U.S. Equity Markets again closed mixed on Wednesday after CPI failed to live up to the dovishness of the PPI report on Tuesday, albeit CPI on net was still in line with expectations and there were no signs of concern within the report. The report did little to alter Fed expectations, with September seen as a guaranteed cut, but markets are still torn between 25 or 50bps. Perhaps Thursday’s Retail Sales and Jobless Claims number will help cement expectations further, but the real test won’t be until the August NFP report. Sectors were also mixed, with outperformance seen in Financials, Energy and Consumer Staples, with the latter buoyed by gains in Kellanova (K) +7% after it announced it is to be acquired by Mars. Underperformance was seen in Communication Services, Consumer Discretionary, Materials, and Utilities, with the former weighed on by weakness in Google (GOOGL) on continued antitrust fears. T-notes saw a wide range around the CPI data, between a peak of 114-02 and a trough of 113-13+, but the curve ultimately flattened on the session with attention turning to Retail Sales and Jobless Claims this afternoon. The Dollar was ultimately flat with the New Zealand Dollar underperforming after the RBNZ cut rates by 25bps vs split analyst expectations for a hold or cut, albeit money markets were pricing in a cut as the more likely option. Sterling was also sold after cooler-than-expected UK inflation data with the Euro the G10 outperformer. Energy prices ultimately settled in the red after a surprise crude stock build in weekly inventory data but geopolitics remains in focus with Hamas not attending cease fire negotiations this week. CPI data was primarily in line with expectations, although when rounded the numbers are a touch on the soft side. Headline CPI rose 0.155%, vs. the 0.2% expectation and prior -0.1%, with the Y/Y rising 2.9%, a touch beneath the 3.0% forecast and prior. Core metrics saw the M/M rise 0.165% vs. the 0.2% forecast and prior 0.1%. The Core Y/Y rose by 3.2%, in line with expectations and a touch beneath the prior 3.3%. On an annualised basis, the headline Y/Y saw the 3mth at 0.4% (prior 1.1%) and 6mth at 2.5% (prior 2.8%). Core annualised saw the 3mth at 1.6% (prior 2.1%) and 6mth at 2.8% (prior 3.3%). Within the report, it notes that the index for shelter rose 0.4%, accounting for nearly 90% of the monthly increase in the all items index. The energy index was unchanged over the month, after declining in the two preceding months. The index for food increased 0.2%, as it did in June. The food away from home index rose 0.2%, and the food at home index increased 0.1%. With the data broadly in line with expectations, it is worth noting it was not as cool as the PPI report on the prior day, perhaps offsetting some of the inflation relief seen on Tuesday. With CPI and PPI both released, economists are now pencilling in their forecasts for Core PCE, the Fed’s preferred gauge of inflation. So far, from what I have seen, forecasts for Core M/M PCE range between 0.12% and 0.18%, with JPMorgan looking for the former, while Oxford Economics sees it at the latter. Overall, the CPI report alone does little to alter the Fed narrative with a September rate cut locked in, while Wall Street Journal’s Timiraos highlights that it does however make it easier at the margin to avoid dissents on the first rate cut, but it does not resolve the debate to start with 25 or 50bps. With the Fed noting risks to the dual mandate “continue to move into better balance”, a sharp slowdown in the labour market would likely be required for a 50bp rate cut. Meanwhile, Goolsbee the Chicago Fed President (2025 voter) said that climbing unemployment may indicate a worsening job market, noting that he is more concerned about the jobs side of the mandate “on the margin”. Goolsbee also added he would focus much more on the employment side of the mandate if the job market weakness, noting that economic conditions will warrant the size of rate cuts. He also noted that policy is very restrictive, and the economy is not overheating. Elsewhere, Oil closed 1.85% lower while Gold closed weak for the second consecutive trading session with a fall of 0.9%.
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For anyone following my Platinum Service it lost 270 points yesterday and is now down by 1093 points for August 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 0.38% higher at a price of 5455.
The Dow Jones Industrial Average closed 242 points higher for a 0.61% gain at a price of 40,008.
The NASDAQ 100 closed 0.09% higher at a price of 19,022.
The Stoxx Europe 600 Index closed 0.49% higher.
This Morning, the MSCI Asia Pacific closed 0.2% higher.
This Morning, the Nikkei closed 0.78% higher at a price of 36,726.
Currencies
The Bloomberg Dollar Spot Index closed 0.05% higher.
The Euro closed 0.1% higher at $1.1005.
The British Pound closed 0.2% lower at 1.2829.
The Japanese Yen fell 0.5% closing at $147.43.
Bonds
Germany’s 10-year yield closed 1 basis points lower 2.18%.
Britain’s 10-year yield closed 6 basis points lower at 3.83%.
U.S.10 Year Treasury closed 2 basis points lower at 3.83%.
Commodities
West Texas Intermediate crude closed 1.85% lower at $76.90 a barrel.
Gold closed 0.9% lower at $2445 an ounce.
This morning on the Economic Front we already had the release of U.K Q2 Preliminary GDP which rose 0.6% as expected. Next, we have both U.S. Retail Sales, Weekly Jobless Claims and the Philly Fed Manufacturing Survey at 1.30 pm. This is followed by a speech from Fed Member Musalem at 2.10 pm and Industrial Production/Capacity Utilisation at 2.15 pm. At 3.00 pm we have Business Inventories and the NAHB Housing Market Index. Finally, we have a speech from Fed Member Harker at 6.10 pm and the Total Net Long-Term TIC Flows at 9.00 pm.
Cash S&P 500
Wrong! Despite CPI coming in stronger than the whispered number following Tuesday’s dovish PPI, the S&P reversed earlier losses following comments from the Wall Street Journal that the Fed will cut rates in September. The S&P rebounded off a 5414 low to hit an overnight high at 5466. This move higher saw my 5411 average short position stopped at a price of 5449 and I am now flat. Some of the biggest companies on the planet have rallied hard in the past week, led by the 19% rise in NVIDIA. These are wild moves leading to the most radical reversal in the VIX in history as it closed a further 10.65% lower last night at a price of 16.19. It was only last week this key indicator was trading at 65. Given the technical price action when the S&P fell from a high at 5669 to last Monday’s 5089 low, I expected to see some re-test of the lows but unfortunately this has not materialised. It has got to the stage where it is impossible to be short – witness the 6000-point rally in the Nikkei since its 12% historic fall on August 5. This spike so out of character in terms of the lack of real damage and the just as swift recovery. There has never been any precedence for this price action. The longer the bounce keeps going without a sell-off the higher the cringe factor and the potential for creating major performance angst. We have seen this movie before as all dips since the October 2022 low have been aggressively bought. Short-term markets are overbought but in the big scheme of things nothing is overbought with RSIs in the low 50s. The S&P needs to break and close below 5300 for the bears to regain some control. As I go to press the Treasury Yield Curve remains inverted as it has been since July 5, 2022. The curve has gotten close to ‘’Univerting’’, which would start the countdown to an economic contraction, but not yet. The S&P has support from 5398/5418 where I will be a small buyer with a 5383 ‘’Closing Stop’’. The S&P has resistance from 5510/5530 where I will be a small seller with a 5546 wider ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5435. If I am taken short, I will have a T/P level at 5491.
EUR/USD
The Euro hit its highest level for the year at a price of 1.1049 before having a small sell-off into the New York close and I am still flat. Today, I will continue to be a seller on any further rally to 1.1070/1.1140 with the same 1.1205 ‘’Closing Stop’’. The Euro has support below from 1.0870/1.0940. I will now raise my buy level to this area with a higher 1.0795 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 1.1020. If I am taken long, I will have a T/P level at 1.0995.
Dollar Index
Despite the two-way volatility in the Euro, the Dollar is trading unchanged from where I marked prices 24 hours ago at 102.60. I am still long at an average rate of 103.30 with the same 102.35 ‘’Closing Stop’’. Meanwhile, I will leave my 103.70 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
Overnight the DAX rallied to my 17980-sell level before selling off small. I have now exited this short position here at 17950 and I am now flat. The Economic data out of Germany continues to disappoint yet the DAX keeps attracting buyer on dips. The DAX has further resistance from 18100/18200 where I will again be a seller with a 18305 higher ‘’Closing Stop’’. I still do not want to be long the DAX at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
No Change: The FTSE continues to consolidate the gains from the end of last week and I am still flat. This morning the FTSE is trading higher at 8285. I will now raise my buy level to 8130/8210 with a higher 8065 tight ‘Closing Stop’’. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
After the Dow traded higher to my 40030-sell level we had a small sell-off to my revised 39960 revised T/P level and I am now flat. The Dow is the strongest of the American Indexes and is only 3% from its July all-time high. Both its 50- and 20-Day Moving Averages have now been re-captured at 39,542 and 39,744 respectively. This support area will now act as strong support on any test. Therefore, I will be a buyer on any dip lower to 39550/39800 with a tight 39385 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 40020. My only interest in selling the Dow is from 40800/41050 with a 41305 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 40610.
Cash NASDAQ 100
Frustratingly the NDX missed my 18810 T/P level by 25 points before turning around and rallying over 200 points. I am still short at an average rate of 18895. I will now raise my exit level to a small loss at 18950 while leaving my 19105 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September BUND
No Change: I am still flat the Bund. The Bund has support below from 133.00/133.70 where I will continue to be a buyer with the same 132.35 ‘’Closing Stop’’. The Bund has resistance from 135.50/136.20 where I will still be a seller with the same 136.85 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 134.30. If I am taken short, I will have a T/P level at 134.95.
Gold Rolling Contract
No Change: I am still flat GOLD as the market traded in a narrow range yesterday below its all-time high despite the Euro trading higher. As I have a large, long silver position I am reluctant to chase the price of Gold higher especially ahead of the weekend. Gold has short-term support from 2398/2416 where I will continue to be a buyer with the same 2383 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2428.
Silver Rolling Contract
I am still long Silver at an average rate of 28.10 with the same no stop policy for. With Silver trading slightly higher at 28.05 this morning, I will continue to leave my Silver T/P level on this large position to 28.80. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Please Note: There will be no Daily Commentary tomorrow. Any of my calls that are not triggered today and subsequently executed on Friday will see me return with updated emails for my Platinum Members.
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