U.S. Equity Markets were sold throughout the session with underperformance in the NASDAQ after disappointing Microsoft and Google earnings while a dismal NYCB report saw the stock, KRE, and Russell 2000 Index tumble, igniting some fears on the regional banking sector, supporting havens. Bonds were bid pre-Fed with the regional banking woes, soft German and French Inflation figures, cooler-than-expected US ECI, ADP, and Chicago PMI supporting the move while the Treasury’s Quarterly Refunding was largely in line with expectations, confirming a final round of auction size increases. The FOMC statement was mixed, where it left rates unchanged and removed reference to possible additional rate hikes as expected but it also downplayed near-term rate cuts, sending stocks lower, sending yields higher off the lows and supporting the U.S. Dollar. Some of the hawkish reaction was pared in the press conference, but that was before Powell explicitly stated that he does not see a March rate cut as likely, weighing again on stocks and supporting the Dollar. In FX, the Japanese Yen was the outperformer, accentuated by the hawkish BoJ Summary of Opinions, which discussed the possibility of ending NIRP, keeping the Yen propped. The Australian Dollar lagged after soft inflation data while China Manufacturing PMI remained in contractionary territory for four months while the hawkish risk tone and revival of the Dollar post-Fed took the Aussie and Kiwi to session lows; NZD testing 0.6100 and AUD testing 0.6550. The Euro was also softer on the aforementioned soft inflation figures out of France and Germany, not to mention weak German Retail Sales. The Fed left rates unchanged at 5.25-5.5%, as expected, whilst also making some big changes to the statement to reflect a more balanced outlook towards cuts vs hikes. The Fed’s growth description was upgraded to describing economic activity as “expanding at a solid pace” vs its December description of it having “slowed from its strong pace in the third quarter”. The lines saying the US banking system is “sound and resilient” and that tighter financial and credit conditions are likely to weigh on the economy were both removed, whilst it added a line noting the risks to achieving employment and inflation are moving into better balance. On the policy guidance, the FOMC removed the line “in determining the extent of any additional firming that may be appropriate” to a more dovish/balanced “in considering any adjustments to the target range”, but it gave a hawkish caveat that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%”. It also maintained language on the balance sheet, as expected. Powell’s Press Conference: In his prepared remarks, Powell said the policy rate is likely at its peak for this tightening cycle and that it will likely be appropriate to begin reducing rates “sometime this year” if the economy evolves as expected, whilst caveating the Fed is prepared to maintain the current policy rate for longer if needed. Powell said reducing rates too soon or too much could reverse the progress in inflation, but at the same time, reducing the policy rate too late could unduly weaken the economy. He described inflation as having “eased notably”, whilst noting risks to achieving the Fed’s goals are moving into better balance. Further on inflation, Powell said the low inflation readings in H2 2023 were welcome, but the Fed needs to see continuing evidence to have confidence it is returning to target. Elsewhere, Oil closed 2.58% lower while Gold ended Wednesday’s session flat following a volatile session.
To mark my 2925th 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 170 points yesterday, 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 points, 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 1.61% lower at a price of 4845.
The Dow Jones Industrial Average closed 317 points lower for a 0.82% loss at a price of 38,150.
The NASDAQ 100 closed 1.94% lower at a price of 17,137.
The Stoxx Europe 600 Index closed 0.1% higher.
Yesterday, the MSCI Asia Pacific closed 0.5% higher.
Yesterday, the Nikkei closed 0.61% higher at a price of 36,286.
Currencies
The Bloomberg Dollar Spot Index closed 0.15% higher.
The Euro closed 0.2% lower at $1.0815.
The British Pound closed 0.1% lower at 1.2685.
The Japanese Yen rose 0.5% closing at $146.78.
Bonds
Germany’s 10-year yield closed 9 basis points lower at 2.17%.
Britain’s 10-year yield closed 10 basis points lower at 3.81%.
U.S.10 Year Treasury closed 13 basis points lower 3.93%.
Commodities
West Texas Intermediate crude closed 2.58% lower at $75.87 a barrel.
Gold closed 0.1% higher at $2037.10 an ounce.
The morning on the Economic Front we have German, Euro-Zone and U.K Manufacturing PMI at 8.50 am, 9.00 am and 9.30 am respectively. This is followed by Euro-Zone Unemployment and CPI at 10.00 am. Next, we have the Bank of England Rate Announcement at 12.00 pm followed by U.S. Weekly Jobless Claims, Unit Labour Costs and Non-Farm Productivity at 1.30 pm. At 2.45 pm we have Manufacturing PMI. Finally, at 3.00 pm we have ISM Manufacturing PMI and Construction Spending.
Cash S&P 500
As we have seen over the past 15 months since the October 2022 low, it is extremely difficult to be short American Indexes unless the RSI reading is over 72. This roadmap has served us well so far this year. Even though we were not short the S&P yesterday at least we were not long. Sentiment had gone wildly bullish over the past few weeks with firms trampling all over themselves to upgrade their respective S&P target levels. Of course, none of these calls were made last October but only after a 20% rally in the market. Yesterdays near 2% fall is the third major daily fall since late December. Each sell-off has been aggressively bought and is one reason why I do not want to short the S&P here. We were lucky to have a Dow short on board which worked well after a frustrating few sessions. One problem with being short now is the low reading in the $BPSPX RSI while the $NYSI is maximum oversold. The S&P has support from 4820/4835 where I will be a small buyer with a 4809 tight ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 4849.
EUR/USD
No Change. Unfortunately, the Euro just missed yesterday’s 1.0900 T/P level with a 1.0888 high print. Subsequently, we sold off hard into the New York close. I will now lower my T/P level on my 1.0835 long position to 1.0875. I will add to this position at 1.0775 while leaving my 1.0715 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
No Change. I will continue to look to sell the Dollar on any further rally to 104.00/104.60 with the same 105.05 ‘’Closing Stop’’. I still do not want to be long the Dollar at this time.
Cash DAX
I am still flat as the DAX just missed yesterday’s buy range before having a small rally overnight. I will now lower my buy level to 16580/16660 with a lower 16495 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 16725. I still do not want to be short the DAX at this time. If this view changes, I will be back with anew update for my Platinum Members.
Cash FTSE
I am still flat as the FTSE traded I a narrow range as we wait for this afternoon’s Bank of England rate announcement. I will not chase the FTSE higher, leaving my 7500/7570 buy level unchanged with the same 7435 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 7615.
Dow Rolling Contract
Yesterday morning the Dow rallied to my second sell level at 38540 for a 38410 average short position. Wednesday’s late sell-off saw the Dow hit my revised 38240 T/P level and I am now flat. Today, I will again be a small seller on any further rally to 38500/38750 with a higher 38935 ‘’Closing Stop’’. I still do not want to be long the Dow at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Wow! Google falling over 6% yesterday sees the NDX trading over 500 points lower than where we were trading on Monday afternoon. This is a big move. I am still flat as I had no buy level yesterday. Short-term the NDX is now oversold which is hard to believe after a two-day fall, but this is the hand we have been dealt with. The NDX has support below from 16900/17050 where I will be a buyer with a 16795 tight ‘’Closing Stop’’.
March BUND
The Bund surged yesterday, and I am still flat. I have no interest in chasing the Bund higher given its low yield nor do I want to be short. For this reason, I will stay flat the Bund until I return on Tuesday. If this view changes, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
No Change. I am still flat Gold. As I still long both the Euro and Silver, I will leave my 1973/1998 Gold buy level unchanged with the same 1959 wider ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I still believe in the bull case for this precious metal. I will continue to hold my 24.40 average long position with no stop or T/P level for now. This morning, Silver is trading lower this morning at a price of 22.91. I will look to add to my existing long position on any further move lower to 21.50. If this view changes, I will be back with a new update for my Platinum Members.
Please Note: There will be no Daily Commentary tomorrow Friday or next Monday as it is a Bank Holiday in Ireland. My next Daily Commentary will be on Tuesday February 6. Any of my calls that are not hit today and are subsequently triggered on either tomorrow or Monday will see me return with updated emails for my Platinum Members.
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