U.S. Equity Markets pared gains and Treasuries fell as Federal Reserve Minutes fell short of signalling the Central Bank was ready to cut Interest Rates sharply. The S&P 500 Index moved away from Wednesday’s highs and two-year Treasury yields surged after the Minutes indicated the Fed is prepared to ease if economic conditions worsen, while hinting the committee did not view the July cut as part of an extended cycle of reductions. The two-year yield was briefly above the 10-year rate, a key signal watched by investors and seen as a harbinger of a recession. The Bond Market expects almost 65 basis points of Rate cuts by the end of the year.
To mark my 1875th 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 63 points yesterday and is now ahead by 1458 points for August, having made 1153 points in July, 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Equities
Stocks already started the day higher after solid results from retailers Target Corp. and Lowe’s Cos. defied recession fears. Traders also assessed the latest developments in the U.S.-China trade spat, with President Donald Trump predicting the U.S. will “probably” make a deal. Trump also said Wednesday that the economy is strong and kept up his relentless attack on the Federal Reserve, claiming that “the only problem we have is Jay Powell and the Fed.” The S&P 500 rose 0.8% to close at 2,924. This move higher was helped by the VIX which closed 10% lower at 15.80. In Europe the Stoxx Europe 600 Index gained 1.2%.
Currencies
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index increased 0.1%.
The Euro dipped 0.1% to $1.1086.
The British Pound declined 0.3% to $1.2129 as the possibility of a so-called no-deal Brexit picked up traction.
The Japanese Yen fell 0.4% to 106.62 per dollar.
Bonds
Federal Reserve officials viewed their Interest-Rate cut last month as insurance against too-low inflation and the risk of a deeper slump in business investment stemming from uncertainty over President Donald Trump’s trade war. “Members who voted for the policy action sought to better position the overall stance of policy to help counter the effects on the outlook of weak global growth and trade policy uncertainty, insure against any further downside risks from those sources, and promote a faster return of inflation” to the 2% target, according to minutes of the July 30-31 Federal Open Market Committee meeting, released last evening in Washington. The Fed cut rates for the first time since 2008, a move Chairman Jerome Powell called a “mid-cycle” adjustment. The Minutes described the Quarter-Point cut as part of an “ongoing reassessment” of the policy path that began in late 2018.
The yield on 10-year Treasuries increased three basis points to 1.58%.
Elsewhere, most European bonds fell after Germany saw anemic demand for a 30-year bond offering zero coupon. This resulted in Germany’s 10-year yield climbing two basis points to -0.67%. Meanwhile Britain’s 10-year yield gained three basis points to 0.479%.
Commodities
The Bloomberg Commodity Index advanced 0.1%.
West Texas Intermediate crude declined 0.8% to $55.68 a barrel.
This morning on the Economic Front we have German and Eur-Zone Markit Manufacturing/Composite PMI at 8.30 am and 9.00 am respectively. This is followed by UK CBI Distributive Survey at 11.00 am and the Minutes from the last ECB Meeting at 12.30 pm. Next we have U.S Weekly Jobless Claims at 1.30 pm. Finally, we have U.S Markit PMI at 2.45 pm and Euro-Zone Consumer Confidence at 3.00 pm.
September S&P 500
Yesterday saw a complete reversal of Tuesday’s last sell-off as yet again the ‘’Buy the Dip’’ won the day. I know the sell-offs have been scary over the past three weeks but it is extremely difficult to go against both the Central Banks and Trump who will do everything in their power to prevent a crash. Trump knows better than anyone that stock market crash scuppers his chances of being re-elected. I am still flat the S&P and today I will now raise my buy level to 2902/2917 with a 2889 wider stop which is just below the 2891.25 ‘’Open Gap’’ from last Monday. The S&P has resistance at 2945 which is its 50 Day Moving Average. Despite this resistance I am reluctant to go short.
EUR/USD
No Change as I am still a small buyer on any dip lower to 1.1020/1.1060 with the same 1.0980 stop. If I am taken long I will have a T/P level at 1.1090.
September Dollar Index
As expected the Daily Sentiment Index has risen to 90% bulls for the US Dollar. In my opinion this is a signal to look to go short the market. I am still flat and today I will continue to be a seller from 98.40/98.80 with the same 99.05 stop.
September DAX
The DAX rallied strongly yesterday as thankfully we have had no sell levels in this market over the past few weeks. If the DAX can break and close over 12,000 it will be a strong buy signal. Today I will raise my buy level to 11570/11670 with a 11515 tight stop.
September FTSE
Contrary to my expectation the Pound sold off yesterday resulting in a strong upward move in the FTSE. I am still flat and today I will raise my buy level to 7060/7100 with a higher 7025 stop. The FTSE has strong resistance from 7280/7330 and I will be a seller in this area with a 7365 stop.
Dow Rolling Contract
Initially my Dow plan worked well with the market trading higher to my 26220 sell level before selling off to my revised 26172 T/P level and I am now flat. Subsequently the Dow made a new high at 26280 before falling nearly 140 points on the release of the FOMC Minutes. However, the sell-off did not last long and we rallied into the close and again overnight as I go to press. Today I will again look to buy the Dow on any dip lower to 25950/26100 with a 25845 stop. I no longer want to be short the Dow at this time as a break and close over 26340 will be a further buy signal with a target level of 26700/26820.
September NASDAQ
After the NASDAQ traded higher to my 7740 sell level I emailed my Platinum Members to exit any short position at my revised 7725 T/P level as I wanted to be flat ahead of the FOMC Minutes. The NASDAQ has strong resistance from 7825/7875 and today I will be a seller in this area with a 7920 tight stop.
September BUND
As I have mentioned numerous times over the past few months that the Bond Market is fraught with more risk than at any period in its history. The issuance of the ‘’World’s First 30-Year Bond That Pays Nothing’’, a German zero-income bond that hit the market yesterday morning, is yet another example. Further confirmation of a more imminent bottom in bond yields is clear by investors response to the offering. Germany failed to meet its 2-billion Euro target which is another sign that the global bond rally may be coming to a halt now that more than $16 trillion securities around the world have negative yields. Remember buyers of negative yield debt have zero margin for safety. When interest rates rise, the value of their investments will plummet. As we wait for the latest ECB Minutes at 12.30 pm I will lower my Bund sell level to 178.90/179.30 with a 179.75 stop.
Gold Rolling Contract
No Change as my only interest in buying Gold is on a dip lower to 1475/1485 with the same 1468 stop.
Silver Rolling Contract
Silver has decent support at 16.70 which must hold or else we could see a quick move lower. I am still flat and today I will lower my buy level to 16.35/16.75 with a 16.08 tight stop. If I am taken long I will have a T/P level at 16.93.
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