U.S. Indices saw considerable downside (SPX -2.95%, NDX -3.6%, DJIA -2.58%, RUT -4.4%) as did Treasuries, while the Dollar surged in the wake of a hawkish FOMC. Highlighting the extent of the moves, the S&P 500 noticed its largest post-Fed move since March 2020. Briefly recapping, the Fed cut rates by 25bps, as expected, but with hawkish dot plots, with the median showing only two cuts seen in 2025. Fed’s Hammack dissented, voting to keep rates unchanged. Guidance was also tweaked to signal a slower pace of easing ahead. In the Q&A, Chair Powell admitted the decision was a “closer call”, but the “right call”, which saw a further extension of the hawkish moves already seen. Sectors were all notably in the red with Consumer Discretionary plunging 4.75% and weighed on by Tesla (TSLA) (-8.5%) weakness. Global FX peers saw downside vs the Dollar, with the DXY at its highest since November 2022. On the central bank footing, attention turns to BoE and BoJ. The crude complex was firmer into settlement but sold thereafter on account of the aforementioned greenback strength. Bitcoin and Gold also saw significant selling with the former dropping to under USD 101k and spot gold under USD 2.6k. The Federal Reserve cut rates by 25bps, as expected, to 4.25-4.5% in an 11-1 split, with Hammack voting to leave rates unchanged. The statement was little changed from the November meeting, but added in considering the “extent and timing” of additional rate adjustments (prev. In considering additional adjustments), Fed will assess incoming data, evolving outlook and balance of risks, signalling a slowing of easing ahead. The further hawkish skew came in the updated Summary of Economic Projections (SEPs) whereby the median dot plot for 2025 and 2026 FFR forecasts were lifted above expectations. Recapping, the median 2025 dot rose to 3.9% from 3.4% (exp. 3.6%), while the 2026 median rose to 3.4% (exp. 3.1%, prev. 2.9%). 2027 and longer run median dot plots rose to 3.1% (prev. 2.9%) and 3.0% (prev. 2.9%), as expected. As such, the 2025 median dot plot looks for just two cuts in 2025. Elsewhere, Core PCE inflation is now seen at 2.5% for 2025 (exp. 2.3%, prev. 2.2%) and 2.2% for 2026 (exp. 2.0%, prev. 2.0%). Forecasts for the unemployment rate were largely as expected, with all horizons, ex-longer run, seen at 4.3%, although 2027 was expected. In addition, and as was alluded to in the latest Minutes, the Fed lowered the repo rate by 30bps to 4.25% (lower end of FFR target, vs 5bps above lower end previously). In Chair Powell’s pre-prepared remarks he stated the Fed is squarely focused on two goals, and that the economy is strong, the labour market remains solid, and inflation is much closer to the 2% goal. Ahead of November PCE on Friday, Powell said total PCE probably rose 2.5% in the 12 months ending in November, while core PCE prices probably rose 2.8% in November. The Chair added that the policy stance is now significantly less restrictive, and going forward they can be more cautious, something which was indicated from the updated SEPs and statement tweak. In the Q&A, the distinct hawkish remark came from the first question, which accentuated hawkish market moves, as Powell said that today’s decision was a “closer call”, but the “right call”, suggesting there was a discussion surrounding holding rates at this meeting. Powell added risks are two-sided, and trying to steer between those two risks. On the statement change, Powell stated that “extent and timing language” shows the Fed is at or near the point of slowing rate cuts, and the slower pace of cuts reflects expectation. Powell said that cuts they make in 2025 will be in response to data and as long as the labour market and economy are solid, they can be cautious as they consider further cuts. In addition, looking to US President-elect Trump’s term, Powell said some people did take a very preliminary step and incorporated conditional effects of coming policies in their projections. Note, one committee member sees no cuts in 2025, and one sees five 25bps rate cuts – showing a wide range of views on the Fed, but many were centred around the median. Continuing to look ahead, Powell said it will be looking for further progress in inflation to make those cuts, and added that from here is a new phase, and the Fed is going to be cautious about further cuts.
To mark my 3100th 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 lost 500 points yesterday and is now down by 72 points for December 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 2.95% lower at a price of 5872.
The Dow Jones Industrial Average closed 1123 points lower for a 2.58% loss at a price of 42,326.
The NASDAQ 100 closed 3.6% lower at a price of 21,209.
The Stoxx Europe 600 Index closed 0.15% higher.
This morning, the MSCI Asia Pacific closed 0.4% higher.
This morning, the Nikkei closed 0.72% lower at a price of 39,081.
Currencies
The Bloomberg Dollar Spot Index closed 1.21% higher.
The Euro closed 1.3% lower at $1.0350.
The British Pound closed 0.9% lower at 1.2567.
The Japanese Yen fell 0.7% closing at $154.74.
Bonds
Germany’s 10-year yield closed 3 basis points higher 2.26%.
Britain’s 10-year yield closed 4 basis points higher at 4.56%.
U.S.10 Year Treasury closed 14 basis points higher at 4.52%.
Commodities
West Texas Intermediate crude closed 0.89% lower at $70.09 a barrel.
Gold closed 2.3% lower at $2589 an ounce.
This afternoon on the Economic Front we have the Bank of England Rate Announcement at 12.00 pm. This is followed by U.S. GDP, Philly Fed Manufacturing Index and Weekly Jobless Claims at 1.30 pm. Next, we have Existing Home Sales at 3.00 pm. Finally at 4.00 pm we have the Kansas City Fed Manufacturing Index at 4.00 pm.
Cash S&P 500
I have been warning for months now about the excess valuations for the American Stock Market and that we were due for volatility event and we certainly got that in spades yesterday as shown by the VIX which closed higher by a whopping 75%. I cannot remember the last time the VIX had such a rise in one session. The S&P is severely oversold as shown by the McClellan Oscillator which had it weakest close in many months at -298. This key signal is probably why the market has rallied hard overnight. Suddenly we have major technical damage to all Indexes which frankly risks there may not be a Santa Rally. The last time the market crashed was on August 5 and this proved to be a one-day wonder before the market regained all of those losses withing three weeks. Powell was the trigger for yesterday’s 3% fall in the S&P as the entire construct now seems in shambles with rate cut expectations dialled down for next year. We saw non-stop selling in one of the most brutal two-hour candle that I can recall in a very long time. The $NYMO is now more oversold versus the April lows. Yet ironically the Index Charts landed at key support levels. The S&P traded into its October highs which should offer support. The Small Cap Russell 2000 got absolutely clobbered yesterday by 5% for a 10% correction off its recent highs. Despite me taking some big losses yesterday the market was due a major correction. It is ugly no doubt, but well deserved frankly. Risk is that selling accelerates if leveraged positions are liquidated across the globe. However, with the MO closing at -298 I cannot be a seller at these levels. Yesterday after the S&P hit my 6014 average buy level I was stopped out of this position at 5985. Subsequently, (really bad timing on my part) I emailed my Platinum Members that I bought the S&P again at 5929 with no stop. As soon as I sent the email the S&P had fallen 50 Handles so hopefully you are long at better levels than me. This morning the S&P is trading at 5890. We have further support at 5850 where I will add to this position. My T/P level on this position is at 5970 but subject to change.
EUR/USD
The Euro got slammed yesterday, trading back to its November 22 spike low of 1.0340. This move lower saw my 1.0440 second buy level triggered for a now 1.0553 average long position. I will have a 1.0325 ‘’Closing Stop’’ on this position with no T/P level for now. If this view changes I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar surged over 1% yesterday, trading the whole of my sell range for a now 1.0760 average short position. I will leave my 1.0855 ‘’Closing Stop’’ unchanged while raising my T/P level to 107.20. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Cash DAX
The DAX is trading 300 points lower from where I marked prices yesterday morning. Thankfully we had no buy level and are still flat. I am going to stay flat the DAX given the side of my S&P and Dow positions currently. If this view changes, I will be back with a new update for my Platinum Members
Cash FTSE
The FTSE traded lower to my second buy level at 8160 for a now 8195 average long position. Given how oversold the FTSE is trading plus the fact that we are at strong trendline support I will now lower my stop to 8065. I will also lower my T/P level to 8240. If any of the above levels are hit, I will be back with a new update for my Platinum Members. Today we have the Bank of England rate announcement. The BoE is expected to hold the Base Rate at 4.75% via an 8-1 vote split on account of stubborn services inflation, elevated wage growth and a potential boost to growth from recent fiscal measures. Note, there is no MPR or press conference for this release. Looking beyond the upcoming meeting, markets look for 57bps of easing in 2025.
Dow Rolling Contract
Wrong! I am annoyed with myself for yesterday’s trading. At one stage I was up over 200 points on my 43500 long position which I refused to take which is not my style. Subsequently, the Dow traded lower to my second buy level at 43250 for a 43375 average long position before stopping me out of this trade a few minutes later at 42995. I have never seen the Dow close lower for 11 consecutive trading sessions. Given the -298 print in the MO I bought the Dow again at a price of 42700. The 14 Day RSI closed below 30 at 24 last night showing how oversold this market is trading. I will add to this position at 42200 while my T/P level on this position will be at 43100. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
The NDX fell almost 1000 points from its afternoon high in one of the most brutal sell-offs in points terms ever for the NASDAQ. The initial sell-off saw my 21920 T/P level triggered on my 21990 average short position and I am still flat as thankfully we had no buy level in this market. This morning the NDX is trading at 21250. We should see a reversal of the NDX/DOW spread over the coming weeks and this is why I am long the Dow. I am going to stay flat the NDX today as I want to see how the U.S. Market reacts when the Cash Markets open this afternoon. If this view changes, I will be back with anew update for my Platinum Members.
March BUND
This morning the Bund hit yesterday’s buy range for a now 133.85 long position. I will add to this trade on any further move lower to 133.15 with a now lower 132.45 ‘’Closing Stop’’. I will have a T/P level on this position at 134.60. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am glad that I did not chase the price of Gold higher over the past few weeks. Yesterday the market traded the whole of my buy range for a 2611 average long position. I will leave my 2585 ‘’Closing Stop’’ unchanged while lowering my T/P level to 2624. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
I am still long Silver at an average rate of 30.95 with the same 29.45 ‘’Closing Stop’’. I will now lower my T/P level to 31.40. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Please Note: There will no Daily Commentary tomorrow. Any of my calls that are not hit today and are subsequently triggered on Friday will see me return with updated emails for my Platinum Members. My next Daily Commentary will be on Monday.
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