U.S. Equity Markets rebounded strongly on Friday following Thursday’s aggressive sell-off. Lower rates saw the Russell 200 lead Friday’s gains, closing higher by 3.2%. The Treasury Market was firmer to end the week, while the Dollar saw weakness after Fed Chair Powell completed his dovish pivot at Jackson Hole. The Chair continued to indicate that a September rate cut is coming, as he said “the time has come for policy to adjust”, with traders on the lookout for clarity regarding the magnitude of the cut. On the labour market, Powell noted they “Do not seek or welcome further labour market cooling”, which once again shows the importance of the US jobs report on 6th September which will seemingly dictate the size of the move by the Fed. As such, the aforementioned dovish reaction was seen, which was sustained throughout the rest of the session, benefitting all G10 FX peers (versus the Dollar) and also supporting rising oil prices, with weekend geopolitical risk also a factor. For the record, a slew of other Fed speak was seen at Jackson Hole (Bostic, Harker, Goolsbee), but they offered little new and reiterated the known Fed message. Note, that sectors all closed in the green with Real Estate and Consumer Discretionary sitting atop of the pile with Consumer Staples and Utilities lagging, albeit still slightly firmer. Powell’s comments continued to indicate that a September rate cut is coming, as he said “the time has come for policy to adjust”, with traders on the lookout for clarity regarding the magnitude of the cut. On the labour market, the Chair said “We do not seek or welcome further labour market cooling”, which once again shows the importance of the US jobs report on 6th September which will seemingly dictate the size of the move by the Fed, as Wall Street Journal’s Timiraos noted earlier in the wake that a report as week as July might lead to a larger than 25bps cut. Powell continued to note how the Fed’s attention has shifted within its dual mandate, as it stated “the balance of risks to our mandates has changed and upside risks to inflation have diminished, downside risks to employment have increased.” Lastly, the Chair reiterated data-dependency noting that “timing and pace of rate cuts will depend on data, outlook, balance of risks”. In reaction, markets saw a broad-based dovish reaction, with upside in Treasuries and stocks alongside downside in the Dollar. Fed Member Bostic said they are on the cusp of a turning point in Fed policy, and the Atlanta Fed reiterated Fed language regarding risks to both sides of the mandate. On rate cuts, Bostic noted close to being ready to cut rates and policy has had its effect, and the BLS payrolls revision did not effect his view. When asked about market pricing, Bostic calls for patience on the policy path, and sending a signal is not going to be helpful. Lastly, Bostic reiterated data-dependency, and he estimates long-run Fed rate at 3% (SEPs were 2.8%). Meanwhile, Fed Member Harker does not see large outsize risk of labour deterioration, and added the neutral rate is somewhere around 3%. On cuts, Harker noted contacts are urging the central bank not to stop and start rate cuts, and the jobless rate will not peak above 5%. Finally, Goolsbee, supports the Fed’s new focus on the job market and noted policy is now at its tightest point of the entire hike cycle. He went on to reiterate, that Powell’s rate comments were clear and definitive and has every reason to think Fed forecasts of rate cuts will happen. On the size and pace of the cuts, Goolsbee took the data-dependent approach, adding, that the size of a given Fed rate cut is not what matters most and the path is key. US New Home Sales soared 10.6% to 0.739 million in July, well above the expected 0.625 million and the prior, revised higher, 0.668 million. Elsewhere within the release, new home supply was 7.5 months’ worth at current pace (prev. 8.4 months’ M/M), while homes for sales was 0.462 million units (prev. 0.467 million units M/M), and median sale price fell 1.4% Y/Y in July to USD 429.8k. On the release, Oxford Economics notes new home sales make only a small contribution to residential investment and GDP growth, but the pace of sales in July, if sustained, would offset some of the downside risk to its forecast coming from weaker than expected housing starts and existing home sales in the same month. Elsewhere, Oil ended Friday with a gain of 2.50% while Gold again closed flat.
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 667 points on Friday and is now down by 896 points 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 1.15% higher at a price of 5634.
The Dow Jones Industrial Average closed 462 points higher for a 1.14% gain at a price of 41,175.
The NASDAQ 100 closed 1.18% higher at a price of 19,720.
The Stoxx Europe 600 Index closed 0.46% higher.
This morning, the MSCI Asia Pacific closed 0.5% lower.
This morning, the Nikkei closed 0.66% lower at a price of 38,110.
Currencies
The Bloomberg Dollar Spot Index closed 0.82% lower.
The Euro closed 0.35% higher at $1.1192.
The British Pound closed 0.8% higher at 1.3215.
The Japanese Yen rose 0.5% closing at $144.38.
Bonds
Germany’s 10-year yield closed 3 basis points higher 2.23%.
Britain’s 10-year yield closed 2 basis points higher at 3.92%.
U.S.10 Year Treasury closed 1 basis points lower at 3.79%.
Commodities
West Texas Intermediate crude closed 2.49% higher at $74.83 a barrel.
Gold closed 0.1% higher at $2512 an ounce.
This morning on the Economic Front we have the German IFO Survey at 9.00 am. With the U.K. closed for a bank holiday the next data of note is U.S. Durable Goods Orders at 1.30 pm. Finally, we have the Dallas Fed Business Manufacturing Index at 3.30 pm.
Cash S&P 500
No surprise as Fed Chair Powell pivots on rate cuts and in the process was as dovish as he possibly could. In essence not only promising rate cuts next month but outlining lower rates as a destination. All it took was a -818K job revision to change his tune. Whether the market’s enthusiasm is well founded or will run into a reality of the Fed actually being too late chasing reality again remains to be seen of course. Clearly Powell has taken inflation off the table and has put Employment front and centre. Even though the Fed will cut rates at its September 19 meeting it will take time for the positive effect to hit. Total Debt as a percent of GDP stands at over 120% compared to 2010 when it was only 20%. For now, this does not matter to investors, but my question is how long can this debt be ignored. Meanwhile Market CAP to GDP stands at 197% and this key stat was why Warren Buffet sold 50% of his Apple Holding and most of his bank exposure and is now in risk free T-Bills earing over 5%. Friday’s late rally in the Dow saw the market close over the key trendline support at 41050. With Equity Markets having risen for nine of the past ten months I cannot justify a long position at these levels. The scary part of this move is the Monthly RSI is not even overbought leaving room for the S&P to trade higher. The S&P has strong resistance from 5650/5670 where two major trendlines from 1987 and 2000 converge. Ahead of the key September/October timeframe it is another reason why I do not want to be long and was one of the main reasons why I said that any of my older members should look to reduce their equity exposure and go into T-Bills in case the unthinkable (CRASH) happens like what occurred in October 2007 when rate cuts could not save the economy. It is interesting that the VIX is now at 15.86 while stock markets are at or near new all-time highs. In July when we had a similar set-up the VIX was trading at 12. This is a strong negative divergence and major red flag for me. The aggressive fall in the VIX from the August 5, 65 high print has left five ‘’Open Gaps’’ above. As we know all gaps in the VIX are eventually filled. If these gaps are filled to the upside, then we can look to put on a macro long position in equities. My S&P plan worked well as the market rallied to my 5641-sell level on Thursday before falling a huge 90 Handles. This move lower saw my 5615 T/P level filled and I am now flat. Friday’s late rally saw the S&P close at 5634 as yet again a downward Key Day Reversal attracted strong buying which has been the theme since the October 2022 low print. The S&P has further resistance from 5648/5668 where I will again be a strong seller with a higher 5685 ‘’Closing Stop’’. If triggered, I will have a T/P level at 5625. I still do not want to be long the S&P at this time.
EUR/USD
No Change. The Euro traded higher to my second sell level at 1.1160 for a now 1.1120 average short position. I will leave my 1.1205 ‘’Closing Stop’’ unchanged while raising my T/P level to 1.1070. The pessimistic extreme in the U.S. Dollar suggests and impending rally in the Dollar and fall in the Euro. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar Index had a nice rally on Thursday following the equity sell-off. This move higher saw my revised 101.60 T/P level triggered on my latest 101.20 long position and I am now flat. Friday’s 0.82% fall in the Dollar saw the market close 100 points lower at 100.65. This move lower saw the Daily Sentiment Indicator close in singe digits which is the lowest level in over three years. Meanwhile the Weekly RSI is at its lowest level since 2018 with the Dollar way outside the bottom of its Daily Bollinger Band. History tells us that this scenario does not last long. The Dollar has support from 99.80/100.60 where I will again be a buyer with a 99.25 ‘’Closing Stop’’. If triggered, I will have a T/P level at 101.30.
Cash DAX
No Change: I am going to stay flat the DAX as I have no edge in this market at the moment. August has been the toughest month for my Platinum Service since I started writing my Daily Commentary over 11 years ago in February 2013. I will stay flat the DAX until I feel my edge has returned. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
I am still flat the FTSE. With the U.K. Markets closed today I will stay flat the FTSE until tomorrow’s Daily Commentary. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
My Dow plan worked well. On Friday the Dow rallied to my 41120-sell level before falling over 250 points. This move lower saw my revised 41030 T/P level triggered and I am now flat. The rally in the last 30 minutes saw the Dow recover most of its earlier losses, closing at a price of 41175. The Dow has further resistance from 41320/41570 where I will again be a seller with a higher 41805 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 41090. Given how extended the Dow is trading I no longer 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
The NDX has seen plenty of two-way price action since Thursday’s Daily Commentary was posted. Having a hit a high above 19920, the NDX subsequently fell over 400 points before regaining most of these losses on Friday. This initial move lower saw my 19630 T/P level triggered on my latest 19750 short position. I emailed my Platinum Members to sell the NDX again at a price of 19750 before the market sold off to my 19645 T/P level and I am now flat. This morning, the NDX is trading at 19720. We have resistance from 19800/19960 where I will again be a seller with a higher 20105 ‘’Closing Stop’’. I still do not want to be long the NDX at this time.
September BUND
No Change: I am still flat the Bund as the market again traded in a narrow range on Wednesday. The Bund has support below from 133.20/133.90. I will now raise my buy level to this support area while leaving my 132.35 ‘’Closing Stop’’ unchanged. The Bund has resistance from 135.50/136.20 where I will still be a seller with the same 136.85 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 134.55. If I am taken short, I will have a T/P level at 134.95.
Gold Rolling Contract
No Change: Gold continues to hold the 2500 support level. Seasonally September can be a difficult month for both Gold and Silver, hence my reluctance to chase the Gold market higher. Today I will continue to be a buyer on any dip lower to 2450/2465 with the same 2437 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2484.
Silver Rolling Contract
I am still flat Silver as I look for the market to play catchup with Gold’s aggressive move higher over the past two months. Silver hit a low at 29.20 on Friday before having a small rally into the New York close. Today, I will raise my buy level to 28.50/29.30 while leaving my 26.29 wider ‘’Closing Stop’’ unchanged. If I am taken long, I will have a T/P level at 30.10.
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