Following Thursday’s aggressive move higher, U.S. Equity Markets ultimately closed little changed on Friday morning weakness pared after cash equity trade opened. Sectors were mixed with outperformance in Financials, Utilities and Communications, while downside was seen in Real Estate, Industrials and Energy. Index performance saw the Nasdaq flat with marginal outperformance in the Russell 2000. US data saw improved University of Michigan Consumer Sentiment while inflation expectations were unchanged. Housing Starts and Building Permits disappointed, which saw a revision lower to the Atlanta Fed Q3 ’24 GDP Now tracker to 2.0% from 2.4% on Thursday. Meanwhile, Fed’s Goolsbee repeated cautious remarks on the labour market. There was also a lot of focus on geopolitics with Hamas rejecting the latest ceasefire proposal demands. T-Notes were choppy, with downside in oil prices and dovish Goolsbee commentary supporting the upside, before paring as equity futures moved off lows after the cash equity open. Crude prices were hit after Libya’s Waha oil field resumed operations. In FX, the U.S. Dollar was weak with soft housing data and dovish Goolsbee keeping the buck pressured while both the New Zealand Dollar and Japanese Yen outperformed. Attention this week turns to the Jackson Hole Economic Symposium. The Chicago Fed President Goolsbee said when the labour market starts to turn it tends to worsen quickly, and he noted that some leading indicators of a recession are flashing warnings. Goolsbee later added that small business defaults are up, and that the unemployment rate is up, both are cautious signs, adding credit conditions seem tight and contacts also say credit is tight. He warned that the impact of past hikes may also not be fully realised and acknowledged that if the Fed moves to less restrictiveness, it will ease some of these credit conditions, stressing “You do not want to tighten any longer than you have to, this is not what an overheating economy looks like to me”. He concluded that GDP is still pretty strong and there are pockets of strength in the economy. Headline University of Michigan Consumer Sentiment beat in the prelim August reading, rising to 67.8 from 66.4, above the 66.9 forecast. The upside was led by an improvement in forward looking expectations, which rose to 72.1 from 68.8 but the current conditions index fell to 60.9 from 62.7. Within the report, it mainly focuses on the impact of the US election on consumer sentiment. It noted sentiment for Democrats rose 6%, while for Republicans, it fell 5%; independent sentiment rose 3%. The survey shows that 41% of consumers believe that Harris is the better candidate for the economy, while 38% chose Trump. Meanwhile, “expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months, consistent with the fact that election developments can influence future expectations but are unlikely to alter current assessments.” UoM also highlights that consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation, still their top concern, will continue stabilising. The 1 Year ahead inflation expectations were unchanged at 2.9%, with the 5 Year expectations also unchanged at 3.0%. Building permits fell 4% in July to 1.396 million from 1.454 million, and beneath the expected 1.429 million, with single-family permits 0.1% to 938k and multifamily -11.1% to 458k. Housing starts fell 6.8% to 1.238 million (exp. 1.33 million, prev. 1.329 million), accompanied by single-family starts tumbling 14.1% to 851k and multi-family soaring 14.5% to 387k. On the disappointing housing starts, Oxford Economics notes Hurricane Beryl may have weighed on activity, but the softness was not limited to the South. In addition, single-family starts, which make a large contribution to GDP growth, fell to their lowest pace in more than a year, and the consultancy notes while it’s only the first month of Q3 data. Overall, OxEco expects housing starts to remain under pressure in Q3 before beginning a modest recovery in Q4 as further declines in mortgage rates boost demand and as credit conditions for builders become less restrictive. Meanwhile last Thursday we had the release of Retails Sales for July rose by 1.0%, well above the expected 0.3% on Refinitiv (Bloomberg consensus was for 0.4%). The core metric, ex autos, rose by 0.4%, above the 0.1% forecast while the prior was revised up to 0.5% from 0.4%. Super core, ex gas and autos, rose by 0.4%, easing from the prior 0.8%. The Retail Control rose by 0.3%, above the 0.1% forecast and but vs a prior 0.9% pace. The control metric is a great gauge for consumer spending of GDP and suggests that the strong growth in Q2 has continued into Q3, albeit perhaps not as fast of a pace seen in June (end of Q2). It is also worth noting that commentary from Walmart (WMT) post earnings saw the retail behemoth state that they are not seeing spending weakness with customers even in the first couple of weeks in August. The strong Retail Sales print has helped ease some fears of a slowing US economy and has also seen market participants start to price out the probability of a 50bp rate cut from the Fed in September. Nonetheless, a lot of focus remains on the labour market after the soft NFP print, but recent Jobless Claims data has not shown any signs of labour market stress, and the retail sales report suggests the consumer is still healthy. Looking into the report, it is clear a lot of the strength was driven by outperformance in motor vehicle and parts dealers, rising 3.6% M/M, reversing the weakness seen in the prior month. Meanwhile, miscellaneous store retailers saw sales -2.5%, vs the prior months 1.7% gain. Elsewhere, Oil closed 1.93% lower while Gold surged, closing at a new all-time high with a gain of 3.1%.
To mark my 3050th 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 lost 615 points on Friday and is now down by 1708 points for August 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 0.20% higher at a price of 5554.
The Dow Jones Industrial Average closed 96 points higher for a 0.24% gain at a price of 40,659.
The NASDAQ 100 closed 0.09% higher at a price of 19,508.
The Stoxx Europe 600 Index closed 0.31% higher.
Last Friday, the MSCI Asia Pacific closed 0.6% higher.
Last Friday, the Nikkei closed 3.64% higher at a price of 38,062.
Currencies
The Bloomberg Dollar Spot Index closed 0.56% lower.
The Euro closed 0.1% higher at $1.1024.
The British Pound closed 0.7% higher at 1.2939.
The Japanese Yen fell 0.1% closing at $147.64.
Bonds
Germany’s 10-year yield closed 6 basis points higher 2.24%.
Britain’s 10-year yield closed 10 basis points higher at 3.93%.
U.S.10 Year Treasury closed 5 basis points higher at 3.88%.
Commodities
West Texas Intermediate crude closed 1.93% lower at $76.65 a barrel.
Gold closed 3.1% higher at $2508 an ounce.
This morning on the Economic Front we have the German Bundesbank Monthly Report at 11.00 am. The other item of interest today is a speech from Fed Member Waller at 2.15 pm.
Cash S&P 500
Wrong! To say the last two weeks have been historic is probably an understatement as simply we have never seen anything like the price in points terms in history. The Nikkel which fell 12% on August 5 has now risen a massive 23% in the last 10 trading sessions for a 7000-point gain. This of course raises the question as to what all this means. But without reference points it is hard to come to a definitive conclusion and I can derive several conclusions from it some bullish and some bearish which I will discuss in more detail tomorrow. The plain fact at this time is the Bulls have recaptured all the main Moving Averages again and as long as these MAs remain support on pullbacks then the bulls will remain in control. For the older readers who have a large exposure to equity markets I would look to reduce some of these holdings and go to cash. The volatility that we have witnessed over the past six weeks is not healthy. Valuations are off the charts and if we do get a crash, it will do serious damage to your retirement plans and pensions as time will not be on your side to recover. Personally, I have switched some of my pension into cash on Friday and will look to move more if the markets continue to build on the gains from the last two weeks. This week we have the key Fed’s Jackson Hole gathering and a key speech from Fed Chair Powell on Friday. Jackson Hole in the past has sometimes led to major policy shift announcements with Bernanke dropping the QE hint from what I recall. On Friday Fed Member Goolsbee certainly rang the recession alarm bells which is all reflective of a Fed racing towards rate cuts. Whether these end up being too late we will only find out after the fact. The Atlanta Fed certainly started dropping GDP estimates rather quickly. The VIX closed a further 3% lower on Friday at a price of 14.80. As I mentioned on Thursday this is an historic move in just 10 trading sessions from the Aug 5 peak at 65. There is no precedence for this ever. Remember in 2007 when the market crashed rate cuts did not help the equity markets which initially spiked on cut announcements before been aggressively sold. Hence my warning to our older members. From here risk/reward for new long positions is simply not there. After the S&P spiked on Thursday’s 1% gain in Retail Sales the S&P traded the whole of my sell range for a 5523 average short position before stopping me out of this position at 5546 and I am now flat. The S&P has further resistance from 5568/5588 where I will again be a seller with a higher 5603 tight ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 5532. I no longer want to be long the S&P at this time. If this view changes, I will be back with a new update for my Platinum Members
EUR/USD
I am still flat the Euro. Today, I will continue to be a seller on any further rally to 1.1070/1.1140 with the same 1.1205 ‘’Closing Stop’’. The Euro has support below from 1.0880/1.0960. I will now raise my buy level to this area with a higher 1.0805 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 1.1020. If I am taken long, I will have a T/P level at 1.1015.
Dollar Index
Despite the two-way volatility in the Euro, the Dollar is trading unchanged from where I marked prices on Thursday morning at 102.55. I am still long at an average rate of 103.30 with the same 102.35 ‘’Closing Stop’’. Meanwhile, I will leave my 103.70 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
Wrong! Despite the awful Economic data out of Germany the DAX keeps attracting buyers on dips. This move higher saw the whole of my sell range again triggered for an 18165 average short position before getting stopped on Friday at 18305 and I am now flat. I am going to stay flat the DAX as I have no edge in this market at the moment. August has been the toughest month for my Platinum Service since I started writing my Daily Commentary over 11 years ago in February 2013. I will stay flat the DAX until I feel my edge has returned. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
No Change: The FTSE continues to consolidate the gains from the end of last week and I am still flat. This morning the FTSE is trading unchanged at 8285. Today, I will continue to be a buyer on any dip lower to 8130/8210 with the same 8065 tight ‘Closing Stop’’. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow with the market trading less than 1.5% from all-time highs. This is hard to fathom given the price action over the past six weeks, but these are the markets we have. Today, I will now raise my Dow sell level to 40950/41200 with a 41405 wider ‘’Closing Stop’’. If triggered, I will have a T/P level at 40680. Given how extended the Dow is trading 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
Wrong! The NDX has now rallied over 2300 points since the 17209 low from August 5. I certainly did not see this move happening and for this I apologise. Thursday’s move higher stopped me of my latest 18895 average short position at 19205 and I am still flat, preferring not to trade on Friday. The NDX has now closed higher for seven consecutive trading sessions. This consecutive closing streak matches the seven consecutive higher daily closes into the July 10 high. The June 18 high led to a three-day decline for a loss of 507 points. The July 10 high led to an 18-trading-day net decline to August 5 where the Index lost over 3300 points. In points terms we have never witnessed this price action before. The NDX has its next ‘’Open Gap’’ above at 19754 from July 23 which is the next short-term target. I will be an aggressive seller from 19660/19820 with a wider 20005 ‘’Closing Stop’’. If triggered, I will have no T/P level on this position for now.
September BUND
No Change: I am still flat the Bund. The Bund has support below from 133.00/133.70 where I will continue to be a buyer with the same 132.35 ‘’Closing Stop’’. The Bund has resistance from 135.50/136.20 where I will still be a seller with the same 136.85 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 134.30. If I am taken short, I will have a T/P level at 134.95.
Gold Rolling Contract
There is no stopping Gold, making one closing high after another on this relentless move higher. Although Gold is short-term overbought, I have no interest in shorting any of the precious metals. I will now raise my Gold buy level to 2450/2465 with a higher 2437 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2484.
Silver Rolling Contract
Although Gold closed at a new all-time high on Friday, Silver has struggled although Friday’s price action may prove that the ship has now steadied. This move higher saw Silver hit my 28.80 T/P level on my very large 28.10 average long position and I am now flat. Silver has support 27.90/28.60 where I will again be a buyer with a wider 26.29 ‘’Closing Stop’’ which is just below last week’s low print. If I am taken long, I will have a T/P level at 29.50.
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