U.S. Equity Markets, Bonds, and Gold all surged while the Dollar slumped in response to the ubiquitously dovish FOMC. The gains were led by the small-cap Russell 2000, with regional banks flying, while the equal-weighted S&P beat the market cap-weighted index – a move lower in rates is seen as most beneficial to those with weaker balance sheets, who need to refinance their debt. The 2year yield plunged nearly 30bps to 4.45% at the time of writing, while the 10year yield is down nearly 20bps, and is testing 4.00% to the downside. The Fed made dovish tweaks to the statement guidance and slashed its 2024 median dot by more than expected to imply three rate cuts in 2024 vs its prior median of one cut (street was looking for two cuts). In his press conference, Fed Chairman Powell also gave the nod to upcoming rate cuts, noting they discussed the timing of rate cuts at the meeting and there was a general expectation that rate cuts will be a topic of discussion going forward. Money markets are now pricing in an 88% probability of the first 25bp rate cut in March vs 50% before the FOMC, with 140bps of easing seen throughout 2024 vs 115bps before. Crude prices saw relatively little reaction to the FOMC but had ground higher throughout the session with inventory data showing deeper than expected draws. Elsewhere, the PPI data was cooler than expected, and Fed Chair Powell acknowledged this, alongside CPI on Tuesday, led some policymakers to adjust their SEP forecasts. Attention now turns to the plethora of central bank releases on Thursday, including SNB, Norges Bank, BoE and ECB rate decisions. The Fed left rates unchanged at 5.25-5.5%, made dovish tweaks to its statement, whilst indicating a greater fall than many had expected to its Fed rate projections. The 2024 median rate dot was dropped to 4.6% from the prior 5.1%, beneath the analyst consensus 4.9%, indicating three cuts from current levels in 2024 – the uncertainty remains high, however, with eight out of 19 officials forecasting rates above the median and five beneath it with a forecast range of 3.9–5.4%. The 2025 median Dot was dropped to 3.6% from 3.9%, whilst the 2026 and long run dots were left unchanged at 2.9% and 2.5%, respectively, bucking some expectations for an upward drift in the longer run (‘neutral’) estimate. The lower rate projections were reflective of faster progress than previously anticipated for inflation, with the Core PCE projections falling to 3.2% from 3.7% for 2023, to 2.4% from 2.6% in 2024, and to 2.2% from 2.3% for 2025. The Unemployment rate forecasts were unchanged through 2025 (4.1% in both 2024 and 2025), while the 2024 GDP forecast nudged lower to 1.4% from 1.5% in 2024. The statement saw its tightening guidance softened, “In determining the extent of ANY [new word] additional policy firming that may be appropriate…”, whilst it also maintained its language added in November describing financial and credit conditions as tighter, despite some expectations that it would be removed after a rally in US Treasuries and stocks since then. It noted growth had slowed from the strong pace in Q3 (prev. expanded at a strong pace in Q3), while it also added that inflation has eased over the past year, but maintained language it remains elevated. Elsewhere, Oil closed 1.1% higher while Gold surged back above $2000 with a gain of 2.8%.
To mark my 2900th 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 lost 305 points yesterday and is now ahead by 317 points for December after ending 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 1.37% higher at a price of 4707.
The Dow Jones Industrial Average closed 512 points higher for a 1.40% gain at a price of 37,090.
The NASDAQ 100 closed 1.27% higher at a price of 16,562.
The Stoxx Europe 600 Index closed 0.056% lower.
This morning, the MSCI Asia Pacific closed 0.4% higher.
This morning, the Nikkei closed 0.73% lower at a price of 32,686.
Currencies
The Bloomberg Dollar Spot Index closed 0.8% lower.
The Euro closed 0.8% higher at $1.0874.
The British Pound closed 0.6% higher at 1.2616.
The Japanese Yen rose 2.1% closing at $142.88.
Bonds
Germany’s 10-year yield closed 4 basis points lower at 2.17%.
Britain’s 10-year yield closed 10 basis points lower at 3.88%.
U.S.10 Year Treasury closed 19 basis points lower 4.01%.
Commodities
West Texas Intermediate crude closed 4% lower at $68.61 a barrel.
Gold closed 0.1% lower at $1978.10 an ounce.
This afternoon on the Economic Front we have the Bank of England rate announcement at 12.00 pm, followed at 12.45 pm by the ECB Statement where no rate increases are expected. This is followed at 1.30 pm by the U.S. Weekly Jobless Claims and Retail Sales. Next, we have the ECB President Lagarde’s press conference at 1.45 pm. Finally, we have Business Inventories at 3.00 pm.
Cash S&P 500
This was my opening comments yesterday morning ‘’Fighting these extreme rallies in Global Equity Markets over the past three weeks is hazardous as the extremes get even more extreme. The big question is how far this rally can extend before we see a meaningful correction. If it is like the autumn of 2019 then it will never stop this year’’. I am just baffled how a Fed Chairman can radically change his narrative in just a few days. Last week he said that it was too early to talk about rate cuts and in his press conference last night he said ‘’we are done, we are cutting rates next year etc’’ He has done a complete ‘’uturn’’ and not one mention of the loosening financial conditions or any concern about it. The radical easing of financial conditions has now gone into hyper drive with 10-year Treasuries trading at 3.96% this morning. I have to ask the question is the Fed using this desperate ploy to avoid a coming recession knowing that growth is slowing down hard and they want to use rising asset prices to boost confidence, spending and therefore hoping growth will rebound. I cannot say but to me pushing markets like this is completely the wrong medicine for its supposed inflation fight by tossing the whole narrative of the past year out the window in one swift move. Remember YOY Inflation came in unchanged at 4% on Tuesday which is well above the Fed’s 2% target. Yesterday’s move higher came as many overbought signals just got severely overbought with no care to levels, resistance or signals. The $BPSPX RSI closed at 88. The last time this happened was in December 2019, when Powell again flipped the narrative. Two months later the S&P crashed. The 14-Day RSI for the S&P closed at 78 last night and given the overnight move is probably at 80 now. Prices are now entirely outside their Bollinger Bands. History tells us that chasing prices outside the BB always ends up badly. To put yesterday’s move into perspective this is the highest move outside the Bollinger Band in many years. However, any sell-0ff from here will be short-lived ahead of the Christmas Holidays so we may have to wait until January for a more meaningful decline. I have been completely wrong for the last 140 Handle rally. I just cannot justify a long position given the vertical move of all these charts. This morning the S&P is trading at 4721 which is only a few handles from new all-time highs with the market squeezing into its upper weekly Bollinger band. After seven weeks straight up, moves like this tend to end up in tears but I have to respect the strength of the market especially as the McClellan Oscillator surged yesterday, closing at +150 last night. The move in 2023 as blown past the relentless assent of 2019 and 1999. Remember both previous extremes ended in a stock market crash a few months later. After the S&P spiked to my second sell level at 4667 for a 4657 average short position, I stopped myself out near the close at 4692 and I am now flat. Trading can be cruel as my 4605 T/P level on Tuesday missed by three handles. As I am now short the other four Indexes that I cover, I will have a sell level in the S&P from 4730/4745 with a tight 4761 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 4698.
EUR/USD
It has taken eight days but finally the Euro rallied to my 1.0875 T/P level on my average 1.0830 long position and I am now flat. This morning the Euro is trading higher at 1.0891. The Euro has support from 1.0740/1.0820. Ahead of the ECB, I will be a strong buyer here with a 1.0695 ‘’ Closing Stop’’.
Dollar Index
The Dollar got hit hard yesterday, trading the whole of my buy range for a now 102.80 average long position. I will leave my 101.95 ‘’Closing Stop’’ unchanged while lowering my T/P level to 103.20. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
The DAX traded heavy all-day yesterday, closing lower by 0.2% at a price of 16766. However, on the back of the surge in the American Indexes, the DAX is trading 200 points higher at 16970 this morning. As a result, I am now short here at this price with the same 17115 ‘’Closing Stop’’. I will not add to this position. I will have a T/P level at 16870. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE has surged this morning following the U.S. Indexes higher. This morning’s open is above yesterday’s sell range. I have now gone short here in small size at 7700. I will add to this position at 7770 with a now higher 7835 ‘’Closing Stop’’. I will have a T/P level on this position at 7630. If any of the above levels are hit, I will be aback with a new update for my Platinum Members.
Dow Rolling Contract
Wow! Incredibly the Dow closed at a new all-time high yesterday above 37,000 following yesterday’s 1.4% gain. This move higher has me short at an average rate of 36845. I will leave my 37105 ‘’Closing Stop’’ unchanged. I will now raise my exit level to a small loss at 36920 as it is unlikely ahead of tomorrow’s Quadruple Expiration that the Dow will see a significant decline. If this view changes I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Although the NDX underperformed both the S&P and Dow the market still hit my second sell level at 16522 for a now 16447 average short position. I am still short with a now higher 16705 ‘’Closing Stop’’. I will have no T/P level on this position for now. If this view changes I will be back with a new update for my Platinum Members.
December BUND
The Bund hit my second sell level at 136.00 for a now 135.65 average short position. I am still short as the market closed below yesterday’s stop. This morning the Bund Yield is at a hard to believe 2.04% making today’s ECB Statement crucial. I cannot see the ECB being dovish as the market is looking for. I will now raise my ‘’Closing Stop’’ on this position to 137.05. I will also have no T/P level on this position for now as I want to see the ECB Statement and the Lagarde press conference first.
Gold Rolling Contract
Gold is trading over $50 higher from where I marked prices yesterday morning. I will now raise my Gold buy level to 1995/2010 with a higher 1979 ‘’Closing Stop’’.
Silver Rolling Contract
Thankfully we have held onto to our 24.40 average long Silver position with the market trading at 24.10 this morning. I will leave my 25.05 T/P level unchanged while still having no stop on this position. My view is Silver is one of the cheapest asset classes in Global Markets at this time.
Please Note: There will no Daily Commentary tomorrow. Any calls not hit today and are subsequently triggered on Friday will see me return with updated emails for my Platinum Members.
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