U.S. Indexes were on the backfoot as major gainers on Thursday pared initial strength on earnings (NVDA -4.6%, CRWD -4.2%). Friday, Marvell earnings also weighed on Indices, after earnings were considered disappointing given lower-than-expected gross margin guidance and the deferral of longer-term fiscal guidance. Adding pressure to cyclical-exposed names was Fed Chair Warsh’s speech at Jackson Hole proving hawkish. Warsh outlined that inflation remains a greater concern than employment, as expected, even in light of better-than-expected inflation figures through summer. Warsh’s clearer picture of the economy comforted the long-end after an underwhelming July press conference, allowing spreads to flatten. Short-end yields rallied as he noted the Fed has more work to do, unless progress towards its 2% inflation target resumes. In response, the Dollar saw broad-based strength, the Treasury curve flattened, and spot Gold was weighed by the renewed Fed rate hike bets; Barclays and SocGen see hikes in September and December. At the same time as Warsh’s speech, the preliminary NFP annual revision was -79k, and University of Michigan final revisions were slightly better than expected, with the 1 Year inflation expectation ticking down; price action was determined by Warsh. Oil prices settled slightly lower with major developments on US-Iran absent. The new economic sanction approach, “Operation Economic Outcast”, has seemingly got underway with the Treasury set to sanction UAE branches of Egypt’s second-largest bank. Fed Chair Warsh’s Jackson Hole speech offered a little more than traders were anticipating; many had expected him to say little, given his bias against any forward guidance. Warsh’s message was heavily inflation-focused: he noted 12-month PCE was at 3.7%, and the six-month rate at 4.1%, both above target, and he stressed that more than half of PCE components are still rising above 3%. He said that underlying inflation trends “have not meaningfully improved,” despite the better-than-expected prints over the summer months. He said the Fed has more work to do, unless progress towards its 2% inflation target resumes. He again put price stability ahead of the labour side of the mandate, judging labour markets consistent with full employment. On growth and economic conditions, Warsh said the economy was resilient and strengthening and pointed to AI-driven capex as a growth driver, adding that he would be “hard pressed” to call financial conditions restrictive, citing easy credit spreads, looser bank lending standards and firm equity markets. And that combination gives the Fed little urgency to ease. As expected, however, there was no explicit forward guidance: July’s FOMC majority preferred to wait for more data before moving, and Warsh reiterated guidance should stay “limited and circumscribed.” Accordingly, there was no explicit signal for the September meeting. In wake of the speech’s release, Money Market pricing tilted more hawkish, now assigning around a 50% probability of a rate hike at the September confab (versus around 36% prior to the release). It is also worth noting that Fed officials more broadly remain divided on the inflation outlook. Last week, Kansas City Fed President Schmid (2028 voter) and Cleveland Fed President Hammack (2026 voter) argued current rates are not sufficiently restrictive and further tightening may be needed, while Boston Fed President Collins (2028 voter) described policy as mildly restrictive and Chicago Fed President Goolsbee (2027 voter) said he is waiting for evidence on whether the inflation shock will persist. Hammack the Cleveland Fed President already spoke a couple of times on Thursday, but in her remarks on Friday she does not see restrictive financial conditions. The hawk reiterated that it is time for the Fed to act by hiking rates, that waiting will create pain, and that they are committed to bringing inflation to its target. Hammack added she keeps an eye on the market to make decisions, and that markets are not a substitute for the Fed. Interest rates are the main and clearest tool for the Fed, and the balance sheet is reflecting many things, starting from the GFC. Consumer Sentiment ended at 51.7 in August, above the expected 51.0, albeit -6% M/M. Current Conditions also declined to 51.9 from 54.8, slightly above the expected 51.8. Consumer Expectations fell to 51.5 from 55.4, above the 50.6 consensus. Inflation expectations ticked lower for the 1yr to 4.0% from 4.2% (exp. 4.3%), whilst the 5 year was unchanged at 3.3% as forecasted. University of Michigan Economist Joanne Hsu wrote that “With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run”. Ahead, consumers expect their purchasing power to erode, “with a growing majority expecting inflation to outstrip income gains.” Elsewhere, Oil closed flat while Gold was hit hard ending Friday’s session with a 3.25% fall.
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For anyone following my Platinum Service it made 245 points on Friday and is now ahead by 2645 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 0.25% lower at a price of 7711.
The Dow Jones Industrial Average closed 9 points lower for a 0.02% loss at a price of 53,559.
The NASDAQ 100 closed 0.70% lower at a price of 29,433.
The Stoxx Europe 600 Index closed 0.51% higher.
This Morning, the MSCI Asia Pacific closed 0.3% lower.
This Morning, the Nikkei closed 0.28% lower at 66,221.
Currencies
The Bloomberg Dollar Spot Index closed 0.53% higher.
The Euro closed 0.61% lower at $1.1580.
The British Pound closed 0.46% lower at $1.3529.
The Japanese Yen fell 0.48% closing at $160.16.
Bonds
U.K.’s 10-Year Gilt closed 3 basis points higher at 5.07%.
Germany’s 10-Year Bund Yield closed 5 basis points higher at 3.29%
U.S.10 Year Treasury closed 6 basis points higher at 4.73%.
Commodities
West Texas Intermediate crude closed 0.23% lower at $83.34 a barrel.
Gold closed 3.25% lower at $4448.10 an ounce.
With the U.K. Markets closed today the only European data is German CPI which will be released at 1.00 pm. Next, we have the Chicago Fed Manufacturing Index at 2.45 pm. Finally, we have the Dallas Fed Manufacturing Business Index at 3.30 pm.
Cash S&P 500
This is going to be a fairly important week for markets, given the amount of economic data coming and where Interest Rates closed. On Friday, the two-year moved up by almost 13 basis points and the ten-year by nearly six, following Fed chair Warsh’s Jackson Hole speech, which I read as hawkish. The metrics he pointed to were financial conditions, full employment, and inflation. If we are talking about a full-employment economy with inflation too high and financial conditions not restrictive, then financial conditions need to be tightened, and the only way you do that is by hiking rates. The Ten-Year finished at 4.74%, a very important level. There is really nothing after that, maybe a little resistance at 4.80%, and otherwise a clean shot up to around 5%. The ten-year broke a major long-term downtrend back in July, and on a weekly basis it looks like a major bull pennant or symmetrical triangle, continuation patterns that would suggest a pretty significant move higher. The Thirty-Year Bond is a very similar picture: an ascending triangle pressing on the 5.30% level after clearing 5.20%, and after that you are talking about 5.5%, perhaps as high as 5.90%. The Two-Year has also broken through its downtrend and has room to rise from 4.4% toward maybe 4.75 to 5%. This is strictly the technicals. Three-month rates moved up last week as well, which is the market’s way of pricing in rate hikes, and the TLT has broken down out of a descending triangle and looks fairly bearish. All of this has positive implications for the Dollar, which made a strong move on Friday. The Japanese Yen weakened back above the 160 level, the highest it has been since this round of intervention, and a breakout there could set up a return to around 162. The Euro is breaking down below 1.16, potentially setting up a return to the 1.145 area, while the Pound and the Canadian dollar are weakening in a similar fashion. Gold is at risk here because it has turned into nothing more than an inverse Dollar trade, and Silver is a similar mirror image, so if rates and the Dollar make a major move this week, the metals are exposed. The curve flattened on Friday because the two-year moved so quickly, and I think the front of the curve probably lifts faster at first, since the market has to adjust for a potential September hike, with the back end doing the rest once the front settles in. Meanwhile, the Semiconductors continued to weaken even with NVIDIA’s results. The Korean Won keeps strengthening materially, and the Bank of Korea hiked rates again this past week, which has been and I think will continue to be a negative for the semiconductor trade. My NVIDIA preview noted the options setup suggested the stock could decline after reporting, even if not in the first 24 hours. The stock rallied on the guidance and cleared $220 in the premarket, but failed at $230, triggering Friday’s sell-off. I would not be surprised to see NVIDIA continue lower on Monday, filling the gap around the $202 to $209 area and potentially testing $190 at some point, because there is still a lot of positive delta built up in the stock and gamma will be greatly reduced this week, so there should be more volatility. That is the unwind, I think, that continues over the next couple of days. My S&P plan worked well as after the market hit my 7740-sell level the S&P sold off to my revised 7722 T/P level and I am now flat. Today, I will be a seller of any further rally to 7745/7770 with a higher 7791 ‘Closing Stop’. Meanwhile, I will continue to be a strong buyer from 7605/7630 with the same 7578 ‘Closing Stop’. If I am taken short, I will have a T/P level at 7718. If I am taken long, I will have a T/P level at 7663. If any of these views change, I will be back with a new update for my Platinum Members.
EUR/USD
The Euro moved lower on Friday following hawking comments from Fed Chair Warsh. The recent 14-day RSI reading of 74 again proved what a fantastic technical tool the RSI is. I am still flat. The Euro has short-term support from 1.1410/1.1490 where I will continue to be a small buyer with the same 1.1345 ‘Closing Stop’. I will now lower my sell level to 1.1670/1.1750 with a lower 1.1825 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1560. If I am taken short, I will have a T/P level at 1.1600.
Dollar Index
The Dollar finally hit my buy range on Friday for a now 99.40 long position. I am still long with a lower 100.05 T/P level. I will add to this position at 98.70 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. The Russell traded in a narrow range again on Thursday and Friday. Today, I will lower my sell level to 3040/3110 with a lower 3185 ‘Closing Stop’. If I am taken short, I will have a T/P level at 2990.
FTSE 100
I am still flat. The FTSE just fell shy of Thursday’s sell range before trading lower following the renewed rise of Gilt Yields. The FTSE has short-term support from 10650/10730 where I will continue to be a buyer with the same 10555 ‘Closing Stop’. If I am taken long, I will have a T/P level at 10810.
Dow Rolling Contract
I am still flat. The Dow continues to trade in narrow ranges with little or no price action seen for the whole month of August. Today, I will continue to be a seller from 53980/54280 with the same 54505 ‘Closing Stop’. If I am taken short, I will have a T/P level at 53710. 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
I am still flat. Today, I will raise my buy level to 28950/29150 with a higher 28795 ‘Closing Stop’. If I am taken long, I will have a T/P level at 29380. I still do not want to be short the NDX at this time.
December BUND
I am still long the Bund from last Wednesday at a price of 124.00. I will add to this position on any further move lower to 123.30 while leaving my 122.65 ‘Closing Stop’ unchanged. I will now lower my T/P level to 124.40. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold fell over 3% on Friday and I am still flat. Today, I will continue to be a small buyer on any further retracement to 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 made an intra-day high at 71.15 before falling almost 500 points, generating a massive downside key day reversal. This move lower saw my 66.50 buy level triggered. As I always respect large KDRs, I emailed my Platinum Members to exit this long position at my revised 67.15 T/P level and I am now flat. Silver has further support below from 60.30/63.30 where I will again be a buyer with a lower 57.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 65.15.
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