U.S. Indices closed at record highs on Friday. Fed Chair Powell set the tone of trade for Friday after he alluded to a September rate cut (more below), despite many expecting the Fed Chair to signal a wait-and-see approach given data is due between now and September – he also echoed some of the arguments for cutting rates mentioned by dovish Dissenters Waller and Bowman. This saw equities rally across the board, with the Russell 2000 clearly outperforming. Sectors were almost all green, with outperformance in Consumer Discretionary, Energy and Communication Services, while Consumer Staples was the only sector in the red, while Utilities and Health care lagged peers on their defensive nature. T-Notes bull steepened on the dovish Fed Chair with front-end yields tumbling while the Dollar plummeted, supporting G10 currencies. The Australian Dollar outperformed on the risk environment, while the Japanese Yen also rallied on US/Japan yield differentials. Oil prices settled only marginally higher with little reaction to Powell despite the Dollar weakness, but gains were seen in the morning after the Hungarian Foreign Minister said oil deliveries to Hungary via the Druzhba pipeline have been halted due to attacks near the Russia-Belarus border. Gold prices rallied on the weaker Dollar and lower-yield environment post-Powell. Attention this week turns to US PCE. Overall, Powell was very dovish at Jackson Hole. He has implied the shifting balance of risks may warrant adjusting the policy stance – a hat tip towards a September rate cut, even with more economic data due before the next meeting. Powell warned that both goals are in tension with the downside risks to the labour market rising. He also suggested that effects on consumer prices are now clearly visible and expects the effects will accumulate in the coming months. He added that it is a reasonable base case that the inflation effect of tariffs will be short-lived, something the dovish dissenters argued in July. He also noted that it is possible tariff-driven upward pressure could spur a lasting inflation dynamic but believes this is unlikely due to downside risks in the labour market. He also stated that as labour supply has softened in line with demand, the breakeven job growth rate is down sharply and the labour market is in a “curious” kind of balance. However, he did acknowledge that stability in the unemployment rate allows the Fed to proceed carefully as it considers changes to the policy stance, but pre-emptive action likely would be warranted should a tight labour market pose a risk to price stability. In the wake of the speech, a clear dovish reaction was observed, with markets now pricing in 55bps of easing by year-end, vs 48bps prior to the speech. A September cut is still not fully priced, but the probability has risen to 84% from 72%. Fed Member Collins did not commit to a September decision, given data is still due between now and then. She appeared slightly more focused on inflation goals due to conversations among the Boston Fed district, but she is still focused on the labour side of the mandate. She suggested risks are roughly in balance, and stressed it is about balancing those risks. Meanwhile, Fed Member Hawker echoed her hawkish comments from the day prior, despite the dovish speech earlier from Fed Chair Powell. She is clearly more concerned about missing inflation goals than labour market goals, noting she tries not to take too much from one report when asked about the July report and revisions. When asked if she would like to see rate cuts later in the year, she said she would like to see inflation coming back to target, reiterated that rates are only a small distance away from the neutral rate, and the Fed needs to be cautious about any move to cut rates. Elsewhere, both Oil and Gold closed higher by 0.43% and 1% respectively.
To mark my 3225th 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 25 points on Friday and is now ahead by 2645 points for August 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 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 1.52% higher at a price of 6466.
The Dow Jones Industrial Average closed 846 points higher for a 1.89% gain at a price of 45,631.
The NASDAQ 100 closed 1.54% higher at a price of 23,498.
The Stoxx Europe 600 Index closed 0.41% higher.
This Morning, the MSCI Asia Pacific closed 0.3% higher.
This morning, the Nikkei closed 0.41% higher at a price of 42,806.
Currencies
The Bloomberg Dollar Spot Index closed 0.91% lower.
The Euro closed 0.98% higher at $1.1719.
The British Pound closed 0.89% higher at $1.3530.
The Japanese Yen rose 1.09% closing at $146.73
Bonds
U.K.’s 10-Year Gilt closed 3 basis points higher at 4.70%.
Germany’s 10-Year Bund Yield closed 1 basis points higher at 2.73%
U.S.10 Year Treasury closed 3 basis points lower at 4.26%.
Commodities
West Texas Intermediate crude closed 0.43% higher at $63.79 a barrel.
Gold closed 1.03% higher at $3373.10 an ounce.
This morning on the Economic Front we have the German IFO Business Survey at 9.00 am, followed by U.S. Building Permits at 1.00 pm and the Chicago Fed National Activity Index at 1.30 pm. Next, we have New Home Sales at 3.00 pm. Finally, we have the Dallas Fed Manufacturing Business Index at 3.30 pm and a speech from Fed Member Logan at 8.15 pm.
Cash S&P 500
My S&P plan worked well as early Friday morning the S&P traded lower to my 6348-buy level before quickly rallying to my 6366 T/P level. Subsequently, one sentence from Fed Chair Powell saw a melt up in the S&P to new highs adding trillions of Dollars to Market Cap. There is no point in moaning about it as these are the markets we have. However, two days after the Fed Minutes showed concern about elevated asset valuations Powell lit a fire under the same by caving (as he did in 2018) and now suggests ‘’balanced risks’’ which is the code for rate cuts, despite financial conditions already loose as a cannon with markets at their highest valuations in history and inflation rising as we saw last week. Not to worry, the new ‘’transitory’’ code word is ‘’one time price increases’’. This is also code for the wealth inequality machine to keep cranking as financial conditions become even more looser. Thursday’s low saw a number of trendlines saved while the VIX got crushed closing lower by 14% on Friday. This surge higher saw the S&P trade the whole of my revised sell range for a now 6458 average short position. I will have a ‘Closing Stop’ at 6481 on this position while raising my T/P level to 6444. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD.
The Euro saw plenty of two-way price action on Thursday/Friday. Initially the Euro traded lower to my 1.1625 T/P level on my latest 1.1670 short position. Subsequently, I emailed my Platinum Members to go short the Euro again and following the huge rally post Powell I am now short at a price of 1.1690. I will add to this position at 1.1760 while leaving my 1.1825 ‘Closing Stop’ unchanged. I will have a T/P level at 1.1620. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar rallied to my revised 98.65 T/P level on my 98.10 long position and I am now flat. This morning the Dollar is trading lower at 97.82. We have short-term support from 96.80/97.50 where I will be a strong buyer with a lower 96.05 ‘Closing Stop’. If I am taken long, I will have a T/P level at 98.25.
Russell 2000
The Russell led Friday’s gains with a 4% rally. Luckily the Russell hit my 2255 T/P level on Friday morning before rallying over 100 points. However, the price is now vastly above the Daily Bollinger Band on yet another negative divergence. Today, I will a strong seller from 2380/2440 with a higher 2505 ‘Closing Stop’. If I am taken short, I will have a T/P level at 2330.
FTSE 100
The FTSE continues to defy logic, rallying to close at a new all-time high on Friday. I was stopped out of my 9220 average short position at 9305 and I am now flat. With U.K. Markets closed today, I will stay flat until Tuesday’s Daily Commentary.
Dow Rolling Contract
Wrong! The Dow exploded on Friday driven by Powell given in to political pressure by sanctioning a rate cut next month. Powell has no credibility left in my opinion and is probably one of the key reasons that the Dollar fell 1%. How the Fed can cut rates with CPI close to 3% is one of life’s great mysteries and will come back to haunt them in the months ahead. The Dow traded the whole of my sell range for a 45230 average short position before stopping me out of this trade at 45505 and I am now flat. The Dow’s new all-time high on Friday came with a negative divergence. The Dow has short-term resistance from 45900/46150 where I will again be a seller with a 46305 tight ‘Closing Stop’. If I am taken short, I will have a T/P level at 45680.
Cash NASDAQ 100
The NDX traded below 23000 on Thursday before rallying to close over 23500 on Friday as just like the S&P above all major trendlines were again saved. This move higher saw the NDX hit my 23560-sell level before trading lower to my revised 23480 T/P level and I am now flat. Today, I will again be a seller from 23620/23780 with a higher 23905 ‘Closing Stop’. If triggered, I will have no T/P level for now.
December BUND
I am still flat the Bund as the market just missed Thursday’s buy range before having a small rally on Friday. I will not chase the Bund higher from here. Therefore, I will continue to be a buyer on any dip lower to 128.00/128.80 with the same 127.45 ‘Closing Stop’. If I am taken long, I will have a T/P level at 129.40. Despite the low yields I still do not want to be short the Bund at this time.
Gold Rolling Contract
I am still flat. I will continue to look to buy Gold on any further dip lower to 3275/3295 with a the same 3259 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3318. If this view changes, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Silver fell shy of Thursday’s buy range before following the price of Gold higher into Friday’s close. I will now raise my Silver buy level to 37.40/38.20 with a higher 36.25 ‘Closing Stop’. If I am taken long, I will have a T/P level at 38.90.
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