U.S. Equity Markets closed lower on Friday with a hot PPI weighing on both stocks and bonds with underperformance in the rate-sensitive Russell 2000 amid rising yields, a sharp reversal in Super Micro (SMCI) shares after its recent rally, as well as downside in the regional banking ETF, KRE. The Dollar initially caught a bid on the hot PPI although gains pared, particularly in wake of the downbeat University of Michigan Consumer Survey. Elsewhere, USD/JPY rose back above 150 despite hawkish source reports and more official jawboning out of Japan. Sterling closed flat against the Dollar and Euro despite super strong Retail Sales data. Both Crude and precious metals advanced on Friday as the Dollar eased from its peak while ever-present geopolitical tensions kept the crude space bid. PPI data was the latest hot economic print from the US, adding to the labour market and CPI report seen earlier in the month. Attention will lie heavily on the Fed’s preferred gauge of inflation, PCE, due at the end of February. Headline PPI rose 0.3% M/M above the 0.1% forecast and above the prior -0.1%. The Y/Y PPI rose 0.9%, easing from the prior 1.0% pace but above the 0.6% consensus. The core print rose 0.5% (prev. -0.1%, exp. +0.1%) with the Y/Y rising 2.0% (exp.1.6%, prev. 1.8%) while the super core rose 0.6% (prev. 0.2%), with the Y/Y ticking up to 2.6% from 2.5%. The gains in the core prices show signs of broad producer price gains. Looking into the data, BLS highlighted the increase was driven by a 0.6% rise in service prices, while goods eased by 0.2%. Some of the Fed Members have been cautious of a reacceleration in goods prices but this report helps ease some of those fears, although the gains in Services is still a primary concern for the Fed. Additionally, the BLS highlighted a 2.2% increase in the Index for hospital outpatient care as a major factor behind the price increase for final demand services. Pantheon Macroeconomics wrote that they think this is a seasonable problem, noting “The BLS does not adjust the outpatient price series, arguing that the evidence of seasonality is not strong enough, but when we readjust the numbers we find hefty seasonal effects, especially in January”. Meanwhile, Pantheon summarises that the data is another disappointment, but there is no change in the trend of the fundamentals. In relation to the PCE, PM adds the PPI data means they can finalise their core PCE forecast for January, at 0.32% – the highest since September. The desk concludes that “nearly a quarter of the January increase will come from the portfolio management component, which just lags the stock market”. Meanwhile, Prelim February UoM Sentiment Index rose to 79.6 from 79.0, but fell short of the expected 80.0. Current conditions fell deeper than forecasted to 81.5 (exp. 82.0, prev. 81.9), while forward-looking expectations outshone consensus as it lifted to 78.4 from 77.1 (exp. 76.5). On the inflation footing, 1yr ahead ticked higher to 3.0% from 2.9% with the 5-10yr unchanged at 2.9%. Overall, Oxford Economics notes, “The significant improvement in confidence seen in the prior two months is now beginning to wane. While falling inflation should continue to support confidence, we expect a slowdown in durable goods consumption and a slight rise in the unemployment rate will keep a lid on sentiment.” Finally, Housing Starts plunged 14.8% in January to 1.331million, way beneath the prior of 1.562million and the expected 1.46million, but Oxford Economics stated they do not read too much into the decline in Starts, as the decline was led by the more volatile multifamily sector in addition to harsh winter weather potentially affecting. As such, Oxford thinks that Starts may continue to be volatile in the winter months but expects it to bounce back and average about 1.45million in 2024. Building Permits, the more forward-looking indicator or housing activity, dipped 1.5% to 1.47million (exp. 1.509million, prev. 1.493million). However, the consultancy notes single-family permits increased, indicating more momentum in that sector. Elsewhere, Oil closed 1.49% higher while Gold ended Friday with a gain of 0.9%.
To mark my 2925th 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 420 points on Friday and is now ahead by 1001 points for February 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 points, 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 0.48% lower at a price of 5005.
The Dow Jones Industrial Average closed 145 points lower for a 0.37% loss at a price of 38,627.
The NASDAQ 100 closed 0.90% lower at a price of 17,685.
The Stoxx Europe 600 Index closed 0.62% higher.
Last Friday, the MSCI Asia Pacific closed 0.6% higher.
Last Friday, the Nikkei closed 0.88% higher at a price of 38,487.
Currencies
The Bloomberg Dollar Spot Index closed 0.34% lower.
The Euro closed 0.3% higher at $1.0776.
The British Pound closed 0.5% higher at 1.2603.
The Japanese Yen rose 0.2% closing at $150.22.
Bonds
Germany’s 10-year yield closed 8 basis points higher at 2.41%.
Britain’s 10-year yield closed 6 basis points higher at 4.11%.
U.S.10 Year Treasury closed 2 basis points higher 4.28%.
Commodities
West Texas Intermediate crude closed 1.49% higher at $79.19 a barrel.
Gold closed 0.9% higher at $2013.10 an ounce.
With the U.S. Markets closed for the Presidents’ Day Holiday, the only Economic Data release of note is the German Bundesbank Monthly report at 11.00 am.
Cash S&P 500
With the DAX and Nikkei trading close to all-time highs despite both economies close or already in recession, one has to ask the question when is reality ever going to come back? It seems like policy makers are just using equity markets as a toy which is certainly what Treasury Secretary is doing in my opinion. Any sell-off is met by the word ‘’Concerned’’ leading to another strong rally. In my opinion asset prices are untethered from fundamental reality driven by options mechanics and policy makers words and actions. But that is what years and years of central bank and policy makers intervention have done since the Global Financial Crisis back in 2008 by continually injecting liquidity on any sell-off. This has led to vertical moves higher in a few tech stocks dragging all three American Indexes to new all-time highs. The poster child is Nvidia which is now the third most valuable company in the U.S. after surpassing the market cap of Google. I have never seen so many vertical charts. History tells us that this will end badly but with Yellen ‘’Concerned’’ a sell-off is almost impossible. I have stated a number of times that there is no chance of CPI falling to the Fed’s 2% target level anytime soon, yet Tuesday’s 130 handle sell-off was recaptured on Friday before a late 30 Handle fall into the Chicago close. I will continue with my strategy of only selling American Indexes when the 14 Day RSI is above 73. On Friday this key signal closed at 63, meaning there is plenty of room for the S&P to move towards 5100. The S&P has support from 4967/4982. I will now raise my buy level to this area with a higher 4955 ‘’Closing Stop’’. With American Cash Markets closed for the Presidents’ Day Holiday, trading should be muted.
EUR/USD
My latest 1.0705 long Euro position worked well as the market rallied to my 1.0765 T/P level and I am now flat. It is interesting that any recent dips in the Euro are attracting buyers. The Euro has short-term support from 1.0670/1.0740 where I will again be a buyer with the same wider 1.0595 ‘’Closing Stop’’.
Dollar Index
My latest 104.80 short Dollar position worked well as the market sold off to my 104.30 T/P level and I am now flat. Today, I will again be a seller from 104.80/105.50 with the same 106.05 ‘’Closing Stop’’.
Cash DAX
Thankfully we have had no sell level in the DAX over the past few weeks as every dip continues to attract strong buying. ‘’Nothing Matters’’ has been my theme for markets this year. Early Thursday morning the German Economics Minister stating that the German Economy is in massive trouble. This comment was totally ignored by the market, as the DAX trades near all-time highs. Japan is in recession and the Nikkei surged over the past week, flirting with its 1989 all-time highs. My old adage ‘’that markets that cannot fall on bad news have to be respected’’ could not be truer given the madness of the last week despite higher U.S. Inflation data. This morning, the DAX is trading at 17100. We have short-term support from 16880/16960. I will now raise my buy level to this area with a higher 16795 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 17030. I still do not want to be short the DAX at this time. If this view changes, I will be back with anew update for my Platinum Members.
Cash FTSE
Despite higher Gilt Yields and lower Sterling, the FTSE has rallied over the past few trading sessions. This move higher finally sees the FTSE playing catchup with European Indexes. The FTSE has strong support from 7580/7650. I will now raise my buy level to this area with a higher 7525 ‘’Closing Stop’’. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow as the market never came close to Thursday’s buy range. I will now raise my buy level to 38160/38410 with a higher 37995 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 38590. I still do not want to be short the Dow at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
My NDX plan worked well as the market finally sold off to my 17680-buy level on Friday, before rallying to my 17810 T/P level and I am now flat. This morning, the NDX is trading lower at 17720. We have strong support from 17480/17630 where I will be an aggressive buyer with a lower 17395 ‘’Closing Stop’’.
March BUND
Following the U.S. PPI print on Friday, the Bund sold off to my 133.10 buy level. I am still long with a now lower 133.65 T/P level. I will add to this position at 132.40 while leaving my 131.85 ‘’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
My latest 1998 average long Gold position worked well as the market rallied to my 2007 T/P level. Subsequently, I emailed my Platinum Members to buy Gold again at 1995 before rallying to my second T/P level at 2004 and I am now flat. This morning Gold is trading slightly higher at 2011. We have support from 1984/1999 where I will again be a buyer with a 1972 tight ‘’Closing Stop’’.
Silver Rolling Contract
No Change. The boring price action shows no sign of ending unfortunately. I still believe in the bull case for this precious metal. I will continue to hold my 24.40 average long position with no stop or T/P level for now. This morning, Silver is trading 100 points higher at a price of 23.35. I will continue to look to add to my existing long position on any further move lower to 21.50. If this view changes, I will be back with a new update for my Platinum Members.
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