The highlight of the day was the softer than expected US CPI report which saw markets back to fully pricing in two rate cuts this year, with the first move now fully discounted by September. Both Equity and Treasury Markets were instantly bid and despite some post data chop, both finished the day around highs, with the S&P 500 closing at a fresh All-Time High. The soft CPI was the key driver, although a weak Retail Sales report supported the moves. The U.S. Dollar was the FX laggard, with the DXY falling from a peak of 105.06 to a trough of 104.300 while Treasuries were bid across the curve to see the 10 Year yield fall from 4.45% to a low of 4.34%. The move lower in yields supported both Gold prices and the Japanese Yen while cyclical currencies also benefited from the rally in stocks. Bitcoin also rose to the highest level since April 24th, but meme stocks (AMC, GME) were hit after their rocket trip to the moon seen earlier in the week. Crude prices sold off throughout the US morning and saw a fleeting bid on the US data, but ultimately settled in the black after a surprise draw in the EIA inventory data. Note, that after the CPI data, many analysts started to release their forecasts for Core PCE, the Fed’s Preferred gauge of inflation, which is expected now to come in between 0.20-0.26% but the import price data this afternoon could have some sway on these forecasts (via Wall Street Journal and Fed Watcher Timiraos who compiled analyst forecasts). Fed’s Kashkari spoke after the data, but he reiterated the Fed line that they need to keep rates on hold for a while longer to figure out where inflation is headed, a message likely to be echoed by the several Fed speakers due throughout the rest of the week, given the CPI data is just one data release. The CPI data was a touch cooler than expected with the headline M/M at 0.31% (exp. 0.4%, prev. 0.4%), while the Y/Y headline eased to 3.4%, in line with analyst expectations. The annualised numbers saw three month at 4.6% (prior 4.6%), six month at 3.7% (prior 3.2%). The core numbers came in at 0.292% M/M, in line with the 0.30% forecast, edging down from the prior 0.4%. The Y/Y was also in line at 3.6%, down from the prior 3.8%. Although a welcome report, particularly after the slew of hot reports in Q1, the Fed will likely stress that inflation is still too high and they still need more confidence that inflation is heading back to 2% in a sustainable manner, and given this is just one report, more data will be needed. The Fed will also likely continue to convey a higher for longer message to ensure inflation returns to target. Nonetheless, it does help support the argument that perhaps the Q1 data was just a “bump”, but it would be wise not to draw conclusions just from one report. A cooler headline inflation number and cooler components of the PPI report on Tuesday do bode well for a cooling PCE number at the end of the month, the Fed’s preferred gauge of inflation. Capital Economics writes that Core CPI was even better than it looked, and given the soft PPI PCE components released on Tuesday, the desk now estimates core PCE increased 0.2% M/M. Cap Eco adds that all things considered, it is consistent with a Fed rate cut in September. Retail sales M/M was much cooler than expected coming in at 0.0% (exp. 0.4%, prev. 0.6%), with ex-autos 0.2% (exp. 0.2%, prev. 0.9%) and ex gas/autos -0.1% (prev. 0.7%). Retail Control fell 0.3% against the expected 0.1% rise and the prior 1.0%. On the data set, Oxford Economics notes “the fact that retail sales growth stalled is not a major concern since it mostly reflects a drop back in nonstore sales following the end of a one-off Amazon sales event that boosted April sales.” As a result, Oxford estimates real consumption growth edged back in May, which together with downward revisions to previous months pushed its tracking estimate of real consumption growth in Q2 down to 2% annualised, suggesting a small downside risk to its baseline forecast for growth of 2.4%. Moreover, consumer spending is slowing as elevated interest rates weigh on rate-sensitive spending and as the labour market cools. As such, OxEco adds, “With aggregate balance sheets solid and the labour market cooling rather than collapsing, we expect that slowdown will remain gradual.” Meanwhile Fed Member Kashkari spoke after the US CPI data, maintaining language that the Fed probably needs to keep policy where it is for a while longer to figure out where inflation is headed, reiterating that the biggest question now is how restrictive policy levels are. Kashkari said the Fed are focussed on underlying demand in the economy to get inflation down and the Fed is committed to achieving its 2% inflation goal. However, he did state that with higher US government debt, it might take higher borrowing costs in the near-term to achieve the 2% inflation goal. On the economy, the Minneapolis Fed President said that consumers are spending more than he would have expected, while he is very focused on housing and that it has been more resilient than he expected. Elsewhere, Oil ended Wednesday with a 0.78% gain while Gold built on Tuesday’s rally with a 1.2% gain.
To mark my 2975th 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 lost 298 points yesterday and is now ahead by 989 points for May, having finished April with a gain of 4010 points 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 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 1.17% higher at a price of 5308.
The Dow Jones Industrial Average closed 349 points higher for a 0.88% gain at a price of 39,908.
The NASDAQ 100 closed 1.49% higher at a price of 18,596.
The Stoxx Europe 600 Index closed 0.59% higher.
This Morning, the MSCI Asia Pacific closed 0.8% higher.
This Morning, the Nikkei closed 1.39% higher at a price of 38,920.
Currencies
The Bloomberg Dollar Spot Index closed 0.68% lower.
The Euro closed 0.4% higher at $1.0883.
The British Pound closed 0.7% higher at 1.2679.
The Japanese Yen rose 1.2% closing at $154.80.
Bonds
Germany’s 10-year yield closed 12 basis points lower at 2.43%.
Britain’s 10-year yield closed 10 basis points lower at 4.07%.
U.S.10 Year Treasury closed 12 basis points lower at 4.34%.
Commodities
West Texas Intermediate crude closed 0.78% gain at $78.63 a barrel.
Gold closed 1.2% higher at $2384.10 an ounce.
This morning on the Economic Front we have no data of note from either the Euro-Zone or the U.K. At 1.30 pm we have U.S Weekly Jobless Claims, Housing Starts, Building Permits, Import/Export Price Index and the Philly Fed Manufacturing Index. Next, we have Capacity Utilisation and Industrial Production at 2.15 pm. Finally, we have a number of Fed speeches later this afternoon and this evening: Barr, Harker, Mester and Bostic at 3.00 pm, 3.30 pm. 5.00 pm and 8.50 pm respectively.
Cash S&P 500
An expensive lesson yesterday for me as I should have stayed flat ahead of the binary CPI print which much to my frustration sees the S&P trading 70 Handles higher from where I marked prices 24 hours ago. This gap higher saw the S&P leave another huge gap from Tuesday’s Chicago close at 5246 to yesterday afternoon’s 5264 low print. This comes on to top of the early May gap from 5064/5101. In normal circumstances all ‘’Open Gaps’’ are filled but these markets are far from normal as no two-way price discovery is allowed anymore. It is possible that the early May low at 4998 could well be the low for 2024. The 14 Day Weekly RSI closed at 69 last night while the top of the Weekly Bollinger Band is much higher at 5378. The S&P could well move to this level before a more meaningful correction ensues. The $SPY has now closed higher for 10 Consecutive trading sessions. This has never happened before, with the previous win streak stopping at eight – which was the top of the bull market way back in 2007. Hence we are starting a vertical melt up with no two-way price discovery. The VIX closed over 7% lower at a price of 12.45 which is a new low for the year while the $BPSPX RSI closed at an overbought 70. Yesterday after the S&P hit my second sell level at 5266 for a 5257 average short position before stopping me out of this position at 5295 and I am still flat. This morning, the S&P is trading higher at 5315. We have further resistance from 5328/5344 where I will be a small seller with a tight 5359 ‘’Closing Stop’’. I am not comfortable in buying the S&P at these levels. However, if the S&P closes Tuesday’s Gap it will attract strong buying. Therefore, I will be a buyer from 5255/5270 with a wider 5239 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 5312. If I am taken long, I will have a T/P level at 5288.
EUR/USD
I have had the correct view in looking for the Euro to rally but unfortunately the market has never come close to any of my buy levels this week. Today, I will raise my buy level to 1.0760/1.0830 with a higher 1.0695 ‘’Closing Stop’’. I still do not want to be short the Euro. If this view changes, I will be back with a new update for my Platinum Members.
Dollar Index
I am still flat the Dollar. This morning the Dollar is trading 0.7% lower at 104.30. The Dollar is oversold now. We have short-term support from 103.00/103.70 where I will be a buyer with a 102.45 ‘’Closing Stop’’. I do not want to be short the Dollar at this time.
Cash DAX
After the DAX hit my initial 18830 sell level we had a small sell-off. As I wanted to reduce risk ahead of CPI, I emailed my Platinum Members to exit this position at 18798 and I am now flat. This morning the DAX hit new all-time high at 18925 before selling off to trade at 18860 as I go to press. The DAX has support below from 18680/18760 where I will be a small buyer with a 18595 ‘’Closing Stop’’. I no longer want to be short the DAX at this time. If I am taken long, I will have a T/P level at 18830.
Cash FTSE
Despite some of the American Indexes making new all-time highs, the FTSE is trading 30 points lower from where I marked prices 24 hours ago. I am still short at an average rate of 8380 with the same 8320 T/P level. I will now add to this position again on any further rally to 8500 with the same no stop policy for now. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
Overnight, the Dow hit my sell range for a now 39920 short position. I will look to add to this position on any further move higher to 40170 with a now higher 40305 ‘’Closing Stop’’. I will now raise my T/P level on this position to 39780. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Post CPI the NDX gapped higher to my second sell level at 18460 for a now 18385 average short position. With the NDX having risen 9.4% in three weeks, I have decided to hold this short position with no stop for now. I will have a T/P level on this position at 18320. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
March BUND
My latest 130.75 long Bund position worked well as the market rallied to my 131.25 T/P level and I am now flat. This morning, the Bund is trading higher at 131.80. We have support from 130.60/131.30 where I will again be a buyer with a higher 129.85 ‘’Closing Stop’’.
Gold Rolling Contract
Gold has now rallied over $110 off its May 2278 low and I am still flat. I will now raise my buy level to 2337/2353 with a higher 2323 ‘’Closing Stop’’.
Silver Rolling Contract
Silver has continued to spike higher, trading at 29.65 this morning. Remember Silver’s all-time high occurred way back in May 2011 at a price of $52, so there is plenty of room for Silver to play catchup with Gold. Today, I will raise my buy level to 28.40/29.20 with a 27.55 ‘’Closing Stop’’.
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