Both Equity Markets and Treasuries saw hefty bids on Wednesday in response to the soft-leaning US CPI report which saw participants boost rate cut bets. 40bps of easing is now priced through year-end, back to around pre-NFP levels. Sectors were bid with notable outperformance in the heavyweight sectors (tech, comms, discretionary) and financials. Futures had already caught a bid pre-CPI data in response to the stellar bank earnings which kicked off the Q4 24 earnings season to a strong start seeing widespread beats. Meanwhile, NVDA and quantum computing names rallied after NVDA announced a quantum computing event while semiconductor ETFs were also bid. Elsewhere, crude prices surged to see WTI reclaim USD 80/bbl for the first time since August with price action still underpinned by US energy sanctions on Russia, but with added support from both Russia and Ukraine were targeting energy facilities in recent strikes. Meanwhile, a Gaza ceasefire was agreed upon late yesterday but it had little sway on price action with crude continuing to storm higher. In FX, the Dollar initially tumbled on the CPI report to see the Dollar Index print a 108.59 low however it largely pared those losses while other assets (stocks and bonds) held onto gains but the Dollar Index reclaimed 109.00. Meanwhile, both the Euro and Swiss Franc underperformed with the Dollar while the Japanese Yen and Australian Dollar outperformed. The Yen was buoyed by rate hike commentary from the Bank of Japan Governor Ueda overnight, noting the BoJ will hike rates if improvement in economy and price conditions continue. The dovish CPI report saw crypto assets surge with Bitcoin briefly reclaiming USD 100k. Overall, US CPI leant on the softer side of expectations. Core CPI was in line at 0.225% (exp. 0.2%), cooling from the prior 0.3%, with Y/Y at 3.2% down from the prior and consensus of 3.3%. The headline came in at 0.393%, above the 0.3% forecast and prior, while the Y/Y rose by 2.9%, in line with expectations but up from November’s 2.7%. Although headline M/M was above forecast, it was primarily led by gains in energy, which accounted for over 40% of the monthly all-items increase. The core metrics therefore took focus with an in-line M/M and soft Y/Y print, which has seen markets move dovish with 41bps of easing now priced for the year, back to around pre-NFP levels. Meanwhile, the first rate cut is now fully priced by July, versus September pre-data. After the cool PPI report on Tuesday and now the CPI report, Pantheon Macroeconomics have updated their Core PCE forecast, expecting Core PCE rose 0.19%, down from the 0.30-0.35% forecast after the PPI data, which was primarily led by a surge in airline services. The NY Fed Manufacturing Index disappointed in January, with the headline business conditions falling to -12.6 from +2.1, despite expectations for a rise to 3.0. The drop was led by New Orders which fell to -8.6 from +4.3, however, the six-month business conditions outlook rose to 36.7 from 26.9. Employment also rose, to +1.2 from -6.6. Prices Paid also gained, to 29.1 from 21.1. To summarise, the report notes “New orders fell modestly, and shipments were little changed. Delivery times were slightly longer, and supply availability was unchanged. Inventories grew slightly. Labor market indicators pointed to steady employment levels but a shorter average workweek. Both input and selling price increases picked up. Firms grew more optimistic that conditions would improve in the months ahead.” The Fed’s Beige Book saw economic activity increase slightly to moderately across the twelve Federal Reserve Districts in late November and December. Consumer spending moved up moderately, with most districts reporting strong holiday sales that exceeded expectations. More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy. On the labour market, employment ticked up on balance, with six Districts reporting a slight increase and six reporting no change. Contacts across multiple sectors noted difficulty finding skilled workers, and reports of layoffs remained rare. However, contacts in some Districts expressed greater uncertainty about their future staffing needs. Wage growth picked up to a moderate pace in most Districts, though there were some reports that wage pressures had eased. Prices increased modestly overall, with growth rates ranging from flat to moderate. Meanwhile, contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases. Finally, New York President Williams, said that monetary policy is data-dependent in a highly uncertain environment, noting that government policy outlook is the main source of uncertainty. However, policy is well positioned for the economic outlook but the Fed is in wait-and-see mode to see what elected officials do on policy. Willaims said that the disinflation process is to continue but it could be choppy but he still sees it moving to 2% over the coming years. Some disinflation is coming from outside the US. He expects unemployment to hold between 4-4.25% (Fed median view for 2025 is 4.3%). Williams noted that housing-related inflation pressures are easing but housing demand remains very strong. Williams added inflation expectations are anchored, adding the economy has returned to balance. He is optimistic about the US productivity outlook, but on the neutral rate, he suggested a wildcard for the neutral rate view is much higher levels of debt, adding higher government debt may have lifted the estimate. He noted views on neutral rate are not a big issue when setting policy. The NY Fed President also does not see higher yields reflecting a big inflation view shift and he is not surprised bond yields have risen. He said term premia factors are a big part of climbing bond yields and there is no prediction of when balance sheet contraction will stop. He also said it is hard to know how Fed bond holdings are affecting yields, and that the Fed has no current plans for asset sales. Elsewhere, Oil surge 4% while Gold ended Wednesday with a 0.7% gain.
To mark my 3125th issue of TraderNoble Daily Commentary I am offering a special 2-Year rate of Euro 2750 for my Platinum Service which includes 1 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 220 points yesterday and is now ahead by 1076 points for January after closing December with a gain of 1997 points after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss 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 1.83% higher at a price of 5949.
The Dow Jones Industrial Average closed 703 points higher for a 1.65% gain at a price of 43,221.
The NASDAQ 100 closed 2.31% higher at a price of 21.237.
The Stoxx Europe 600 Index closed 1.33% higher.
This morning, the MSCI Asia Pacific closed 0.5% higher.
Yesterday, the Nikkei closed 0.08% lower at a price of 38,444.
Currencies
The Bloomberg Dollar Spot Index closed 0.19% lower.
The Euro closed 0.05% lower at $1.0286.
The British Pound closed 0.24% higher at 1.2243.
The Japanese Yen rose 0.6% closing at $156.49.
Bonds
Germany’s 10-year yield closed 9 basis points lower 2.54%.
Britain’s 10-year yield closed 16 basis points lower at 4.74%.
U.S.10 Year Treasury closed 14 basis points lower at 4.66%.
Commodities
West Texas Intermediate crude closed 3.93% higher at $80.53 a barrel.
Gold closed 0.73% higher at $2697 an ounce.
This morning on the Economic front we have U.K. GDP and Index of Services at 7.00 am. At the same time, we have German CPI, followed by Euro-Zone Trade Balance at 10.00 am. Next, we have the ECB Minutes from the December Meeting at 12.30 pm. This is followed by U.S. Weekly Jobless Claims, Retail Sales and the Philly Fed Manufacturing Index at 1.30 pm. Next, we have Business Inventories and the NAHB Housing Market Index at 3.00 pm. Finally, we have a speech from Fed Member Williams at 4.00 pm and the Atlanta Fed GDP Now at 6.00 pm.
Cash S&P 500
While the CPI came in as expected yesterday, it was the fact that ‘’Core CPI’’ only grew by 0.2% that cheered Wall Street. There is no doubt that Wednesday’s near 2% rally is an overreaction especially at 8.30 pm on Tuesday the S&P had made a new intra-day low at 5805 before rallying 150 Handles over the following 24 hours. Thankfully we were not short any of the American Indexes over the past week given how oversold my technical signals were. Although we were not long the S&P we did make plenty of points on the four other positions that I have been holding which has led to a decent start for the year. The question is now whether we trade back to new highs following Monday’s Inauguration or do we run into large selling pressure again above 6000.? To Be Determined. Although the 50 Day Moving Average is just above current pricing at 5957 and should offer some resistance, I am reluctant to go short here. I prefer to wait to see if the S&P can break 6000. If it does, I will be a small seller from 6020/6040 with a 6055 ‘’Closing Stop’’. The S&P has short-term support from 5880/5895. I will now raise my buy level to this area with a higher 5859 wider ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 6002. If I am taken long, I will have a T/P level at 5913.
EUR/USD
It took a while but finally the Euro rose to my 1.0330 T/P level on my latest 1.0265 average long position, and I am now flat. Despite the Euro attracting strong selling above 1.0340, I will continue to be a buyer of dips given how oversold the market is. The Euro has support from 1.0180/1.0260 where I will again be a buyer with a lower 1.0095 ‘’Closing Stop’’.
Dollar Index
Following the release of Wednesday’s CPI the Dollar sold off to my 108.95 T/P level on my latest 109.30 average short position and I am now flat. This morning, the Dollar is trading at 109.10. We have short-term resistance from 109.45/110.05 where I will again be a seller with a higher 110.65 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 108.95.
Cash DAX
The DAX is now trading an incredible 400 points higher from where I marked prices yesterday morning. Thankfully we have moved our sell level higher over the past couple of sessions as yesterday’s surge saw the DAX trade all of Wednesday’s sell range for a now 20585 average short position. I will now raise my T/P level to 20535 while leaving my tight 20705 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
My latest 8190 long FTSE position worked well as lower-than-expected U.K. CPI saw the FTSE rally over 8300. This move higher saw my 8250 T/P level triggered and I am now flat. The FTSE has support below from 8170/8250 where I will again be a buyer with a higher 8095 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8310. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Thankfully, we had no sell level in the Dow this week with the market now trading over 1500 points higher from where we were last Monday morning. A change in Administration is not going to change the buy the dip mentality anytime soon. The only difference is the Trump Admin are coming to power with valuations at all-time highs. The 50 Day Moving Average for the Dow is just above Wednesday’s closing price at 42350. As a result, I will be a small seller from 43400/43650 with a tight 43895 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 43210. Ahead of today’s Retail Sales, my only interest in buying the Dow is on a large sell-off to 42600/42850 with a higher 42395 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 43020.
Cash NASDAQ 100
Thankfully we were not short the NDX yesterday as the market is now trading over 500 points higher from its 20616 low print at 8.30 pm on Tuesday night. The NDX is now overbought. We have resistance from 21300/21470 where a number of Moving Averages are located. I will be a small seller in this area with a 21605 ‘’Closing Stop’’. My only interest in buying the NDX is on a dip lower to 20700/20850 with a higher 20565 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 21170. If I am taken long, I will have a T/P level at 20980.
March BUND
Frustrating! I get stopped of the Bund at 130.65 on Tuesday ahead of yesterday’s CPI print that led to a 120-point rally in which the market rallied without me involved. The Bund closed at 131.47 last night. The Bund is still oversold despite Wednesday’s rally. We have short-term support below from 130.00/130.80. I will now raise my buy level to this area with a higher 129.15 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 131.60
Gold Rolling Contract
Gold continues to build value above 2650 without me being long. I am still reluctant to chase the price of Gold higher especially given the backdrop of the strong Dollar. Gold has support from 2625/2643. I will move my buy level to this area with a higher 2609 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2656
Silver Rolling Contract
My latest average long 30.00 Silver position worked well as the market rallied to my 30.60 T/P level and I am now flat. Today. I will again be a buyer on any further dip lower to 29.70/30.40 with a lower 28.65 ‘’Closing Stop’’. It is still my view that it is only a matter of time before Silver trades back to it May 2011 high at $50. If I am taken long, I will have a T/P level at 31.10.
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