Frustratingly Gold just missed my buy range before rallying $400 and I am still flat. Today, I will raise my buy level to 4080/4180 with a higher 3955 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4250.
Silver Rolling Contract
I was very unlucky as Silver missed my 56.50 buy level by just 9 points before turning around and rallying over 700 points. I will not chase Silver from and will stay flat today to see how the market reacts to last week’s huge run higher. If this view changes, I will be back with a new update for my Platinum Members.
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