Both Equity and Bond Markets were choppy on Quadruple Witching Friday but ultimately closed mixed with the Dow outperforming, printing another record closing high while the S&P and NASDAQ 100 finished slightly red, but the Russell 2000 plummeted. Sectors were predominantly lower, with Industrial, Materials and Tech lagging. Apple (AAPL) rallied for the majority of the session on account of funds rebalancing AAPL weights given Warren Buffet’s recent share sales. However, the upside throughout the day was pared in the final minutes of trade in rebalancing influenced trade. Elsewhere in the tech space, the Wall Street Journal reported that Qualcomm (QCOM) approached Intel (INTC) with a takeover offer in recent days. Sectors that outperformed were Utilities, which soared c. 2.6% to a record closing high after a three-day losing streak, with upside supported by Constellation Energy (CEG) surging 22% after it announced it will restart the Three Mile nuclear plant, intending to sell the power to Microsoft (MSFT). Communications and Consumer Staples were the only other sectors to close green. T-notes were choppy with weakness in the European morning seen in wake of hot UK Retail Sales and hawkish commentary from Bank of England Member Mann. However, Fed Governor Waller’s CNBC appearance explaining his reasons for a 50bp rate cut (inflation falling faster than anticipated) saw the selling pressure reverse with the curve bull steepening by the end of the day. Bowman also explained her dissent, she saw a risk that a larger cut would signal that the Fed’s fight against inflation could be interpreted as a premature declaration of victory. The dovish Waller commentary took the Dollar off its earlier highs while the Japanese Yen lagged in wake of the Bank of Japan and commentary from Governor Ueda who signalled they are in no rush to hike rates. Sterling outperformed on the aforementioned retail sales and Mann updates. Crude prices were choppy but ultimately settled lower on the day with participants likely taking risk off the table ahead of the weekend. Fed Governor Bowman, the sole voter for a smaller 25bp rate cut, explained her dissent on Friday. She sees a risk that the FOMC’s larger policy action could be interpreted as a premature declaration of victory on inflation when they have not yet achieved that goal. Bowman believes a more measured pace towards a more neutral policy stance will ensure further progress is made in returning inflation to the 2% goal. She added that this would avoid unnecessarily stoking demand. She added the economy remains strong and the labour market remains near full employment, but she respects and appreciates that colleagues preferred to go with a larger reduction and remains committed to working with them to ensure policy is appropriately positioned to achieve its dual mandate goals. Meanwhile the Bank of Japan kept its short-term policy rate unchanged at 0.25%, as expected with the decision made by a unanimous vote. BoJ also stated that inflation is likely to be at a level generally consistent with BoJ’s price target in the second half of its 3-year projection period
through fiscal 2026 and it sees medium and long-term inflation expectations increasing. Furthermore, it sees exchange rate trends as having a greater influence on prices and said Japan’s economy is likely to achieve growth above potential but also stated that they must be vigilant to the impact of financial and FX market moves on Japan’s economy and prices. Governor Ueda’s post-meeting presser was more interesting in which he struck a clear dovish and cautious tone. In this press conference, Ueda put significant weight on overseas economies, particularly the U.S. following the Fed’s 50bps rate cut. One of Ueda’s most notable comments was that upside price risks have decreased given recent FX moves, and risks of an inflation overshoot have somewhat diminished. Furthermore, Ueda kept referring to markets as unstable. As a reminder, on August 7th Deputy Governor Uchida said the BoJ will not hike rates when markets are unstable. As such, Governor Ueda referring to markets as being unstable in the post-meeting press conference, alongside the decrease in upside price risk, has been taken as a “slowing” of hiking plans. Last Thursday, we had the Bank of England rate decision. As expected the MPC opted to keep the Base Rate at 5.0% after delivering a 25bps rate cut at the prior meeting. The decision to maintain policy settings was made via an 8-1 vote (vs. consensus 7-2) with Dhingra the lone dissenter in voting for a rate cut. Within the consensus that backed an unchanged rate, “there was a range of views among these members on the degree to which the unwinding of past global shocks, the normalisation in inflation expectations and the current restrictive policy stance would lead underlying domestic inflationary pressures to continue to unwind”. For most members, it was noted that “in the absence of material developments, a gradual approach to removing policy restraint would be warranted”. This view was echoed by Governor Bailey who remarked that the MPC must be careful not to cut rates too fast, or by too much. Furthermore, the policy statement reiterated that policy “will need to continue to remain restrictive for sufficiently long”. Aside from the rate decision, the MPC also voted unanimously to reduce the stock of Gilts by GBP 100bln between October 2024 and September 2025 (as expected). Note, the BoE refrained from including sales of 1–3-year maturity Gilts. Overall, the tone of the policy statement was one of caution with the MPC very much in data-dependent mode. This prompted a hawkish repricing for the rest of the year with just a 64% chance of a cut seen in November (vs. 100% pre-release) and a total of 40bps of easing seen by year-end (vs. 52bps pre-release). Pantheon Macro sees just one cut for the rest of the year with the MPC likely to prefer November on account of it being an MPR meeting. In wake of the meeting, Governor Bailey was on the wires and noted he is optimistic that UK interest rates will fall further, though further evidence is required, while he needs to see residual inflation pressures disappear. The Governor added it is imperative that the UK improves its current potential growth of 1.2-1.3%. Regarding QT, Bailey is “very relaxed” that the gov’t will take the right decision on the treatment of QT within fiscal rules and will have no impact on BoE policy. Elsewhere, Oil closed Friday with a loss of 0.22% while Gold closed 1.5% higher as buyers continue to buy every retracement.
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 746 points on Friday and is now ahead by 3154 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 0.19% lower at a price of 5702.
The Dow Jones Industrial Average closed 38 points higher for a 0.09% gain at a price of 42,063.
The NASDAQ 100 closed 0.24% lower at a price of 19,791.
The Stoxx Europe 600 Index closed 1.42% lower.
This morning, the MSCI Asia Pacific closed 0.4% higher.
Last Friday, the Nikkei closed 1.53% higher at a price of 37,723.
Currencies
The Bloomberg Dollar Spot Index closed 0.12% lower.
The Euro closed 0.4% higher at $1.1163.
The British Pound closed 0.8% higher at 1.3321.
The Japanese Yen fell 0.8% closing at $143.85.
Bonds
Germany’s 10-year yield closed 2 basis points higher 2.21%.
Britain’s 10-year yield closed 6 basis points higher at 3.90%.
U.S.10 Year Treasury closed 4 basis points higher at 3.75%.
Commodities
West Texas Intermediate crude closed 0.22% lower at $71.00 a barrel.
Gold closed 1.2% higher at $2628 an ounce.
Cash S&P 500
My recent process of selling rallies in the S&P worked really well last week. Previously I have been bullish the U.S. Equity Market, but we are now at a point where nothing seems appealing on the buy side. I am not calling for a crash or end of the bull market but there are so many factors that are aggregating. Now it may be that none of the things I outline below matter and they will keep squeezing these markets higher from here: Markets have been up for 10 of the last 11 months which is not by itself a sell signal but a reflection of how one-sided this market has been. Markets have been chasing coming rate cuts all year long and the Fed finally caved in to the bond market making new highs in the process. New highs are generally bullish but when new highs come one must also assess the context and look for signals and assess probabilities of whether new highs are actually sustainable. I am seeing ‘’Red Flags’’ everywhere. On a basic level we have negative divergences on everything which is never a good look. The new highs in the S&P are showing a pronounced negative divergence on the Weekly Chart. Now negative divergences can go away if momentum just keeps melting up but if price cannot sustain the divergence for a couple of weeks then it could turn into a much larger reversal. In short: a dangerous time for bulls while the Quarterly Chart is also signalling negative divergence at a time when we have a 200% Market Cap to GDP. This market has run a massive multiple expansion: 30 GAAP Multiple. And for all the record earnings I am actually surprised to see GAAP earnings having flat lined and not even having reached the 2022 peak. How do we get to 15% earnings growth in 2025 with a forward multiple of 21 into a slowing economy? I just can’t see it. The S&P is now approaching strong trendlines of historic resistance. My S&P plan worked well as the market traded the whole of my sell range for a 5713 average short position before trading lower to my revised 5702 T/P level. Subsequently, I emailed my Platinum Members to sell the S&P again which we did at an average rate of 5712.50 before selling off again to my 5702 T/P level and I am now flat. Having hit an intra-day low on Friday at 5675 the S&P is trading higher at a price of 5713 as I go to post. The S&P has further resistance from 5720/5740 where I will again be a seller with a higher 5761 ‘’Closing Stop’’. I will continue to be a small buyer on any large dip lower to 5606/5622 with a 5589 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5635. If I am taken short, I will have a T/P level at 5704.
EUR/USD
I am still flat the Euro as the market has surprisingly traded in a narrow range over the past three trading sessions. The Euro has resistance from 1.1210/1.1300 where I will be an aggressive seller with a 1.1375 ‘’Closing Stop’’. My only interest in buying the Euro is on a large dip lower to 1.0970/1.1050 with the same 1.0895 ‘’Closing Stop’’.
Dollar Index
The Dollar eventually traded lower to my initial 100.50 buy level. I am still long with a now lower 100.90 T/P level. I will continue to look to add to this position at 98.80 while leaving my 99.25 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
My DAX plan worked well. After the market hit my 18990-sell level the market fell 200 points. Unfortunately, I covered this position too early at my revised 18904 T/P level and I am now flat. This morning, the DAX is trading at a price of 18780. We have resistance from 18880/18980 where I will again be a seller with a lower 19105 ‘’Closing Stop’’. My only interest in buying the DAX is still on a large dip lower to 18330/18430 with the same 18195 ‘’ Closing Stop’’ which is just below the September low print. If I am taken long, I will have a T/P level at 18505. If I am taken short, I will have a T/P level at 18805.
Cash FTSE
Despite the hawkish Bank of England, the FTSE has traded in a narrow range. The FTSE did hit my buy range for a now 8240 long position. I will add to this trade on any further move lower to 8160 with a now lower 8095 ‘’Closing Stop’’. I will now lower my T/P level to 8270. If any of the above levels are hit, I will be back with anew update for my Platinum Members.
Dow Rolling Contract
My Dow plan worked well but you have to be quick to take your gains as any sell-off does not last. The S&P hit my 42100-sell level before trading lower to my 41880 T/P level and I am still flat. The Dow has further resistance from 42300/42550 where I will again be a seller with a higher 42705 ‘’Closing Stop’’. I still do not want to be long the Dow at this time.
Cash NASDAQ 100
My NDX plan worked well as the market traded the whole of my sell range for a 19855 average short position before finally selling off on Friday to my revised 19700 T/P level and I am now flat. This morning the NDX is trading at 19808 having hit an overnight high at 19925. The NDX has strong resistance from 19860/20020 where I will be an aggressive seller with a higher 20155 ‘’Closing Stop’’. A combination of weak seasonals and buybacks stopping is another strong reason why I have no interest in buying the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members. If I am taken short, I will have a T/P level at 19720.
December BUND
No Change: Bond yields are higher following the Fed’s 50bp rate cut. I am still flat the Bund as the market again fell shy of last week’s buy range. I will continue to be a buyer from 132.50/133.30 with the same 131.85 ‘’Closing Stop’’. I will now lower my sell level to 134.90/135.60 with a lower 136.35 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 133.80. If I am taken short, I will have a T/P level at 134.40.
Gold Rolling Contract
There is just no end to the Gold rally. Gold is now up over 28% for the year. I have no interest in chasing the Gold market higher while the risk/reward in being short is not worth it give the insane appetite for investors and traders to buy every dip. Gold has support from 2540/2556 where I will be a small buyer with a higher 2528 tight ‘’Closing Stop’’.
Silver Rolling Contract
No Change: Today, I will again be a buyer on any dip lower to 29.70/30.50 while leaving my wider 27.95 ‘’Closing Stop’’ unchanged. If I am taken long, I will have a T/P level at 31.30
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