U.S. Indices (SPX, NDX, RUT, SPX) closed in the green on Friday but still ended the week notably in the red, as they were especially weighed on in wake of the hawkish FOMC on Wednesday. To conclude the week there was broad risk-on sentiment through the US afternoon, albeit closing off peaks, highlighted by US equity and Treasury strength, and Dollar weakness, although the latter still significantly firmer on the week on account of the aforementioned hawkish Fed. As such, all G10 FX peers firmed against the Dollar with the Japanese Yen seeing the greatest gains. The distinct highlight on Friday was the cooler-than-expected US core PCE data set, which sparked a cross asset dovish reaction. Recapping, every metric came in below the consensus, highlighted by the M/M printing 0.1% (exp. 0.2%) and Y/Y 2.8% (exp. 2.9%). Elsewhere, Fed’s Williams, Goolsbee, Daly, and dissenter Hammack all spoke but saw little reaction to any of them. Nonetheless, as participants begin to wind down for the year for the holiday season we are likely to see thinner volumes, which in turn could see greater volatility. The crude complex ended the day relatively flat, in a marked turnaround from the pressure seen in the European session and the start of the US one. Sectors all closed in the green with Real Estate, Financials, and Utilities sitting atop of the pile, with Consumer Discretionary and Staples at the bottom, albeit still positive. Fed Member Williams (voter) largely towed a neutral tone during a CNBC interview, noting there is encouraging news on the economy but the journey has been bumpy. The NY Fed President stressed the economy is in a good place, policy is well positioned and “somewhat restrictive”; he acknowledged progress on inflation but recent data has been a tough higher. Williams noted the Fed is currently above the neutral rate and acknowledged the neutral rate may have lifted a bit due to higher productivity. He also spoke of his neutral rate model which has real rates at 0.75%, vs. the Fed’s 1.00% real rate projection (long run FFR median 3.0% – Long run PCE projection of 2.0%). He was also quizzed about the move higher in long-end yields and mortgage rates despite Fed policy cuts, noting that it is not a concern and being driven by a strong economy. Williams also noted that his projections incorporate how some fiscal policy will affect the economy, implying he was one of those on the FOMC who incorporated the potential Trump impact into projections. Fed Member Daly (voter) spoke on BBG, noting the December meeting as a close call, while looking ahead she said she is very comfortable with the median for two rate cuts in 2025. When asked about criteria to cut rates, the San Fran President said she will continue to consider information and noted every meeting is live from the standpoint of what is right for the economy, but she expects fewer rate cuts in 2025 than initially thought, and with inflation rising, it was one of the reason rate cut projections were pulled back. Daly did note there is a lot of uncertainty about the neutral rate of interest. When asked about her projections being based on incoming administration or on the data, she said it is always about the data (Powell in the Q&A said some people did take a very preliminary step and incorporated conditional effects of coming policies in their projections). Daly reiterated data dependence noting the Fed may respond with fewer or more than two cuts in 2025, but it depends on the data. Regarding inflation, she said it has been coming in a little slower than what they wanted and it is a bumpy bath, but regarding meeting decisions they cannot focus on just one or two months of inflation data. Finally, Fed Member Hammack (voter) the dissenter from the 25bps rate cut on Wednesday, said she dissented because data supported holding Fed policy steady. The Cleveland Fed President said the rate cut was a close call, but she favoured holding steady. On inflation, she said there is more work to do, given inflation is elevated and progress to 2% is uneven. Hammack added a strong jobs market allows the Fed to focus on lowering inflation, and the balance of risks are skewed towards higher inflation risks. Overall, PCE prices were softer than expected. The Fed’s preferred gauge of inflation, Core PCE, rose by 0.115% M/M, cooling from the prior 0.273%, and beneath the 0.2% consensus. The Y/Y rose by 2.8%, matching the prior month pace and beneath the 2.9% forecast, but it was also in line with Fed Chair Powell’s projection. The headline numbers rose by 0.128%, cooling from the prior 0.238% and beneath the expected 0.2%. The Y/Y rose by 2.4%, beneath the 2.5% consensus and Fed Chair Powell projection but above the prior 2.3%. The super core measures, PCE Prices, ex-food, energy and housing rose by 0.1%, cooling from the prior 0.2%, which was revised down from 0.3%. The PCE Services price ex-energy and housing rose 0.2%, down from the prior revised lower 0.3%. The inflation prints are a welcome sign after some bumpy prints in recent months although the Fed likes to look at the totality of the data when making their decisions, so one report should not sway their thought process much. Elsewhere in the report, personal income rose by 0.3%, beneath the 0.4% forecast and beneath the prior 0.7%, while spending (adjusted) rose by 0.4%, short of the 0.5% consensus and above the prior 0.3%. Real spending rose by 0.3%, surpassing the prior 0.1%. Looking ahead there is tremendous uncertainty about the impacts of US President-elect Trump’s policies and its impacts on the US economy, particularly around inflation. The Fed has guided us to two 25bps rate cuts in 2025, but the Fed will be taking a data dependent approach to make its decisions, so this is also only a rough estimate and the Fed advises us to take this with a pinch of salt. Nonetheless, growth has been strong and chances of a recession are low while inflation has been bumpy, and downside risks to the labour market have diminished, which gives the Fed the ability to be patient as it assesses its next move with inflation still above target. Elsewhere Oil closed flat following a volatile two-way trading session while Gold ended Friday with a gain of 0.6%.
To mark my 3100th 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 was made 1210 points on Friday and is now ahead by 1138 points for December after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss 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 1.09% higher at a price of 5930.
The Dow Jones Industrial Average closed 498 points higher for a 1.18% gain at a price of 42,840.
The NASDAQ 100 closed 0.85% higher at a price of 21,289.
The Stoxx Europe 600 Index closed 0.88% lower.
This morning, the MSCI Asia Pacific closed 0.5% higher.
This morning, the Nikkei closed 1.19% higher at a price of 39,161.
Currencies
The Bloomberg Dollar Spot Index closed 0.55% lower.
The Euro closed 0.5% higher at $1.0428.
The British Pound closed 0.3% higher at 1.2561.
The Japanese Yen rose 0.6% closing at $156.30.
Bonds
Germany’s 10-year yield closed 2 basis points lower 2.25%.
Britain’s 10-year yield closed 4 basis points lower at 4.51%.
U.S.10 Year Treasury closed 4 basis points lower at 4.53%.
Commodities
West Texas Intermediate crude closed 0.12% higher at $69.46 a barrel.
Gold closed 0.6% higher at $2622 an ounce.
This morning on the Economic front we already had the release of U.K. Final GDP which came in at 0.00% versus +0.1 preliminary. Next, we have U.S. Chicago Fed National Activity Index at 1.30 pm and Consumer Confidence at 3.00 pm. Finally, at 6.00 pm we have a Two-Year Treasury Auction.
Cash S&P 500
A scary Thursday and Friday morning before buyers returned shortly after the December Futures Contract expired on Friday afternoon at 2.35 pm saw aggressively buying before a small retracement into the Chicago close. However, markets are higher this morning on the back of the Debt Ceiling been increased. I emailed my Platinum Members at 1.30 pm on Friday explaining that all American Indexes were trading outside the bottom of their respective Bollinger Bands while the McClellan Oscillator had closed at a severely oversold 300 on Thursday night and the risk/reward was to be a strong buyer on these dips. Thankfully that strategy worked as the S&P had hit my second buy level at 5850 with a 5802 low print for a 5884 average long position before rallying to my 5954 revised T/P level and I am now flat. This move higher shows that we have had a solid bounce from outside the Bollinger Band with plenty of room to move higher before we get overbought again. There will be strong resistance at the 14 EMA (5987) and the 20-day Moving Average at 6020. Given the amount of technical damage to the market following Powell’s press conference on Wednesday I would expect some selling at these resistance levels above despite been in the seasonally strong period of the year. Wednesday’s 71% rally in the VIX was the second highest VIX Daily Move in history. My own view is the Q1 will see a strong sell-off in the S&P that will be met by aggressive buying to new highs before the market runs into trouble in Q3 2025 on the back of the insane valuations. Remember this is the most expensive market in history and as I have been saying for the past few months Inflation is not gone and will come back with a vengeance especially if the Dollar stays strong. Today, I will be a small seller from 5985/6015 with a wider 6033 ‘’Closing Stop’’. My only interest in buying the S&P is on a dip back to 5845/5865 with a 5837 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 5970. If I am taken long, I will have a T/P level at 5888.
EUR/USD
I am still long the Euro at an average rate of 1.0553 with the same 1.0325 ‘’Closing Stop’’. This morning the Euro is trading at 1.0440. I will now have a T/P level on this position at 1.0580 as I have had this position for over three weeks now which is way too long. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
I am still short the Dollar at an average rate of 107.60. I will leave my 108.55 ‘’Closing Stop’’ on this position while raising my T/P level to 107.40. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
I am going to stay flat the DAX until the New Year. Without doubt this has been the trickiest market to trade in for the last few months. It looks like we have finally put at least a short-term top in this market last week at 20600 but given the seasonality I am afraid to short the market. I still have no interest in buying the DAX at this time.
Cash FTSE
I am still long the FTSE at an average rate of 8195 with the same 8065 ‘’Closing Stop’’ Given the weakness of the morning’s GDP print my stop is been tested as I go to press. I will now lower my exit lvel on this position to 8150. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
Thankfully on Thursday the Dow rallied to my revised 42780 T/P level on my 42700 long position. Subsequently I emailed my Platinum Members to buy the Dow again which I did following Friday’s rout at an average price of 42310 before the market rallied an incredible 800 points. This move higher saw my revised 42610 T/P level triggered and I am now flat. Today, my only interest in buying the Dow is on a further dip lower to 42200/42500 with a tight 41995 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 42750. Given how oversold the Dow is trading I still do not want to be short the market at this time.
Cash NASDAQ 100
I am still flat. This morning the NDX is trading 150 points higher from Friday’s 21290 close. I have no interest in chasing the market higher despite the seasonality. The NDX has short-term support below from 20800/21000. My only interest in buying the market is on a dip lower to this area. Otherwise if not triggered I will stay flat until the start of the new year. If this view changes, I will be back with a new update for my Platinum Members. If I am taken long, I will have a T/P level at 21150
March BUND
I am still long the Bund from last Thursday morning at a price of 133.85. I will continue to look to add to this position at 133.15 with the same 132.45 ‘’Closing Stop’’. Ahead of the Christmas Holidays I will now lower my T/P level to 134.30. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
My 2611 long Gold position worked well as the market rallied to my 2624 T/P level and I am still flat. This morning, Gold is trading at a price of 2628. We have support below from 2580/2596 where I will again be a small buyer with a lower 2567 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2610.
Silver Rolling Contract
I am still long Silver at an average price of 30.95 with a now lower 28.95 ‘’Closing Stop’’. I will leave my 31.40 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Please Note: My next Daily Commentary will be on Monday December 30th. I would like to wish you all a Happy Christmas and wonderful holidays with your families. I would like to thank everyone for their continued support. As usual, any of my calls that are not hit today and are subsequently triggered over the next few days will see me return with updated emails for my Platinum Members.
Recent Comments