Equity Markets tumbled on OpEx Friday while T-notes rallied across the curve. Stocks started to sell off from the U.S. morning, with the ongoing deterioration of Ukraine relations with the US and Russia and lingering tariff deadlines weighed in the background, but the drivers today focused on weak US PMI data and reports of a potentially pandemic inducing Coronavirus being found in China. On the data, the composite fell, primarily due to a sharp drop in the Services PMI into contractionary territory, printing a 25-month low, while manufacturing was in line with expectations. The sharp miss in the services number weighed on stocks and saw upside in T-notes with the Dollar trading off its highs. The Final University of Michigan Survey for February was revised lower, beneath all analyst expectations, while inflation expectations were unchanged on the 1 Year but ticked up on the 5 Year. Upside in T-notes and downside in stocks extended in later trade with reports circulating of a powerful enough coronavirus to spread through Humans, which has the potential to trigger a pandemic. Elsewhere, crude prices were weighed on reports that Russia could concede USD 300 billion sovereign assets frozen by the West be used for Ukraine reconstruction, via Reuters citing Russian sources. Reuters also reported the US has asked Iraq to resume Kurdish oil exports quickly, or face sanctions alongside Iran, noting the US believes Kurdish oil sales can help to lower oil prices and offset a drop in Iranian supplies. COVID fears also hit, seeing benchmarks settle at lows. In FX, the Japanese Yen saw notable outperformance while the Dollar was also bid. The lower US Treasury yields supported the Yen, seeing USD/JPY hit lows of 148.93, down from the highs of 150.73 seen after Bank of Japan Governor Ueda signalled a BoJ willingness to increase bond buys if yields rise too much, which followed after hot Japanese inflation data. Note, although there were a lot of driving factors in markets on Friday, option expiries likely increased volume somewhat. The Flash S&P Global PMI data for February saw the manufacturing print inline at 51.6, up from 51.2, while the services PMI tumbled to a 25-month low (49.7, prev. 52.9), entering contractionary territory. This saw the composite fall to 50.4 from 52.7. The report noted that “The upbeat mood seen among US businesses at the start of the year has evaporated, replaced with a darkening picture of heightened uncertainty, stalling business activity and rising prices”. Meanwhile, looking ahead – optimism slumped from 3 Year highs at the turn of the year, to one of the gloomiest since the pandemic. “Companies report widespread concerns about the impact of Federal Government Policies, ranging from spending cuts to tariffs and geopolitical developments. Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff-related price hikes from suppliers.” It added that although inflationary pressures remain muted, this reflected a squeezing of margins in the services sector as companies sought to absorb cost increases in order to offer competitive prices amid weakened demand. S&P Global adds that “A concern is the sharp, tariff-related, jump in manufacturing input prices, which will likely either put further upward pressure on inflation in the coming months or further squeeze profit margins among US companies”. In terms of GDP, Pantheon Macroeconomics suggest that “Uncertainty over the severity of federal spending cuts and tariffs has led to a sudden stop in decision-making, likely weighing materially on GDP growth in Q1.” The University of Michigan headline sentiment fell to 64.7 from 67.8, and beneath the bottom end of the forecast range, 65.0, with the decrease unanimous across groups by age, income, and wealth. Conditions and Expectations also dropped, printing 65.7 (exp. 68.7) and 64.0 (prev. 67.3), respectively. The report adds that all five index components deteriorated this month, led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent. In addition, the report adds, expectations for personal finances and the short-run economic outlook both declined almost 10% in Feb., while the long-run economic outlook fell back about 6% to its lowest reading since November 2023. 1 Year inflation expectation remained at 4.3%, while the longer-term 5 Year lifted to 3.5% from 3.3%, as they rose for Independents and Democrats alike, but fell slightly for Republicans. Existing Home Sales fell 4.9% in December to 4.08 million (rev. 4.29 million), beneath the expected 4.08 million. Diving deeper, the median existing-home sales price rose 4.8% from January to USD 396,900, while the inventory of unsold existing homes grew 3.5% from the M/M to 1.18 million at the end of January, or the equivalent of 3.5 months’ supply (prev. 3.3 months) at the current monthly sales pace. On market dynamics, NAR Chief Economist Yun noted “Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” “When combined with elevated home prices, housing affordability remains a major challenge”. Ahead, Pantheon Macroeconomics notes the prospects for home sales further ahead are also far from bright: a lack of supply likely will remain a key issue. German CDU Party Leader Merz, said that their party won Sunday’s German Election with 29% of the vote with the far right AFD second with 20%, while German Chancellor Scholz’s were in third place with just 16%. Markets are opening higher on these results this morning. Elsewhere, Oil closed Friday with a loss of 3% while Gold was flat.
To mark my 3150th 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 lost 105 points on Friday and is now ahead by 2765 points for February. 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 record 9619 points in October 2022. 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 1.71% lower at a price of 6013.
The Dow Jones Industrial Average closed 748 points lower for a 1.69% loss at a price of 43,428.
The NASDAQ 100 closed 2.16% lower at a price of 21,614.
The Stoxx Europe 600 Index closed 0.52% higher.
Last Friday, the MSCI Asia Pacific closed 0.3% higher.
Last Friday, the Nikkei closed 0.26% higher at a price of 38,776.
Currencies
The Bloomberg Dollar Spot Index closed 0.22% higher.
The Euro closed 0.38% lower at $1.0461.
The British Pound closed 0.23% lower at 1.2633.
The Japanese Yen rose 0.36% closing at $149.14.
Bonds
Germany’s 10-year yield closed 10 basis points lower at 2.45%.
Britain’s 10-year yield closed 3 basis points lower at 4.58%.
U.S.10 Year Treasury closed 12 basis points lower at 4.42%.
Commodities
West Texas Intermediate crude closed 3.02% lower at $70.27 a barrel.
Gold closed 0.18% lower at $2933.10 an ounce.
This morning on the Economic Front we have Euro-Zone CPI at 10.00 am. This is followed by the Chicago Fed National Activity Index at 1.30 pm. Finally, we have the Dallas Fed Manufacturing Business Index at 3.30 pm.
Cash S&P 500
I have been warning of an imminent sell-off in the S&P and we certainly got that on Friday with its 120 Handle fall. Wednesday’s late rally to a closing high at 6144 has now trapped a number of long positions. Friday’s move lower saw the S&P close below its 5 EMA, 14 EMA and 20 MA (6082, 6075 and 6067 respectively). The 50-Day MA is just below Friday’s close at 6008 and needs to be carefully monitored given the fact that the Dow closed nearly 300 points below its 50 MA on Friday. This move lower leaves us with the distinct possibility of a major Double Top while has yet to be determined. Risk happens fast. Bulls failing to sustain new highs last week meaning this market can get ugly quickly. Thankfully, we had no buy level in the S&P last week. However, if the S&P continues to sell-off today, I will be a buyer from 5940/5960 with a tight 5925 ‘’Closing Stop’’. The S&P has short-term resistance from 6063/6083 where I will be a seller with a wider 6101 ‘’Closing Stop’’.
EUR/USD
I am still flat the Euro. I will now raise my Euro buy level to 1.0340/1.0410 with a higher 1.0255 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
Dollar Index
The Dollar saw plenty of two-way price action since Thursday’s Daily Commentary was posted. The rise in the Dollar saw my 106.60 buy level triggered. I am still long with a now lower 107.10 T/P level. I will add to this position on any further move lower to 106.00 while leaving my 105.55 ‘’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
The Russell got hit hard on Friday, closing lower by over 2.7%. This sell-off saw the market hit my buy range for a now 2210 long position. I will add to this trade on any further move lower to 2150 while leaving my 2115 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 2260. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE never came close to Thursday’s sell range, and I am still flat. The market is trading over 180 lower from Wednesday’s high in a badly needed shake out to correct some of its severely overbought condition. The FTSE has short-term support below from 8460/8540 where I will be a buyer with 8395 tight ‘’Closing Stop’’. If triggered, I will have a T/P level at 8605. I no longer want to be short the FTSE at this time.
Dow Rolling Contract
On Thursday my Dow plan worked well as the market traded the whole of my buy range for a 44050 average long position. A late rally into the close saw the Dow hit my revised 44190 T/P level. Unfortunately, I emailed my Platinum Members to buy the Dow again on Friday which I did at an average price of 43800 before getting stopped out of this position at 43495 and I am now flat. Friday’s aggressive sell-off saw the Dow close below its 50 Day Moving Average (43715) and this pivot point should act as resistance on any bounce. However, following last week’s 4% drop the Dow is close to oversold. The Dow has left a large ‘’Open Gap’’ below the market from 42500/42700 where I will be an aggressive buyer on any tag with no stop. Meanwhile, the Dow has short-term support from 42900/43150 where I will again be a buyer with a tight 42755 ‘’Closing Stop’’. If triggered, I will have a T/P level at 43390.
Cash NASDAQ 100
Frustratingly, the NDX hit a high on Thursday morning at a price of 22216, just below my 22240 initial sell level before subsequently falling 600 points into Friday’s Chicago close. This morning, the NDX is trading at 21690. The 50-Day Moving Average is just below at 21520. The NDX has short-term support from 21300/21450 where I will be a small buyer with a lower 21175 ‘’Closing Stop’’. Given the extent of last week’s sell-off, I have no interest in selling the NDX at this time.
December BUND
My latest 131.20 long Bund position worked well as the market rallied to my 131.80 T/P level and I am now flat. On the back of Friday’s equity rout the Bund is bid trading higher, at a price of 132.15 as I go to post. The Bund has support below from 131.00/131.70 where I will again be a buyer with a higher 130.25 ‘’Closing Stop’’. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold hit a high on Thursday at 2956 before having a small sell-off into Friday’s New York Close. Today, I will continue to be a seller on any further rally to 2970/2990 with the same 3003 ‘’Closing Stop’’. If triggered, I will have a T/P level at 2953.
Silver Rolling Contract
No Change: I am still flat. Today, I will continue to be a buyer on any dip lower to 31.30/32.20 with the same 29.95 ‘’Closing Stop’’. If triggered, I will have a T/P level at 32.90.
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