U.S. Equity Markets closed higher on Friday as Stocks were bid throughout the session with outperformance in the small caps Russell 2000 while all sectors closed green with Utilities, Communication and Materials leading, but Health Care, Real Estate and Financials lagged. T-Notes bull steepened as traders increased bets for a 50bp rate cut at this week’s Fed meeting with money markets (via refinitiv) pricing the decision at a near coin toss. The bets were piled on from Thursday in wake of the Wall Street Journal article citing a former Powell advisor who said 50bps is on the table while former NY Fed President Dudley overnight said he favours 50bps. The FT Fed preview also said 50bps was an option on Wednesday. Elsewhere, data was encouraging with import/export prices declining while this University of Michigan Consumer Sentiment beat, with upside seen in both current conditions and forward looking expectations. Inflation expectations saw the 1 year ease to the lowest since December 2020, although the 5 year ticked up to 3.1% from 3.0%. The Dollar was flat but the Japanese Yen and Swiss Franc were clear outperformers with US yields selling off on dovish rate expectations from the Fed, which also buoyed LatAm FX, such as the Brazilian Dollar Mexican Peso. Gold continued to push to fresh all-time highs while crude prices failed to hold onto their morning bid, settling in the red. Looking ahead, there is plenty of key risk events this week, namely the FOMC Rate Decision and updated SEPs, but also we see the Bank of England, Bank of Japan and Norges Bank rate decisions, US and UK Retail Sales, inflation reports from Japan, Canada and UK, Aussie jobs, New Zealand GDP, China activity data and PBoC LPR. As expected, last Thursday the ECB opted to cut the deposit rate by 25bps from 3.75% to 3.5% whilst also lowering the main refi and marginal lending rates by 60bps (as previously announced in March). In the policy statement, the ECB reiterated that it will continue to follow a meeting-by-meeting approach and remain in data dependent mode. Furthermore, policy rates will be kept sufficiently restrictive for as long as necessary and the ECB will not pre-commit to a specific policy path. In the accompanying macro projections, headline inflation forecasts for 2024-26 were left unchanged; 2026 remained below target at 1.9%. On a core basis, 2024 and 2025 forecasts were upgraded by 10bps on account of stubborn services inflation. From a growth perspective, 2024-2026 projections were lowered by 10bps each “owing to a weaker contribution from domestic demand over the next few quarters”. At the follow-up press conference, Lagarde noted that Thursday’s decision to cut the DFR by 25bps was “unanimous”. On the inflation path, the President noted that September inflation is likely to see a downtick on account of base effects before rising again in Q4. Despite attempts by journalists to extract information about easing intentions for the October meeting, Lagarde stated she would neither commit to a position or comment on how close the ECB is to R-star. Elsewhere, the President noted that the GC is going to be attentive to the risks of undershooting inflation. Overall, pricing has moved in a slightly more hawkish direction with around 7bps of easing seen in October vs. around 9bps pre-release with a total of 38bps of easing seen by year-end vs. 39bps pre-release. As such, it remains a case of seeing how inflation and growth dynamics play out in the coming weeks. Following this, Bloomberg sources noted that ECB officials have not ruled out a rate cut at the October meeting even if such a move is unlikely. The BBG sources added that given the downside risks to economic growth in the Euro-Zone, officials would rather keep open the option to lower borrowing costs at that meeting. Separately, Reuters sources noted that an October rate cut is unlikely for now and a move before December would take exceptional negative growth surprises. The sources added a move on October 17th could not be ruled out, but it was not likely because policymakers would not have much new information by then and would rather wait for a new round of projections in December. Elsewhere, Oil closed Friday 0.46% lower, while Gold surged to a new all-time high with a gain of 2.5%.
To mark my 3075th issue of TraderNoble Daily Commentary I am offering a special 2-Year rate of Euro 2750 for my Platinum Service which includes 1 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 131 points on Friday and is now ahead by 1613 points for September having ended August with a loss of 301 points after closing July with a gain of 1918 points while June closed with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 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 5626.
The Dow Jones Industrial Average closed 297 points higher for a 0.72% gain at a price of 41,393.
The NASDAQ 100 closed 0.47% higher at a price of 19,514.
The Stoxx Europe 600 Index closed 0.76% higher.
This morning, the MSCI Asia Pacific closed 0.3% lower.
This morning, the Nikkei closed 0.68% lower at a price of 36,581.
Currencies
The Bloomberg Dollar Spot Index closed 0.45% lower.
The Euro closed 0.4% higher at $1.1074.
The British Pound closed 0.5% higher at 1.3123.
The Japanese Yen rose 0.7% closing at $140.83.
Bonds
Germany’s 10-year yield closed 3 basis points higher 2.15%.
Britain’s 10-year yield closed 1 basis points lower at 3.76%.
U.S.10 Year Treasury closed 1 basis points higher at 3.67%.
Commodities
West Texas Intermediate crude closed 0.46% lower at $68.65 a barrel.
Gold closed 2.5% higher at $2578 an ounce.
This morning on the Economic Front we already have Euro-Zone Trade Balance and Unit Labour Costs at 10.00 am. The only data of note is the New York Empire State Manufacturing Index which will be released at 1.30 pm.
Cash S&P 500
The move in Treasury Yields over the past six months has been extraordinary. Bond Markets are now anticipating huge U.S. rate cuts of a magnitude that will only happen if the economy sinks into a recession in the coming months. Yet, even after the summer’s modest correction, equity markets are at valuations that will only be justified if profits keep compounding without interruption for years, or even decades, to come. Meanwhile outside the financial markets, the real-world economic data shows nothing remotely as dramatic as either of these contradictory views. Instead, the data – including last week’s U.S. Payroll statistics – suggests economic activity is drifting only slightly below its trend growth rate. Inflation is still running significantly above the 2% rate that used to be considered the lodestar of monetary policy. There is no doubt that the Fed will cut rates on Wednesday and will probably cut again in October, almost regardless of what happens to the economic data. That was effectively announced by Fed Chair Powell in his August Jackson Hole speech. What seems unlikely in my opinion is an additional 175-200bp of rate cuts in the subsequent 12 months. Yet this is what the Futures Market is now pricing in, with the Federal Funds Rate priced at 3% in August 2025 and 2.8% in December 2025. Only a full-scale recession would justify such extreme monetary easing especially at a time when core inflation is still well above 2%. This is why JP Morgan calculated last week that the current bond pricing implies a 70% probability of an imminent recession, whereas equity and credit market pricing implies only a 9% recession risk. This suggests that even if the bond market turns out to be right about an imminent recession (which I believe to be extremely unlikely), there will be limited profits from buying bonds at today’s yields, since the probability of a recession is largely priced in. If, on the other hand, the U.S. economy avoids recession and instead enjoys the ‘’Soft Landing’’ that Treasury Secretary Yellen keeps telling us then bond investors will lose money. (Case in point how can you buy the German Bund with yields at 2.10%). There is a lot of food for thought going into Wednesday’s Fed Meeting. Having spent a number of months in Florida already this year I can tell you that Inflation is nowhere near 2%. The S&P in my opinion is at nose-bleed levels with so much good news priced in. However, as we have seen it is extremely difficult to be short. On Friday the S&P traded the whole of my sell level for a 5629 average short position before selling off to my revised 5619 T/P level and I am now flat. The S&P will probably trade sideways to higher ahead of the FOMC Statement. The S&P has a further ‘’Open Gap’’ from August 30 at a price of 5648. Therefore, I will again be a seller from 5640/5660 with a higher 5673 ‘’Closing Stop’’. Today, I will continue to be a strong buyer on any dip lower to 5505/5521 with a tight 5489 ‘’Closing Stop’’.
EUR/USD
The Euro rallied above 1.1100 since Thursday’s Daily Commentary. This move higher saw my revised 1.1036 T/P level triggered and I am now flat. In my opinion the Euro continues to be a buy on dips pretty much like all asset classes at this time. The Euro has short-term support from 1.0960/1.1030 where I will again be a buyer with a higher 1.0895 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
Dollar Index
Overnight, the latest Dollar sell-off saw the market hit my initial 100.80 buy level. I am still long as I continue to look to add to this position on any further move lower to 100.20 while leaving my 99.75 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 101.20. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
Thankfully we have had no sell level in the DAX as every dip is bought. Since Wednesday’s 18216 low print the DAX has surged 550 points as yet again anyone trying to short the DAX is run over. I will now raise my DAX buy level to 18330/18430 with an 18195 ‘’ Closing Stop’’ which is just below las week’s low print. If I am taken long, I will have a T/P level at 18505. I still do not want to be short the DAX at this time
Cash FTSE
The FTSE continues to trade heavy and is getting no upside momentum from the rest of the Global Indexes. This morning the FTSE is trading at a price of 8260. I will now raise my buy level to 8140/8210 with a higher 8075 ‘’Closing Stop’’. I still do not want to be short the FTSE Market at this time.
Dow Rolling Contract
Although the Dow made a new all-time intra-day high at 41533 on Friday the market fell 140 points from this high into the close and is now back below its September all-time high print. This move higher saw the whole of my sell range triggered for a now 41280 average short position. I am never comfortable in being short the Dow as every dip since October 2022 has been aggressively bought. We have a rare occurrence in that the September 1929 Calendar and September 2024 Calendar are the same. If the topping sequence is the same for this September as it was back in 1929, then the Dow should top between September 16 and September 20. In 1929 the Dow fell 17% from its September high until October 4, which was Rosh Hashanah. The Index then rallied until Friday October 11. Yom Kippur was on Monday October 14, 1929. After that stocks crashed. We will soon see how long the parallels remain. However, Ms Yelln will no doubt have something to say about this if markets do crash – which in my opinion is long overdue. I will leave my 41605 ‘’Closing Stop’’ unchanged while raising my T/P level to 41220. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX rallied over 1000 points last week. This latest recovery move saw the NDX hit my sell range for a now 19440 short position. I am still short, and I will add to this trade on any further move higher to 19600 while leaving my 19705 ‘’Closing Stop’’ unchanged. I will now raise my T/P level to 19340. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
Despite the ECB cutting rates as expected last Thursday, the Bund continue to trade in narrow ranges. Given how low the Bund Yield is I find it very hard to be a buyer while just like all asset classes it is extremely difficult to be short. As I detailed at length in my S&P commentary above in my opinion all the good news is priced into these markets with no room for error. I cannot see inflation having a sustained move below 2% and I think the new base case for Interest Rates will be 3% and not the 1% or zero rates that we have enjoyed for most of the past 15 years. The Bund has resistance from 135.60/136.30 where I will be a small seller with a lower 137.05 ‘’Closing Stop’’. Meanwhile, my only interest in buying the Bund is still on a move lower to 133.20/133.90 with the same 132.65 ‘’Closing Stop’’.
Gold Rolling Contract
Wow. Gold has surged over $70 since my last Daily Commentary. This move higher saw the precious metal close at a new all-time high at a price of $2578. Gold is now severely extended to the upside. It is very rare that I will attempt a short position in Gold but the market is so extended short-term I will use any further rally to 2610/2630 to be a small seller with a 2649 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 2588.
Silver Rolling Contract
Silver has now rallied over 10% since missing my 28.00 buy level on Wednesday and I am still flat. I still long in my pension and this is one position I have no interest in exiting. Remember Silver was trading above $51 back in 2011 so the upside potential from here in Silver is huge. I will now raise my buy level to 29.10/30.00 with a higher 27.95 ‘’Closing Stop’’.
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