Both Equity and Bond Markets were choppy in response to the FOMC Statement. The 50bp rate cut and dot plots implying a further 50bp of cuts in 2024 sparked a typical dovish reaction with stocks, bonds and gold rallying while the Dollar was slammed. However, assets were off extremes heading into the Powell Press Conference before things turned more hawkish with stocks, bonds and gold finishing the US session in the red, while the Dollar reversed higher. The turnaround in the presser was seen after Powell kept future options open noting that decisions will be made in a meeting-by-meeting approach, while also suggesting to not take yesterday’s move and think of it as the new pace. He also did little to signal concern on the economy and spent a lot of the presser talking up the state of the economy, while adding that Wednesday’s 50bp move was a sign of the Fed’s commitment to not get behind the curve. He also said that he thinks the neutral rate is higher than it was (see below for a full summary of the FOMC and Press Conference). Elsewhere, sectors were predominantly lower with underperformance in Utilities, Tech and Consumer Staples, while Energy, Communication and Industrials underperformed, with only Energy closing green. Oil prices were choppy in response to bullish inventory data and ongoing Middle East geopolitics, as well as the Fed policy announcement. In FX, Sterling outperformed after CPI data was largely as expected but saw marginally hotter than expected core and services Y/Y figures ahead of the Bank of England decision on Thursday, which is expected to maintain policy in a 7-2 vote split. The Japanese Yen was volatile to the FOMC, with strength seen on the rate cut before completely paring and more after the aforementioned presser. The FOMC cut rates by 50bps, taking the target for the federal funds rate to 4.75-5.00%, more in fitting with money market pricing before the release rather than the analyst consensus of 25bps. There was one dissenter; Governor Bowman opted to vote for a smaller 25bp rate reduction. Within its projections, the 2024 rate forecast was revised down to 4.4% from 5.1%, which implies a further 50bps of easing from current levels. The projections showed that nine of the 19 policymakers see the policy rate above the median forecast for 2024, nine at the median, while one sees it below that. The Statement saw some changes: it noted inflation has made further progress but remains somewhat elevated, and it added it has gained greater confidence inflation is moving sustainably towards 2%, and judges risks to achieving its goals are roughly in balance. However, it left its guidance unchanged, noting that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” but it said that it is strongly committed to “supporting maximum employment” and returning inflation to its 2% objective (previously it only referenced inflation). Further out, the FOMC’s median projections see the 2025 rate at 3.4% (prev. 4.1%), and end-2026 dot at 2.9% (prev. 3.1%), where it also sees the neutral rate (2.9% vs prev. 2.8%). Money markets are still pricing in a risk of another 50bp rate cut with 74bps priced through year-end to 4.00% (prev. 4.2% pre-meeting). However, looking ahead to 2025, rates are seen bottoming at 2.8% in October 2025, with the volume of rate cuts that markets are pricing unchanged from before the announcement. Elsewhere in the SEPs, the unemployment rate was revised up throughout the forecast horizon, but the longer run was unchanged at 4.2%; PCE and Core PCE were revised down for 2024 and 2026, while growth saw a revision lower in 2024 but was unchanged throughout the forecast horizon. Fed Chair Powell used the press conference to stress that the Fed is not on a pre-set path and that decisions will be taken on a meeting-by-meeting basis (something he stressed several times), noting the Fed can go quicker or slower, or even pause if it is appropriate – maintaining maximal optionality in their guidance. However, he did also add that no one should think that this is the new pace. He also toed his usual line on SEP meetings that projections are not a plan or decision and also highlighted that the range of views in the SEPs are varied. When asked about why the Fed moved by 50bps, he said there has been a lot of data, including in the blackout period, but he highlighted how the BLS labour market revisions show that payrolls may be revised down – he later stated the Fed will mentally tend to adjust payroll numbers based on the QCEW. He also stated that downside risks to employment have increased. Elsewhere, he did not seem too concerned about the economy, noting that retail sales data and Q2 GDP indicate the economy is growing at a solid pace, which will also support the labour market. He also noted how they are not seeing rising claims or layoffs, but they are not waiting for that to happen, the time to support the labour market is when it is strong. Powell said the unemployment rate is still at a healthy level, participation is at a good level, quits have come back down to normal levels, and vacancies are still at a pretty strong level. Wage increases are still a bit above being consistent with 2% inflation. On inflation, Powell said they will ultimately get down to 2% inflation. When asked if ‘’50’’ means the Fed are behind the curve, Powell stressed the Fed does not think this is the case, noting they have been patient where other central banks have already started to cut. He said they are moving at a pace that they think is appropriate, but no one should look at today and think this is the new pace. On the Neutral Rate, Powell said it feels that the neutral rate is probably significantly higher than it was pre-pandemic, adding the Fed is recalibrating their policy over time to be more neutral. On the balance sheet, Powell said the Fed is not planning to stop the run-off any time soon, noting that both balance sheet and policy rate moves are a form of normalisation. Elsewhere, Oil closed Wednesday 1.66% lower while a stronger Dollar saw Gold end yesterday’s session with a 0.3% loss.
To mark my 3075th 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 515 points yesterday and is now ahead by 2408 points for September having ended August with a loss of 301 points 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 0.29% lower at a price of 5618.
The Dow Jones Industrial Average closed 103 points lower for a 0.25% loss at a price of 41,503.
The NASDAQ 100 closed 045% lower at a price of 19,344.
The Stoxx Europe 600 Index closed 0.50% lower.
This morning, the MSCI Asia Pacific closed 0.4% higher.
This morning, the Nikkei closed 2.13% higher at a price of 37,155.
Currencies
The Bloomberg Dollar Spot Index closed 0.17% higher.
The Euro closed 0.1% higher at $1.1102.
The British Pound closed 0.3% higher at 1.3196.
The Japanese Yen fell 0.1% closing at $142.40.
Bonds
Germany’s 10-year yield closed 4 basis points higher 2.19%.
Britain’s 10-year yield closed 7 basis points higher at 3.84%.
U.S.10 Year Treasury closed 6 basis points higher at 3.71%.
Commodities
West Texas Intermediate crude closed 1.66% lower at $70.01 a barrel.
Gold closed 0.3% lower at $2554 an ounce.
This morning on the Economic Front we have Euro-Zone Current Account at 9.00 am followed by a speech from ECB Member Schnabel at 10.00 am. Next, we have the Bank of England Rate Announcement at 12.00 pm. This is followed by U.S. Weekly Jobless Claims and the Philly Fed Manufacturing Survey at 1.30 pm. Finally, we have Existing Home Sales at 3.00 pm and a 10-Year Treasury Auction at 6.00 pm.
Cash S&P 500
The S&P made a new all-time intra-day high at 5692 shortly after the FOMC Statement was released. The S&P’s top in 1929 came on September 16. Interestingly, the S&P’s all-time closing high remains at 5667 on July 16, two full months ago which was four trading days after the July 10 all-time peak in the NASDAQ 100 Index. Yesterday was an ugly session as the S&P made a failed attempt at a new high, raising the possibility of a Double Top. With the S&P closing at a price of 5618 last night, the last thing I expected this morning when I woke up was to see the S&P trading at 5682 as I go to post. The 2% rally in the Nikkei is a factor but anyone trying to short and hold a short position just keep get run-over almost every day. The bull case is pretty straightforward: Nothing continues to matter, not valuations, not overbought readings, not seasonality, just liquidity, fiscal impulse and the reflexive desire to chase the new perceived easy money era. If you are bullish you have to ignore the $NYSI near maximum overbought. The S&P has a 21 forward P/E, a near 30 GAPP P/E and a giant multiple run since the October 2022 lows while GAAP earnings have actually not done much at all this year. The market is not cheap is my point and any rally from here would make it even more expensive and buyers would have to ignore that fact too. Yesterday, my S&P plan worked well as the market rose to my 5685-sell level before selling off to my ‘’tight’’ 5662 T/P level and I am now flat. September has worked well in comparison to the August demise. I want to protect these gains while also looking to avail of any opportunities that may arise. I will continue to be a seller of spikes. The S&P has short-term resistance from 5699/5719 where I will again be a seller with a higher 5733 tight ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 5681. The S&P will have support at last night’s 5618 closing price. Therefore, I will be a small buyer from 5606/5622 with a 5589 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5635.
EUR/USD
The Euro had a strong downside reversal yesterday following the release of the FOMC Statement. The Euro hit a high at 1.1190 before falling almost 100 points into the New York close. I am still flat. The Euro has resistance from 1.1210/1.1300 where I will be an aggressive seller with a 1.1375 ‘’Closing Stop’’. My only interest in buying the Euro is on a large dip lower to 1.0970/1.1050 with the same 1.0895 ‘’Closing Stop’’.
Dollar Index
A wild day for the Dollar yesterday. Unfortunately, the Dollar missed my second buy level at 100.20 by 2 points before rallying to hit my 101.10 T/P level just before the close and I am now flat. We have seen a number of positive divergences in the Dollar over the past week. The Dollar is oversold and due a bounce. Today, I will again be a buyer on any dip lower to 99.80/100.50 with a lower 99.25 ‘’Closing Stop’’.
Cash DAX
The DAX continues to defy logic. Germany is close to a recession as the recent economic data is telling us. No matter as the DAX continues to make new recovery highs. With Bund Yields hitting lows in recent days that may well not be broken, higher Bund Yields may be a headwind for any further progress in the DAX. I very rarely short the DAX given the bullish price action over the past 18 months. However, the DAX has short-term resistance from 18960/19060 where I will be a small seller with a 19155 tight ‘’Closing Stop’’. My only interest in buying the DAX is still on a large dip lower to 18330/18430 with the same 18195 ‘’ Closing Stop’’ which is just below last week’s low print. If I am taken long, I will have a T/P level at 18505. If I am taken short, I will have a T/P level at 18880.
Cash FTSE
Frustrating! The FTSE hit a low at 8237 which was 7 points above my 8230-buy level before rallying to sit at 8325 this morning. Ahead of the Bank of England rate announcement I will now raise my buy level to 8180/8260 with a higher 8115 ‘’Closing Stop’’. I still do not want to be short the FTSE Market at this time. If I am taken long, I will have a T/P level at 8310.
Dow Rolling Contract
Wow! The Dow made a new all-time intra-day high at 41995 before eventually falling 500 points from this high into the close. This move higher saw my next sell level at 41880 triggered for a large 41580 short position. It is so difficult to be short and extremely stressful watching a market tick higher when you are short. Subsequently, I emailed my Platinum Members to exit any short position at my revised 41525 T/P level and I am now flat. This morning the Dow is trading higher at 41800. Given the backdrop I just cannot be a buyer here as the risk/reward is not favourable. However, anyone who has been a buyer of dips all-year has made strong gains. With the $BPINDU RSI above 80, I will continue to be a small seller of rallies. The Dow has short-term resistance from 42050/42300 where I will again be a seller with a tight 42405 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 41880.
Cash NASDAQ 100
My NDX plan worked well as the market rose to my 19600-sell level before falling over 200 points. This move lower saw my revised 19530 T/P level triggered and I am now flat. The NDX has strong resistance from 19750/19910 where I will be an aggressive seller with a higher 20005 ‘’Closing Stop’’. Given the number of negative divergences over the past few days as the NDX made new recovery highs I have absolutely no interest in being long the market. A combination of weak seasonals and buybacks stopping is another strong reason why I have no interest in buying the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members. If I am taken short, I will have a T/P level at 19630.
December BUND
Bond yields are higher following the Fed’s 50bp rate cut. I am still flat the Bund as the market fell shy of yesterday’s buy range. I will now lower my buy level to 132.50/133.30 with a lower 131.85 ‘’Closing Stop’’. I will also lower my sell level to 135.20/136.00 with a lower 136.65 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 133.80. If I am taken short, I will have a T/P level at 134.75.
Gold Rolling Contract
Gold hit a high at 2600 post the FOMC Statement before falling over $40 into the close. I am still flat. However, with Gold trading 25% higher for the year-to-date we are due at least a short-term correction, possibly back to the 2500 area which is key support. Today, I will continue to be a buyer from 2495/2510 with the same 2479 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2522.
Silver Rolling Contract
Wow! Silver hit a post FOMC Statement high at 31.25 before falling 4% off this high into the close. This move lower saw my buy 30.00 buy level triggered. This morning Silver has rallied to my 31.10 T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 29.70/30.50 while leaving my wider 27.95 ‘’Closing Stop’’ unchanged. If I am taken long, I will have a T/P level at 31.30
Please Note: There will no Daily Commentary tomorrow. Any of my calls that are hit today and are subsequently triggered on Friday will see me return with updated emails for my Platinum Members.
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