U.S. Indices ultimately finished Friday’s session with an upward bias, with SPX, NDX and DJI closing green, but the Russell 2000 lagged and closed lower. Sectors were also mixed. Communication, Tech and Consumer Discretionary led the gains, while Utilities, Health Care and Industrials underperformed. Focus on Friday was largely on US data, which saw PCE lean softer than expected in September, while the University of Michigan Survey beat forecasts with declining inflation expectations. The data had little impact on Fed expectations. Meanwhile, T-notes were sold across the curve with yields settling three basis points firmer across maturities tracking Canadian bonds lower after a very strong Canadian jobs report. There was also a slew of chunky block trades in the 5- and 10-year futures alongside commentary from NEC Director Hassett to digest. The potential Fed Chair said it is time for the Fed to proceed “cautiously” with rate cuts, with the cautious language perhaps not as dovish as you would expect from a close Trump ally. The Dollar managed to claw back losses to finish Friday trade flat, with Japanese Yen strength pared as the currency appears exhausted by further Bank of Japan hawkish sources, as well as weighed on by higher US yields. The Canadian Dollar was the clear outperformer after a stellar Canadian jobs report, which saw a hawkish shift in rate pricing to see a 25bps hike fully priced in from the Bank of Canada next year. Gold continues to hover around USD 4,200/oz while silver caught a bid. Oil prices settled in the green amid the lack of progress on the Russia/Ukraine peace talks. Core PCE rose 0.198% in September, in line with the 0.2% forecast and prior, seeing the Y/Y rise 2.8%, cooler than the 2.9% seen in August, despite expectations for another 2.9% print. On the headline, PCE rose 0.269%, in line with the 0.3% prior and forecast, with Y/Y rising 2.8%, in line with forecasts but ticking up from the prior 2.7%. Within the report, Personal Income rose 0.4%, above the 0.3% forecast, matching the prior pace, while adj. consumption rose 0.3%, in line with forecasts, while the prior was revised down to 0.5% from 0.6%. Real consumption was unchanged, beneath the 0.1% consensus. The cooler price data is welcome, albeit quite stale, given it is from September, with data delayed due to the government shutdown – it ultimately had little impact on Fed expectations. However, it may influence the projections the Fed are set to update next week. Pantheon Macroeconomics note the rise in core PCE should be small enough for most to revise down near-term inflation forecasts, helping justify more policy easing. PM expects most members to revise down their Core PCE Y/Y forecast to 2.9% next week. Within the report, Pantheon suggests, based on their calculations, that the inflation uplift from the tariffs is continuing to build to 0.41% in September, from 0.37% in August. The desk also writes that “Core PCE inflation probably still will slightly exceed 2% at the end of next year, but progress towards the FOMC’s target likely will be sufficient for the Committee to ease policy by a further 75bp in 2026.” If the Fed cuts by 25bps (as expected) on Wednesday, it takes the FFR to 3.50-3.75%. The Bloomberg dot plot median estimate for the 2026 dot is at 3.25-3.50%, which implies just one more rate cut in 2026. Money markets and Pantheon are more dovish than this. Money markets are pricing in rates between 3.00-3.25%; Pantheon expects rates between 2.75-3.00%.Tthe University of Michigan Sentiment Index saw its first rise in five months, hitting 53.3 in December from 51.0 in November (exp. 52.0). The increase was concentrated primarily among younger consumers. Current conditions fell to 50.7 from 51.1 despite expectations for an uptick to 51.3. Expectations rose to 55.0, matching the highest forecast among analysts surveyed (exp. 51.2, prev. 51.0), led by a 13% rise in expected personal finances, with improvements visible across age, income, education, and political affiliation. Director Hsu notes that consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly sombre, as consumers continue to cite the burden of high prices. On inflation, year-ahead inflation expectations fell to 4.1% from 4.5%, the lowest reading since January, while the five-year-ahead fell to 3.2% from 3.4%. Elsewhere, Oil closed higher by 0.7% while Gold closed lower on Friday by 0.2% following a late sell-off.
To mark my 3275th 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 was made 430 points on Friday and is now ahead by 942 points for December 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 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 0.19% higher at a price of 6870.
The Dow Jones Industrial Average closed 104 points higher for a 0.22% gain at a price of 47,954.
The NASDAQ 100 closed 0.43% higher at a price of 25,692.
The Stoxx Europe 600 Index closed 0.02% lower.
This morning, the MSCI Asia Pacific closed 0.5% lower.
This morning, the Nikkei closed 0.18% higher at a price of 50,581.
Currencies
The Bloomberg Dollar Spot Index closed 0.31% higher.
The Euro closed 0.21% lower at $1.1638.
The British Pound closed 0.15% lower at $1.3328.
The Japanese Yen fell 0.12% closing at $155.31
Bonds
U.K.’s 10-Year Gilt closed 3 basis points higher at 4.48%.
Germany’s 10-Year Bund Yield closed 7 basis points higher at 2.80%
U.S.10 Year Treasury closed 6 basis points higher at 4.13%.
Commodities
West Texas Intermediate crude closed 0.69% higher at $60.08 a barrel.
Gold closed 0.3% lower at $4197.10 an ounce.
This morning on the Economic Front we already had the release of German Industrial Production which rose 1.8% versus +0.4% expected. Next, we have Euro-Zone Sentix Investor Confidence at 9.30 am. At 3.00 pm we have Durable Goods Orders and Factory Orders followed at 4.00 pm by the New York Fed One-Year Consumer Inflation Expectations. Finally, at 6.00 pm we have a Three-Year Treasury Auction.
Cash S&P 500
The S&P 500 closed 0.2% higher on Friday at a price of 6870. The index has really been struggling over the past week to break out of its current trading range. Although it made a decent attempt on Friday, it still could not push much beyond the 6,850-6,870 range I have identified as resistance. This is mainly because implied volatility has fallen sharply over the past week, leaving the market with very little apparent “juice” at the moment. Even so, realised volatility — at least the nine-day measure — also fell on Friday to 8.63. This continues to suggest that volatility is compressing, and it means that any market move larger than roughly 50 basis points is likely to push realised volatility higher again, which would in turn put upward pressure on implied volatility. Plus, with the Fed meeting on Wednesday, it seems more likely than not that implied volatility will rise this week, at least heading into the event. If implied volatility does rise heading into the Fed meeting and the index breaks below 6,800, we could see the S&P 500 fall back toward roughly 6,760, which marks a gap created on November 26. Obviously, it does not take me to tell you that if the index continues to move higher instead, it is likely we push back beyond the all-time highs — despite the liquidity constraints we have been seeing in the marketplace and even with Bitcoin’s collapse over the past couple of months. While we did see overnight funding rates ease somewhat last week — with the general collateral rate slipping to a mid-week low of 3.96% — it moved back up to around 3.98% on December 5, suggesting that SOFR is likely to resume rising. This is important because, despite two Treasury paydowns last week, we have not seen general collateral rates decline further. We will get two more paydowns this week, but that dynamic will change on the 15th, when roughly $80 billion in Treasury Settlements are expected. Given this setup, it seems likely that we have found a floor for repo rates around 3.95%, and as we head into Monday, the 15th, repo rates will probably begin rising again. That suggests that while liquidity pressures have eased, underlying market stress remains unresolved — and is unlikely to resolve unless the Fed allows its balance sheet to move back above $3 trillion. As of now, there is no indication the Fed intends to expand its balance sheet. By my estimate, over the past year, the Fed has averaged roughly $30 billion per month in asset declines, with a range of about $11 billion to $40 billion. This suggests the Fed will begin reinvesting on the order of $30 to $35 billion per month. But all this would do is keep the asset side of the balance sheet neutral and prevent further declines in assets. It would not represent outright QE, which is the expansion of the assets. These would be reinvestments of maturing securities—not net new purchases intended to expand the balance sheet. The bottom line is this: if you hear people saying the Fed is restarting QE, it reflects a fundamental misunderstanding of what is actually happening and a clear indication that they do not understand how the system works. Market Cap to GDP closed at 224% on Friday which is now unchartered territory. Yes, the S&P can rally further from here, but the risk/reward is not to be caught long in my opinion. This consequence of years and years of markets drowning in ever more liquidity injected every time there is the slightest problem, hence these non-stop rallies that we have witnessed over the past few years. The COVID Crash is now barely a blip on the Monthly Chart due to everything getting drowned in liquidity. The Russell Index has closed higher for eight straight months. Precedence for this over the past 20 years? Zero. I could find two consecutive seven month runs. One had a month down move only, the other a big correction ensued. So here too unchartered waters now with 8 months straight up. If this sticks into year-end you then have to count 9 straight up to justify longs in January. My S&P plan worked well as the market sold off to my 6842 T/P level on Thursday from my 6860 short position. Subsequently, I emailed my Platinum Members to go short again at 6894 before selling off to my 6865 T/P level and I am now flat. Today, I will again be a seller from 6895/6915 with no stop. If triggered, I will have a T/P level at 6868. I still do not want to be long the S&P at this time.
EUR/USD
No Change: I am still flat. The Euro has resistance from 1.1690/1.1760 where I will be a small seller with a 1.1815 ‘Closing Stop’. Meanwhile, I will continue to be a buyer on any dip lower to 1.1440/1.1510 with the same 1.1375 ‘Closing Stop’. If I am taken short, I will have a T/P level at 1.1615. If I am taken long, I will have a T/P level at 1.1570.
Dollar Index
The Dollar Index has traded in a narrow 120-point range for most of the past six weeks. The Dollar continues to hold above the key 97.00/98.00 support zone before briefly rallying above 100. If the Dollar can move back above 100, I would be more confident of the completion of a base. Resistance is from 99.60/100.20 which is derived from the last three intermediate swing lows. Beyond that, 101.65/104.91 represents a Fibonacci 38.2%-61.8% retracement of this year’s January-July decline. Regarding support, the 96.22-96.38 range is a Double Bottom. A breakdown (which I do not expect) would allow for further weakness toward the 93.50 area which is the top from the late 2020/early 2021 bottom formation. I am still long the Dollar from last week at 99.20 with the same 99.50 T/P level. I will continue to look to add to this position on any further move lower to 98.40 while leaving my 97.95 ‘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 short the Russell from last week at a price of 2505. I will add to this position at 2565 with the same 2605 ‘Closing Stop’. The Russell is short-term overbought having risen 8.7% in the past 10 days which is an insane move. I will leave my 2460 T/P level unchanged for now. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
FTSE 100
I am still flat the FTSE as the market has continued to trade in a narrow range. Today, I will lower my buy level to 9530/9600 with a lower 9465 ‘Closing Stop’. If I am taken long, I will have a T/P level at 9660. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat as the Dow fell shy of Thursday’s sell range. Today, I will continue to be a seller from 48300/48600 with the same 48805 ‘Closing Stop’. If I am taken short, I will have a T/P level at 48010. If this view changes I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX rallied to my second sell level at 25700 for a 25615 average short position before selling off to my revised 25540 T/P level on Friday afternoon and I am now flat. The NDX has short-term resistance from 25790/25990 where I will again be a seller with a higher 26155 ‘Closing Stop’. If I am taken short, I will have a T/P level at 25630. I still do not want to be long the NDX at this time.
December BUND
Wrong! I was stopped out of my 129.50 average long position on Thursday at 128.35 and I am still flat. The Bund has strong support below from 127.80/128.50 where I will again be a buyer with a lower 126.95 wider ‘Closing Stop’. If I am taken long, I will have a T/P level at 129.20.
Gold Rolling Contract
I do not like the price action in Gold and is the main reason that I have not been chasing the market higher. Gold has short-term support from 4060/4090. Today, I will continue to be a buyer on any dip to this area with the same 4035 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4114.
Silver Rolling Contract
Despite Gold trading sideways/lower over the past few days, Silver has surged to new all-time highs. The Monthly Chart for Silver shows its highest Monthly RSI ever with everything virtually stretched with historically no sustainability for this move. Yet, all I see is bullish targets being raised everywhere. It is too dangerous to try and short Silver as I prefer to stay flat, preferring to observe the market price action before committing to a new trade. If this view changes, I will be back with a new update for my Platinum Members.
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