Overall, a dovish reaction to the FOMC and Press Conference which saw the Fed leave rates on hold as expected but it also announced it is to taper its QT run-off to just USD 25 billion a month from USD 60 billion, slightly more dovish than the expected USD 30 billion. The typical dovish reaction (upside in stocks, bonds, gold and downside in the Dollar) extended on Fed Chair Powell’s press conference, albeit stocks saw a large reversal into the close in absence of a fresh catalyst, while bonds pared half the move. The Fed Chair said it is unlikely the next move will be a hike and the Fed is rather focused on how long to keep policy at its current level. Powell did admit several times that the recent inflation data does not boost the Fed’s confidence in inflation returning to 2%, but he does believe policy is restrictive enough for that to occur. Money markets now price in a 35bps of easing throughout 2024 vs 30bps pre Powell. Elsewhere, ahead of Friday’s NFP, the ADP national employment print beat expectations at 192k while wages eased for both job stayers and changers. The ISM Manufacturing PMI was mixed, the headline dipped into contractionary territory but prices paid saw a notable increase while the employment component saw a slight gain. JOLTS data came in beneath expectations and the quits rate eased; a welcome sign for the Fed, something Powell mentioned as well. In oil, WTI and Brent tumbled on the huge EIA inventory build while we now await Hamas’ response on the latest ceasefire/hostage release proposal. On earnings, chip names were hit on AMD’s weakness after investors were disappointed in how much it raised its AI chip sales forecast while SMCI figures also disappointed. Meanwhile, AMZN. PINS, PFE & NYCB earnings impressed. SBUX, EL, CVS, and SWKS disappointed. The Fed left rates unchanged at 5.25-5.50% as expected, whilst also confirming the announcement of the QT taper. In its statement, it retained its description of economic activity continuing to expand “at a solid pace”, repeating that “Job gains have remained strong, and the unemployment rate has remained low.” It also repeated that inflation has eased over the past year but remains elevated, but crucially added the line, “In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.” At the same time, it said “risks to achieving its employment and inflation goals have moved toward better balance”, that was changed from “are moving into better balance”, reflective of some growing concerns of an employment downturn. The Statement also kept its guidance that the Fed “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent”, the key being that the focus is still on rate cuts. On the QT taper, the Fed announced it will be tapering QT by USD 35Bn from June, more than the USD 30B estimate, whilst also maintaining the monthly redemption cap on agency debt and agency mortgage‑backed securities at USD 35B. The key takeaway from Powell’s presser/Q&A was that the Fed remains satisfied with its current policy rate and future moves remained skewed to rate cuts, even though cuts have been delayed and the bar has been raised. He said when the Fed gets confidence on inflation, rate cuts will be in scope, but he does not have great confidence either way on whether there will be rate cuts this year. Powell said a rate hike remains unlikely, when asked, alleviating some hawkish risks that Powell may open up a more two-sided policy debate at this meeting. Powell stressed that he does not know when it will be appropriate to cut rates, but he did say the Fed believes it is restrictive and over time it will be proven to be “sufficiently restrictive” to bring inflation back down to 2%. The Fed Chair did not put much focus on the hot Q1 Employment Cost Index from Tuesday, and even drew attention to some dovish data points such as the soft JOLTS Job Openings figures reported earlier on Wednesday, which he said showed that policy is restrictive. On the inflation path, Powell said his expectation is that it will move back down this year, albeit his confidence is lower than before, noting the substantial lags in when lower market rents will turn up in the data. And on the labour market, after saying the Fed would respond to an unexpected weakening in the labour market, Powell said a rise in unemployment would have to be meaningful for the Fed to react, saying “a couple tenths” of an increase in the unemployment rate does not count as an “unexpected weakening” that would justify cuts, caveating that it would have to be a broader thing that would suggest it would be appropriate to consider cutting rates. On the dual mandates, Powell said as inflation has come down to below 3%, the Fed’s employment goal comes back into focus, reflecting the statement language that “risks to achieving its employment and inflation goals have moved toward better balance”. Elsewhere, Oil fell 3.9% while Gold ended Wednesday with a small 0.7% gain following a volatile trading session.
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 made 495 points on the first trading day of 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 0.34% lower at a price of 5018.
The Dow Jones Industrial Average closed 87 points higher for a 0.23% gain at a price of 37,903.
The NASDAQ 100 closed 0.7% lower at a price of 17,318.
The Stoxx Europe 600 Index closed 0.79% lower.
This Morning, the MSCI Asia Pacific closed 0.6% lower.
This Morning, the Nikkei closed 0.1% lower at a price of 38,236.
Currencies
The Bloomberg Dollar Spot Index closed 0.39% lower.
The Euro closed 0.4% higher at $1.0725.
The British Pound closed 0.2% higher at 1.2536.
The Japanese Yen rose 1.7% closing at $154.90.
Bonds
Germany’s 10-year yield closed 6 basis points higher at 2.59%.
Britain’s 10-year yield closed 2 basis points higher at 4.37%.
U.S.10 Year Treasury closed 4 basis points lower at 4.63%.
Commodities
West Texas Intermediate crude closed 3.7% lower at $79.00 a barrel.
Gold closed 0.75 higher at $2312.10 an ounce.
This morning on the Economic Front we have German and Euro-Zone Manufacturing PMI at 8.55 am and 9.00 am respectively. Next, we have U.S. Weekly Jobless Claims, Non-Farm Productivity, Unit Labour Costs and the Trade Balance. Finally, we have Factory Orders at 3.00 pm.
Cash S&P 500
The S&P had a wild ride on Wednesday. I was right in my analysis that we would see both Fed Chair Powell and Treasury Secretary Yellen coordinate to get Treasury Yields lower, leading to a massive ramp higher on a very dovish Powell in his press conference. The S&P hit a high at 5095 before a large sell-programme hit the market driving the S&P over 70 Handles lower into the close. I was surprised by this move lower because QT Tapering, Treasury buybacks and funding announcements all point to more liquidity leading to lower Bond Yields. There is nothing more sentiment dampening than seeing a 70 Handle reversal out of nowhere. The late reversal saw the S&P again close below its Weekly 14 EMA at 5042. However, overnight the S&P has rallied 25 Handles, trading at 5045 as I go to press. With both the Fed and more importantly Yellen wanting lower Yields, I certainly would not be short any of the American Indexes at this time despite the May timeframe. After the close this evening we have earnings from Apple whose shares closed flat last night. These earnings will have a big impact. Yesterday my S&P plan worked well as the market traded lower to my 5010-buy level before rallying to my 5025 T/P level and I am still flat. We have had an excellent start to May which gives us some breathing room. The S&P has short-term support from 5007/5022 where I will again be a buyer with a 4993 tight ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5038.
EUR/USD
My latest long 1.0670 EURO position worked well as the market rallied post the FOMC Statement to my 1.0720 T/P level and I am now flat. Speculation that the ECB will cut rates before the Fed keeps downward pressure on the Euro but in my opinion, this gives us an opportunity to continue to buy the dip. The Euro has support from 1.0620/1.0690 where I will again be a buyer with the same wider 1.0535 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
Dollar Index
The Dollar hit an afternoon high at 106.50 before falling over 90 points into the close. The aggressive Dollar sell-off was on the back of the second intervention in the Yen from the Bank of Japan in three days following the FOMC Statement. This move lower in the Dollar saw my 105.60 T/P level triggered on my latest 106.15 short position and I am now flat. Today, I will again be a seller from 106.10/106.80 with the same 107.15 ‘’Closing Stop’’.
Cash DAX
My latest average long 17930 DAX position worked well as the market rallied to my 17980 T/P level and I am now flat. This morning the market is trading at 17930. We have strong support from 17730/17820 where I will be an aggressive buyer with a 17665 lower ‘’Closing Stop’’. I still do not want to be short the market at this time..
Cash FTSE
The FTSE just missed my buy range before rallying 50 points overnight and I am still flat. I will not chase the market higher, continuing to be a buyer on any dip lower to 8020/8090 with the same 7955 tight ‘’’Closing Stop’’. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Frustratingly the Dow missed my initial 37700 buy level yesterday morning by just two points before rallying over 600 points off this low. Subsequently, the Dow fell 400 points into the close on what turned out to be an incredibly volatile trading session. Today, I will raise my Dow buy level to 37550/37800 with a higher 37395 ‘’Closing Stop’’. Given how oversold the Dow is trading, I still do not want to be short the market at this time.
Cash NASDAQ 100
My NDX plan worked well yesterday as the market traded lower to my 17300-buy level before rallying to my 17385 T/P level. Subsequently, I emailed my Platinum Members to buy the NDX again at a price of 17300 before we rallied a second time to my 17405 T/P level and I am now flat. Apple earnings after the close is another binary event for the NDX. We have short-term support from 17110/17260 where I will be an aggressive buyer with a 16995 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 17410. I no longer want to be short the NDX at this time despite Friday’s huge reversal. If this view changes, I will be back with a new update for my Platinum Members.
March BUND
Late Tuesday the Bund hit my 130.30 buy level. I am still long with a now lower 130.80 T/P level. I will add to this position at 129.70. I will have a ‘’Closing Stop’’ at 128.95. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold spiked higher yesterday on the dovish Fed. I am still flat as the market had earlier missed my buy range. I will now raise my buy level to 2272/2287 with a higher 2259 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2301.
Silver Rolling Contract
I am still long Silver at an average rate of 27.30. This morning, Silver is trading at 23.60. I will continue to have no stop on this position while leaving my 27.70 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Please Note: As Ireland and England are closed for the Mayday Bank Holiday on Monday, my next Daily Commentary will be on Tuesday May 6. Any of my calls that are not hit today and are subsequently triggered tomorrow or Monday will see me return with updated emails for my Platinum Members.
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