U.S. Equity Markets were slammed on Wednesday with both the S&P and NASDAQ 100 closing lower by 2.3% and 3.7%, respectively. The weakness was primarily observed in the large caps with Tech, Consumer Discretionary and Communication Services tumbling c. 4% with Google (GOOGL) and Tesla (TSLA) earnings hitting sentiment ahead of other Magnificent 7 reports in the upcoming weeks. The risk-off trade saw traditional haven stocks outperform, with Utilities and Healthcare notching gains, while Energy also saw slight gains as crude prices pared some of the recent weakness. Also hitting sentiment was a surprise contraction print in the US manufacturing PMI, printing beneath all analyst forecasts, although the services PMI beat. Euro-Zone PMIs were soft. The risk-off trade saw traditional haven FX with both the Japanese Yen and Swiss Franc notching up notable gains, while the Yen was also buoyed by reports the Bank of Japan are to consider a rate hike next week. Gold however failed to benefit from haven demand. Antipodes underperformed given their cyclical nature while the Canadian Dollar saw weakness with USD/CAD rising above 1.3800 in the wake of the 25bps rate cut from the BoC, while Macklem signalled more cuts are coming. U.S. New Home Sales fell to 617k in June, a 0.6% drop from the upwardly revised May figure of 621k (prev. 619k). The headline remains well below April’s YTD high of 698k, albeit the M/M change was less severe than the 11.3% drop in May. New Home Supply rose to 9.3 months from May’s 9.1 months, while the median June sale price fell 0.1% to 417.3k from 417.6k. On the headline, Pantheon Macroeconomics attributes the reversal of the spring bounce, partially to the sharp 40bp rise in mortgage rates in April, which has since steadily unwound. Looking ahead, the desk notes that this effect will likely fade as mortgage rates drop across the remainder of the year and into 2025, releasing some of the pent-up supply of existing homes. PM wrote that “new home sales are likely to fall as the broader market recovers unless the rebound in mortgage demand is so big that it offsets homebuilders’ loss of market share”, the desk believes this is unlikely, as they believe that the unemployment rate is likely to rise across the rest of this year and 2025. The S&P Global Flash PMI day for June was mixed, with Services rising to a 28-month high of 56.0 (exp. 55.0, prev. 55.3), and Manufacturing falling to a 7-month low, and back into contractionary territory, of 49.5 (exp. 51.7, prev. 51.6), leaving Composite rising to 55.0 from 54.8. The report highlighted that the flash PMI data signals a ‘Goldilocks’ scenario at the start of Q3, with the economy growing at a robust pace while inflation moderates. On prices, the report added, “The rate of increase of average prices charged for goods and services has meanwhile slowed further, dropping to a level consistent with the Fed’s 2% target.” On inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs. On growth, it highlighted that the data is “indicative of GDP rising at an annualised rate of 2.5% after a 2.0% gain was signalled for Q2.” It is worth noting the drop in the manufacturing component was larger than the most pessimistic analyst forecast, with the report noting the downside was led by falls in new orders, production and inventories, with inventories dropping especially sharply. A reduced rate of employment also dragged on the headline. The S&P Global Chief Business Economist Williamson said that “From the output perspective, growth has become worryingly skewed, with manufacturing slipping back into contraction as the service sector gains further strength. Some of the production decline was linked to staff shortages, so could prove temporary – something which is supported by the sector reporting improved confidence about future growth prospects. However, both manufacturers and service providers are reporting heightened uncertainty around the election, which is dampening investment and hiring”. The Bank of Canada cut rates by 25bps taking its policy rate to 4.50%, as was expected by the majority of analysts although some had been looking for the BoC to keep rates on hold. Within the statement, the BoC noted that risks to the inflation outlook are balanced, whilst removing language that referred to the BoC being more concerned about upside risks. However, it noted that it is assessing opposing forces on inflation, with ongoing excess supply lowering inflationary pressures, although shelter and some other services inflation is holding inflation up. Looking ahead, the BoC said decisions will be guided by incoming information and their assessment of their implications for the inflation outlook. The MPR saw the BoC revise down its Q2 24 CPI forecast to 2.7% from 2.9%, with Q3 CPI seen at 2.3%. The BoC does not see CPI returning to the midpoint of their target range until 2026 however, with 2025 CPI projections raised to 2.4% from 2.2% in April. Its estimate of the nominal natural rate was unchanged vs April at 2.25-3.25%, while it estimates the output gap between -0.75% and -1.75%, vs the April projection of -0.5% and -1.5%. BoC Governor Macklem noted there was a clear consensus to cut rates by 25bps, and that if inflation continues to ease broadly in line with their forecast, it is reasonable to expect further rate cuts, although the timing will depend on how the BoC see these “opposing forces” playing out. Overall, it was a dovish rate decision, cutting by 25bps again, with the Governor signalling more cuts are coming while the Statement removed language the BoC is concerned about upside risks to inflation, while Macklem highlighted an increase in weight to the downside risks. Forecasts were more mixed in the MPR, but the BoC lowered its Q2 CPI forecast with Q3 CPI seen at 2.3%. Looking ahead, data will dictate rate decisions from the BoC, but Money Markets are currently pricing in a c. 50% probability of another cut in September. With 42bps being priced in by year-end, fully pricing in at least one more rate cut this year, with a decent probability of another. Elsewhere, Oil ended Wednesday with a 0.71% gain while Gold was weak closing below $2400 with a 0.4% fall.
To mark my 3025th 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 645 points yesterday and is now ahead by 485 points for July after closing June 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 to 4 updated emails throughout the trading day to demonstrate this value, a 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 2.31% lower at a price of 5427.
The Dow Jones Industrial Average closed 504 points lower for a 1.25% loss at a price of 39,853.
The NASDAQ 100 closed 3.65% lower at a price of 19,032.
The Stoxx Europe 600 Index closed 0.64% lower.
This Morning, the MSCI Asia Pacific closed 1.1% lower.
This Morning, the Nikkei closed 3.28% lower at a price of 37,869.
Currencies
The Bloomberg Dollar Spot Index closed 0.10% lower.
The Euro closed 0.1% lower at $1.0838.
The British Pound closed 0.1% lower at 1.2894.
The Japanese Yen rose 1.2% closing at $153.81.
Bonds
Germany’s 10-year yield closed 1 basis points higher 2.45%.
Britain’s 10-year yield closed 3 basis points higher at 4.16%.
U.S.10 Year Treasury closed 1 basis points lower at 4.22%.
Commodities
West Texas Intermediate crude closed 0.71% higher at $77.51 a barrel.
Gold closed 0.4% lower at $2398 an ounce.
This morning on the Economic Front we have German IFO Survey and Euro-Zone Money Supply at 9.00 am. Next, we have U.S. GDP, Durable Goods Orders and Weekly Jobless Claims at 1.30 pm. This is followed by Pending Home Sales at 3.00 pm. Finally, at 4.00 pm we have the Kansas City Fed Manufacturing Activity Index and a speech from ECB President Lagarde.
Cash S&P 500
Most members of the ‘’Magnificent Seven’’ gapped lower at yesterday’s opening and declined sharply through the day. Nvidia, Microsoft and Google closed at their lowest level in six weeks while Apple shares are down over 8% from their high made just seven days ago. The VIX jumped the most in three months, closing 23% higher at a price of 18.04. The NYSE Advance/Decline ratio was negative by nearly 5 to 1, the strongest downside breadth in almost two months. Meanwhile, on the Big Board, down volume was 78% of both up and down volume, a fairly robust down day. At the same time, optimism remains extreme. The Bull-Bear spread in the Investors Intelligence Advisors’ Survey is now 49.3%, one of the most lopsided bullish number relative to the bearish number in history, this is a scary statistic. Although stocks remain highly vulnerable to more selling pressure, short-term the markets are severely oversold. Yesterday, for a lack of a better word, sucked as we had zero bounces and nothing but lower highs and lower lows with the 30 Minute RSI pounded into the ground all day long. It has been a long time since we have seen something like this. Indeed, this was the first 2%+ down day for the S&P in over 352 trading days which I believe is the longest streak since 2007 which has now come to an end. The Mag 7 got dropped 6% in aggregate making its worst day since the ETF was created. The positive news is the VIX closed its 18.45 ‘’Open Gap’’ from many months ago, leaving three open gaps below and two open gaps on the main Indexes. Markets are obviously short-term very oversold. We have a number of positive divergences, but risks remain lower, i.e. to the 5400 gap below. My Closing Stop strategy did not work yesterday as I was stopped out of my 5514 average long position after the close at 5442. Subsequently, I emailed my Platinum Members to buy the S&P at 5422 which was filled overnight, before the market rallied to my 5441 T/P level and I am now flat. The S&P has strong support from 5390/5408 where I will be an aggressive buyer with a 5375 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5440. I still do not want to be short the S&P at this time.
EUR/USD
My Euro plan worked well as the market traded lower to my 1.0830 buy level before rallying to my revised 1.0865 T/P level and I am now flat. Today, I will again be a buyer on any dip lower 1.0750/1.0810 with a lower 1.0695 ‘’Closing Stop’’. If triggered, I will have a T/P level at 1.0860.
Dollar Index
The boring sideways price action for the Dollar shows no sign of stopping any time soon. It is hard to make points when the Dollar Index only has a 30-point range. I would have expected the Dollar to have more of an impact given yesterday’s aggressive sell-off, but no this move was completely ignored by the Dollar for now. I am still flat the Dollar as I continue to be a buyer on any dip lower to 103.20/103.90 with the same 102.45 ‘’Closing Stop’’. I still do not want to be short the Dollar at this time.
Cash DAX
Until this morning the DAX was relatively calm compared to the American Indexes. However, the DAX opened lower hitting my 18230-buy level. As I did not want to have a long position, I emailed my Platinum Members to exit any long position at my revised 18265 T/P level and I am now flat. As I go press the DAX is trading lower at 18145. We have strong support from 17950/18030 where I will be a buyer with a lower 17865 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 18110. Ahead of this week’s blockbuster of tech earnings from America, I still not want to be short the DAX at this time. If this view changes I will be back with a new update for my Platinum Members.
Cash FTSE
Shortly after I posted yesterday morning the FTSE rallied to my 8160 T/P level on my latest 8115 long position, and I am still flat. This morning, the FTSE is trading lower at 8085. We have support from 7950/8030 where I will be a strong buyer with a lower 7885 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8090.
Dow Rolling Contract
After the Dow hit my buy range for a 39980 long position the Dow had a small rebound to my revised 40070 T/P level and I am now flat. This morning the Dow is trading lower at 39920. The Dow has support below from 39470/39720. My only interest in buying the Dow is a dip lower to this area with a lower 39295 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 39950. Ahead of next week’s FOMC Meeting I do not want to be short the Dow at this time.
Cash NASDAQ 100
Wrong! Just before the U.S. Markets opened the NDX traded lower to my second buy level at 19400 for a 19475 average long position. I was stopped out of this position on the close at 19105. Given how oversold the NDX Is trading after falling over 1700 points in the past week, I bought the market again at a price of 19090. I will add to this trade at 18900. I will have no T/P level on this position while my ‘’Closing Stop’’ will be at a price of 18795. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September BUND
No Change: The Bund never came close to yesterday’s buy range, and I am still flat. Ahead of so much Treasury Supply this week I am reluctant to chase the Bund higher. Therefore, I will continue to be a buyer on any dip lower to 130.70/131.40 with the same 129.95 tight ‘’Closing Stop’’. Despite the low Yield for the Bund, I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold has got hit hard this morning. This move lower saw my buy level triggered for a now 2371 long position. I will add to this trade at 2355 while lowering my stop to a ‘’Closing Price’’ of 2343. I will have a T/P level on this position at 2388. 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 from last week at a price of 29.80. This morning Silver is trading at 28.00 as I go to press. I will now cancel my stop on this position and instead I will look for a spot to add to my Silver portfolio over the coming days. If this view changes, I will be back with a new update for my Platinum Members.
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