U.S. Equity Markets eventually saw strength on Wednesday, in a reversal of post-CPI moves, with the tech-heavy NDX outperforming and buoyed by strength in mega-cap names such as Nvidia (NVDA) (+8%). Nonetheless, sectors were mixed with Tech sitting atop the pile with Consumer Staples and Energy lagging, despite the resurgence in the crude complex amid the turnaround in risk sentiment and potential production shut-in on the Gulf of Mexico due to Hurricane Francine. It was a choppy day overall and started with the Dollar seeing weakness in the wake of the US Presidential debate whereby the majority, highlighted by betting markets and a CNN poll, suggested Harris won vs. Trump and she is largely seen as Dollar-negative (relative to Trump). Thereafter the next big risk event was US CPI, which overall was mixed, but was largely dominated by hotter-than-expected core CPI M/M, although it was largely due to upward surprises in shelter and transport services, which are not expected to be ongoing concerns. In wake of the data, which significantly backs the case for a 25bps cut by the Fed next (highlighted by Citi adjusting its call to 25bps from 50bps) we saw Dollar and Treasury strength, accompanied by stock weakness which soon led to a clear flight-to-quality trade. However, through the US afternoon, and on no clear headline driver, the moves reversed and noticed risk-on trade supporting US indices, highlighted by them settling at highs. Elsewhere, there was a very strong US 10 Year Auction, albeit garnering little reaction, while the US government is reportedly considering allowing Nvidia (NVDA) to export advanced chips to Saudi Arabia. Goldman Sachs CEO was also on the wires, whereby Solomon was speaking on Fed expectations, and he noted he sees two, maybe three rate cuts as they move through the fall, and his best guess for the September rate cut meeting is 25bps but thinks there is a case to be made for 50. Core CPI M/M was hotter than expected, as it came in at 0.3% (exp. & prev. 0.2%), with the unrounded figure at 0.281%, as it reflected upward surprises in shelter and transport services. Core Y/Y was in line at 3.2% (exp. & prev. 3.2%), as was headline M/M at 0.2% (exp. & prev. 0.2%), and unrounded at 0.187%. Headline CPI Y/Y was slightly softer than anticipated and printed 2.5% (exp. 2.6%, prev. 2.9%). On the data set, Pantheon Macroeconomics notes that the fundamental story of sustained disinflation remains unaltered by this inflation report, as the pick-up in the core index was driven by components that have a much smaller weight in the core PCE deflator, the Fed’s preferred inflation gauge, or which are sourced from the PPI. Overall, Oxford Economics states that in their view inflation still has a little way to go before hitting 2% and that labour market conditions are unlikely to weaken substantially from here and argues for a gradual pace of rate cuts relative to previous easing cycles. As such, its long-held view is that the Fed will cut rates by 25bps in September and once per quarter thereafter. Elsewhere, Oil rebounded from the previous week’s meltdown, closing Wednesday with a 2.39% gain while Gold again closed flat.
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For anyone following my Platinum Service it made 230 points yesterday and is now ahead by 1482 points for September having ended August with a loss of 301 points 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 1.07% higher at a price of 5554.
The Dow Jones Industrial Average closed 124 points higher for a 0.31% gain at a price of 40,861.
The NASDAQ 100 closed 2.17% higher at a price of 19,237.
The Stoxx Europe 600 Index closed 0.01% higher.
This morning, the MSCI Asia Pacific closed 0.3% higher.
This morning, the Nikkei closed 3.49% higher at a price of 36,862.
Currencies
The Bloomberg Dollar Spot Index closed 0.07% higher.
The Euro closed 0.1% lower at $1.1018.
The British Pound closed 0.3% lower at 1.3045.
The Japanese Yen rose 0.1% closing at $142.22.
Bonds
Germany’s 10-year yield closed 1 basis points lower 2.12%.
Britain’s 10-year yield closed 5 basis points lower at 3.77%.
U.S.10 Year Treasury closed 2 basis points higher at 3.66%.
Commodities
West Texas Intermediate crude closed 2.39% higher at $67.32 a barrel.
Gold closed 0.2% lower at $2511 an ounce.
This morning on the Economic Front we already had the release of the German Wholesale Price Index which fell a huge 0.8% versus +0.1% expected. Next, we have the ECB Monetary Statement at 1.15 pm where the ECB are expected to announce a further 25 basis point rate cut. At 1.30 pm we have U.S. PPI and Weekly Jobless Claims, followed at 1.45 pm by the Lagarde Press Conference. Finally, at 6.00 pm we have a Thirty – Year Treasury Auction.
Cash S&P 500
September is certainly living up to its seasonal volatility. Yesterday produced one of the largest upside Key Day Reversals in many years in points terms. Post CPI the S&P closed last Friday’s 5408 Gap with 5407 low print before surging 150 Handles off this low into its Chicago close. This move higher saw the S&P close above its 50 Day Moving Average at 5507 and its 20 Day MA at 5521. This zone will now act as strong support on any tag. The catalyst for yesterday’s reversal was comments from NVIDIA CEO Jensen who said that demand for AI chips is off the charts. And just like that the market got saved helped by the 8% rise in NVIDIA shares. However, internally the session was weak with 53% of the S&P stocks closing lower which is a surprise given the extent of the reversal. Yet again we have a narrow and concentrated rally. Frustratingly after the S&P hit my 5420 buy level I emailed my Platinum Members to exit any long position at my revised 5426 T/P level. Hopefully you fared better as 10 minutes later we got the NVIDIA comments. Subsequently, the S&P rallied to my 5515 initial sell level before thankfully falling to my revised 5502 T/P level and I am now flat. Yesterday was a session that you had to be at your desk given the volatility. This morning the S&P is trading higher at 5667 following the 3.5% gain in the Nikkei overnight. Today, I will be a strong buyer on any dip lower to 5505/5521 with a tight 5489 ‘’Closing Stop’’. The next resistance level for the S&P is from 5610/5630 where I will be a small seller with a 5641 tight ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5536. If I am taken short, I will have a T/P level at 5594. Remember some of the technical signals that I follow are fried to the upside so I will not be surprised if markets reverse after next week’s Fed Rate cut.
EUR/USD
Higher than expected core inflation saw the Euro trade lower to my 1.1005 buy level. I am still long with the same 1.1060 T/P level. I will add to this trade on any further move lower to 1.0945 while leaving my 1.0875 ‘’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
The Dollar traded in a narrow range yesterday and I am still flat. Today, I will continue to be a buyer from 100.30/100.90 with the same 99.75 ‘’Closing Stop’’.
Cash DAX
Frustratingly the DAX just missed my initial 18200 buy level by 18 points before rallying over 200 points off this low into the New York close and I am still flat. This morning the DAX is higher again at a price of 18520. Ahead of the key ECB Meeting this afternoon I will not chase the DAX higher. Therefore, I will continue to be a buyer on any dip lower to 18150/18240 with the same 17995 wider ‘’Closing Stop’’. If triggered, I will have a T/P level at 18305. I still do not want to be short the DAX at this time
Cash FTSE
The FTSE continues to trade heavy and found aggressive selling above 8400 last week. The FTSE hit an afternoon low at 8170 before bouncing into the close and I am still flat. Today, I will continue to be a buyer on any dip lower to 8070/8140 with the same 7995 ‘’Closing Stop’’. I still do not want to be short the FTSE Market at this time.
Dow Rolling Contract
Incredible price action with the Dow falling 750 points following yesterday’s post CPI print before managing to record one of its largest upside Key Day Reversals in points terms in many months. This move higher saw the Dow rally over 850 points off its afternoon 39990 low print. Normally when you such wide price movements so close to an all-time high it is a warning signal that markets are in trouble. For JPM to close 7% lower on Tuesday is a major red flag that the Banking Sector may be in trouble. As I said in yesterday’s DC, that I cannot justify any long position when you have the $NYSI so fried to the upside. Goldman Sachs shares are also trading weak which is another worry especially with the Dow less than 1.5% from its all-time high. Looking at the Banking Sector Daily Chart ($BKX) it looks like a massive Double Top to me with this DT coming on the back of a number of negative divergences. No matter what way you look at it, yesterday’s core inflation is a lot higher than expected which again puts the Fed in the spotlight for not cutting rates in July when the case was easier to justify a rate cut. Crude Oil has closed lower for nine of the past 10 weeks registering its most oversold reading in four years as demand forecasts are taken down globally as China is languishing. Today, I will continue to be a seller of the Dow on any further rally to 41130/41380 with a higher same 41605 ‘’Closing Stop’’ which is just above the all-time high. If I am taken short, I will have a T/P level at 40940. Despite yesterday’s strong reversal off the 40000-support level, 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
Just when it looked like the NDX was going to test last Friday’s 18400 low print the market was saved again as this time NVIDIA CEO said that demand for AI chips is so great that customer relations are ‘’Tense’’. This saw NVIDIA shares reverse earlier losses, closing Wednesday with a gain of 8%. Earlier I bought the NDX at 18620 before unfortunately taking profit on this long position way too early at 18660 and I am still flat. This morning the NDX is trading above 19300. It just shows how difficult it is to be short as just when it looks like the Bears will get some traction, we get verbal intervention from somewhere. The NDX has resistance at 19350 which is the 50-Day Moving Average. As a result, I will be a small seller from 19400/19560 with a tight 19705 ‘’Closing Stop’’. Ahead of the ECB and U.S. PPI this afternoon, I do not want to be long the NDX at this time even though we had one of the strongest upside Key Day Reversals in many years. We have had a nice start to September, and I am not going to take any unnecessary risks especially after losing money in August. If this view changes I will be back with a new update form my Platinum Members.
December BUND
The Bund just missed my 135.60 initial sell-off before falling 50 points into the New York close and I am still flat. The ECB have a lot of catching up to do to bring rates lower to align with the Bund Market and they will start that process with a further 25 basis point cut this afternoon. With inflation still stubbornly high I find it hard to be a buyer of the Bund at these inflated levels. The Bund has resistance from 135.80/136.50 where I will be a small seller with a higher 137.25 ‘’Closing Stop’’. Meanwhile, my only interest in buying the Bund is still on a move lower to 133.40/134.10 with the same 132.65 ‘’Closing Stop’’.
Gold Rolling Contract
No Change: Gold continues to meander around the 2500 pivot point. On a valuation basis I much prefer to own Silver especially as we are in the seasonally weak September timeframe for the precious metals. I will not chase Gold higher preferring to only be a buyer on any dip lower to 2437/2452 with the same 2423 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2466.
Silver Rolling Contract
Frustratingly Silver missed my 28.00 buy level by six points before rallying to sit at a price of 28.70 this morning. Given the September seasonality I will not chase the price of Silver higher as I continue to be a buyer on any dip lower 27.00/28.00 with the same 25.35 wider ‘’Closing Stop’’ unchanged. If I am taken long, I will have a T/P level at 28.70.
Please Note: There will be no Daily Commentary tomorrow. Any of my calls that are not executed today and are subsequently triggered on Friday will see me return with updated emails for my Platinum Members.
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