U.S. Indexes closed higher on Friday, with gains broad-based, although the Dow and Russell outperformed while the NASDAQ 100 slightly lagged. Breadth was strong, with the equal-weight S&P 500 rising around 0.6%, while sectors were also predominantly firmer. Materials, Health Care and Consumer Discretionary led the gains. Utilities were the clear laggard, with notable pressure in sector heavyweights NEE, SO, DUK and AEP, likely weighed on by the continued rise in Treasury yields despite the Treasury’s recent announcement of increased long-end buybacks, while some may be taking data centre-related profits. The Treasury curve bear flattened on Friday, with front-end yields leading the move higher. Long-end yields returned above levels seen before the Treasury’s buyback announcement, although the increased focus on long-end liquidity may be helping limit the relative move higher. Treasury raised the maximum size of long-end liquidity-support buybacks from USD 2 billion to “at least” USD 4 billion, while Bessent subsequently acknowledged a signalling element to the move and suggested long-end operations could exceed USD 4 billion. In otherwise quiet trade, this may be leaving the path of least resistance towards some flattening following the pronounced recent steepening. In FX, the Dollar extended its recent decline despite higher US yields, while the Antipodeans outperformed amid hopes for additional Chinese fiscal stimulus and the rally in metals prices. In commodities, crude settled higher but gave back the gains post-settlement. Geopolitical messaging was mixed, with Iranian President Pezeshkian speaking in favour of ending the war while Iran remained in a position of strength, although the Iranian Navy commander separately warned that a “historic lesson” was coming for the enemy. Gold and Silver extended their recent rally despite higher Treasury yields, while broader metals were also supported by hopes for additional Chinese stimulus. Attention thist week turns to Treasury Secretary Bessent announcing Iranian sanctions on Monday, the US PCE report, BLS prelim benchmark revisions, and Fed Chair Warsh at Jackson Hole. Manufacturing PMI unexpectedly declined to 53.2 in August from the expected and prior 53.9. Services surprised to the upside, rising to 56.8 from 54.6 (exp. 54.0). Meanwhile, the composite rose to 56.0 from 54.5. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, wrote that the data for Q3 currently points towards annualised growth approaching 3.0%, accelerating from the 1.5% pace seen in Q2. Positively, he added that “Jobs growth has also shown a welcome revival in August, with employers gaining in confidence as concerns fade over the negative economic impacts of tariffs and the conflict in the Middle East”. Yields rose across the curve on Friday in quiet trade. The curve bear flattened, with front-end yields leading the move higher, while crude prices settled marginally firmer. The Treasury’s actions earlier this week remain at the front of participants’ minds. Traders may be reluctant to push long-end Treasury Futures materially lower given the prospect of further Treasury action; Bessent said on Thursday that the Treasury has a wide toolkit, while also stressing that buybacks could exceed the USD 4bln per-operation maximum announced earlier this week. It is also worth noting that the increased liquidity-support buybacks are focused on the 10-30-year sector, potentially providing greater support to the long end relative to the front end and contributing to Friday’s flattening. Elsewhere, Oil closed flat while Gold surged, ending Friday’s session with a gain of 2.4%.
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For anyone following my Platinum Service it made 305 points on Friday and is now ahead by 2190 points for August after closing July with a gain of 8031 points, after ending June with a new record of 10527 points after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a previous record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 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 0.43% higher at a price of 7674.
The Dow Jones Industrial Average closed 517 points higher for a 0.98% gain at a price of 53,277.
The NASDAQ 100 closed 0.33% higher at a price of 29,308.
The Stoxx Europe 600 Index closed 0.59% higher.
Last Friday, the MSCI Asia Pacific closed 0.4% higher.
Last Friday, the Nikkei closed 0.30% lower at 66,016.
Currencies
The Bloomberg Dollar Spot Index closed 0.05% lower.
The Euro closed 0.07% lower at $1.1675.
The British Pound closed 0.13% higher at $1.3642.
The Japanese Yen fell 0.41% closing at $158.97.
Bonds
U.K.’s 10-Year Gilt closed 2 basis points higher at 5.07%.
Germany’s 10-Year Bund Yield closed 2 basis points higher at 3.26%
U.S.10 Year Treasury closed 4 basis points higher at 4.73%.
Commodities
West Texas Intermediate crude closed 0.14% lower at $86.71 a barrel.
Gold closed 2.4% higher at $4603.10 an ounce.
This morning on the Economic front we have no data of note from either the U.K. or the Euro-Zone. At 1.30 pm we have U.S. Chicago Fed National Activity Index. Finally, we have a three- and six-Month Bill Auction at 4.30 pm.
Cash S&P 500
The U.S. economy is losing altitude just as the Fed hawks make their last stand. Single-family Housing Starts collapsed to a near four-year low, the FOMC minutes revealed a divided committee whose own staff sees downside GDP and labor market risks, and a BEA methodology change is set to knock core PCE down next month. Meanwhile, the fiscal impulse is flipping negative. All eyes now turn to Jackson Hole. The U.S. housing market remains in a deep funk. Starts rang in light, at 1.239 million annualised units in July, well below the 1.345 million consensus and off -12.4% from the prior month. They are now down in three of the past four months and -13.5% below year-ago levels. What is most critical is that single-family starts, which are far more important for GDP than multi-family, sank nearly -10% to 808k annualised units, the lowest since November 2022, when the Fed was nine months into its aggressive tightening cycle. This time around, the mortgage market is doing the job on its own, with homeowner affordability some 20% more stretched than the historical norm. With two months to go in Q3, the “build in” for housing starts is -26% at an annual rate. You read that right. We have no growth in the Index of aggregate hours worked and a slight drop in real retail sales. Inventories, meanwhile, continue to be shed by the business sector, especially in retail. It could well be that current-quarter real GDP growth ends up printing with a minus sign in front of it. Jackson Hole is the marquee event, with Chair Powell’s speech on Thursday setting the tone. If not for US intervention this week, the stock market would have crashed already. It is a bold statement, but it is true. For those of you who are new, I have been warning something like this could happen to the bond market for the past 3 years. The fact that it is happening RIGHT NOW should not be a surprise to any of my readers either. We are right on the cusp of the most dangerous season for financial markets throughout the entire year. The graveyard season for financial markets kicks off with Jackson Hole and does not end until Oct 20 which is right around the time of the 1987 crash and the 1998 low in Asian Contagion 1.0. Anything can happen during this period although it usually does not. Last year markets were also in disrepair but former Fed Chai Powell changed course, loosened up enough to avoid a disaster for last September. So, this is Warsh’s first Jackson Hole Symposium. He is already behind the 8 ball. He came out earlier preaching price stability and if that meant raising rates, that is what it would be. Now Treasury had to activate the printing press because nobody was going to buy the bonds the Japanese were going to dump. Phase one was an orderly sell off with the buyer of last resort, the US Treasury. It is not QE, rather it is an extraordinary reaction to an emergency which no doubt would have created Asian Contagion 2.0 and for all we know, maybe it has. Friday came around and there was little confidence in the bond market and the US Dollar. Had Bessent not acted, bonds would have fallen off the cliff, driving the cost the capital through the roof at the worst possible time. While this week will be all about Nvidia, that will only last through Wednesday. Then attention shifts to the annual Jackson Hole Symposium, where Fed Chair Kevin Warsh will give his first speech as chair. Markets will be listening closely for any sign that Warsh has changed his tune on ending the Fed’s habit of hand-holding markets. My hunch is he has not. I firmly believe that a market free of Fed forward guidance is a good thing, and more importantly, that allowing the yield curve to steepen is too. We are already seeing the term premium rise, which is the bond market’s way of asking for greater compensation to hold US debt. At just 82 bps, the 10-year term premium (ACM) remains very low by historical standards; it averaged around 150 bps in the decades before QE. A return to that level alone, on top of a neutral rate in the low 4s, would push the 10-year above 5%. A Fed that provides less forward guidance should also mean higher implied volatility in the bond market. The MOVE index remains very low despite the recent rise in long-end rates, because the market is still confident it knows the Fed’s next few moves. Take that certainty away, and every meeting becomes a live event. That is how rate volatility reprices structurally higher without a single hike. This matters because the Funds Rate by itself does very little to tighten financial conditions. What tightens them is the long end: higher 10-year yields feed through to mortgage rates, corporate borrowing costs, and equity multiples, and higher rate volatility feeds through to credit spreads. That is the channel Powell never used. So, I think the plan is to let the long end do what it never did under Powell: rise. Let the curve steepen, let bond-market volatility expand, and let higher long-end rates do the tightening until inflation meaningfully turns lower. Once that happens, the Fed has the room it needs to cut at the front of the curve. The S&P has traded in a relatively narrow range over the past 10 days. The market did hit my 7655 buy level before rallying to my revised 7568 T/P level and I am now flat. The S&P has short-term resistance from 7715/7740 where I will be a small seller with a 7761 ‘Closing Stop’. The S&P has short-term support from 7605/7630 where I will be a strong buyer with a 7578 ‘Closing Stop’. If I am taken short, I will have a T/P level at 7688. If I am taken long, I will have a T/P level at 7658.
EUR/USD
I am still flat as the Euro has also traded in a narrow range following Wednesday’s move higher. The 14-Day RSI is overbought, closing at 74 on Friday night. Today, I will be a small seller from 1.1730/1.1800 with a 1.1865 ‘Closing Stop’. If I am taken short, I will have a T/P level at 1.1660. I no longer want to be a buyer of the Euro at this time.
Dollar Index
The Dollar traded lower to my 98.60 buy level. I am still long with a now lower 99.20 T/P level. I will continue to look to add to this position at 97.80 while leaving my 96.95 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Russell 2000
I am still flat. Today, I will continue to be a seller from 3050/3120 with a lower 3195 ‘Closing Stop’. If I am taken short, I will have a T/P level at 3005.
FTSE 100
I am still flat as the FTSE traded in a narrow range over the past two trading sessions. The FTSE has short-term support from 10580/10660 where I will continue to be a strong buyer with the same 10505 ‘Closing Stop’. If I am taken long, I will have a T/P level at 10730.
Dow Rolling Contract
The Dow never came close to Thursday’s sell range and I am still flat. I will not chase the Dow lower as I continue to be a seller on any further rally to 53800/54100 with a lower 54305 ‘Closing Stop’. If I am taken short, I will have a T/P level at 53520. I still do not 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
My NDX plan worked well as after the market hit my 29200-buy level we rallied to my revised 29375 T/P level and I am now flat. The NDX has short-term support below from 28920/29120 where I will be a small buyer with a lower 28795 ‘Closing Stop’. If I am taken long, I will have a T/P level at 29330. I still do not want to be short the NDX at this time.
December BUND
I am still long the Bund from Tuesday at a price of 123.70 with the same 124.30 T/P level. I will add to this position on any further move lower to 122.90 while leaving my 122.15 ‘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
Gold rallied further on both Thursday and Friday without ever challenging my buy range and I am still flat. I am reluctant to chase the price of Gold higher without a meaningful correction first. Therefore, I will continue to be a buyer from 4300/4380 with the same 4225 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4470. If this view changes, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Silver tagged on a further 5% since Thursday’s commentary and I am still flat as frustratingly Silver just missed my 65.00 buy level before rallying 400 points. This morning, Silver is trading higher at 69.00. Today, I will be a small buyer from 63.00/66.00 with a higher 61.35 ‘Closing Stop’. If I am taken long, I will have a T/P level at 68.10.
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