It was a geopolitical risk-off session on Wednesday, with equities lower across the board, although the NASDAQ outperformed and closed down just 0.2% versus a 1.4% decline in the Russell 2000. Sector performance was mixed, with Energy and Health Care outperforming, while Consumer Discretionary, Financials and Technology lagged. Energy stocks benefited from higher crude prices after the US and Iran exchanged attacks overnight, with the US striking Iran’s Qeshm Island and Iran targeting US military bases in the Middle East. Oil prices briefly pared gains after President Trump said the US is working on a deal with Iran and that Tehran had agreed not to pursue nuclear weapons. However, Iranian media pushed back on those claims, while Iran’s Foreign Minister later said communication channels remain open but that no meaningful progress has been made in negotiations. The comments helped support crude into settlement. Geopolitical tensions remained elevated after Iran claimed it had struck a US Navy command centre in the Gulf of Oman, although the report was denied by US CENTCOM. On the data front, ISM Services PMI surprised to the upside, while the employment component remained subdued and prices stayed elevated. Fed speakers Williams and Barr both reiterated that policy is in a good place, while the Fed’s Beige Book described labour market conditions as broadly stable but noted ongoing price pressures across most districts. Cross-asset price action continued to be dictated by geopolitics and energy markets. Crude settled firmly in the green, while the Dollar outperformed against most major peers. In FX, the Japanese Yen was a relative outperformer, although USD/JPY still reclaimed the 160 handle despite renewed jawboning from Japanese officials. The New Zealand and Australian Dollars lagged amid the risk-off tone, with the Kiwi additionally pressured by softer trade data overnight. Gold and silver both declined as higher oil prices boosted inflation expectations and reinforced the prospect of potentially more restrictive Fed policy. Looking ahead, attention turns to Friday’s US Non-Farm Payrolls Report following the stronger-than-expected ADP employment data for May. The headline ISM Services PMI for May rose to 54.5 from 53.6, above the 53.7 forecast. The upside was supported by rising business activity, to 57.7 from 55.9, while new orders picked up to 57.3 from 53.5. Meanwhile, Prices remained elevated at 71.3, accelerating from the prior 70.7, while employment was little changed at 47.9 (prev. 48.0). Service-sector respondents largely pointed to rising inflationary pressures, driven by higher fuel and energy costs stemming from Middle East tensions, as well as tariff-related cost increases. Businesses reported suppliers increasingly passing through higher transportation, freight and raw material costs, while some sectors are beginning to experience supply constraints and delivery delays, particularly in construction materials, technology products and energy-related supply chains. Despite these cost pressures, underlying demand remains generally resilient. Healthcare providers reported strong patient volumes, utilities continue to see robust demand, and data centre-related investment is supporting activity in power generation and industrial supply chains. However, respondents remain cautious on the outlook as elevated fuel costs, labour shortages, supply continuity concerns and broader macroeconomic uncertainty continue to weigh on planning, margins and capital spending decisions. ADP national employment for May rose to 122k from 109k, also above the expected 110k. Within the release, the wage metrics show job-stayers remained at 4.4%, while job-changes printed 6.5% from 6.6%. ADP Chief Economist Richardson said, “Hiring was more broad-based in May than we’ve seen in the last few years. The labour market continues to show sustained momentum going into the summer hiring season.” The ADP print comes ahead of US NFP metric on Friday, whereby Pantheon Macroeconomics continue to look for a 50k increase, given that payrolls overshot their trend in April, mostly due to unusually warm weather. Pantheon adds, all told, evidence that the labour market is regaining momentum remains unconvincing. Fed Member Williams said there is no obvious argument to alter interest rates currently, and monetary policy is in the correct place, and no need to move on rates. On inflation, it is up, “quite a bit”, and anticipates it peaking in the next few months, while the upside risks have increased. The New York Fed President described the job market as “healthy”, and that the market has stabilised. Elsewhere, Oil closed higher by a further 2.5% while Gold was weak ending Wednesday’s session with a loss of 1%.
To mark my 3375th 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 300 points yesterday and is now ahead by 710 points for June after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 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 0.74% lower at a price of 7553.
The Dow Jones Industrial Average closed 620 points lower for a 1.21% loss at a price of 50,687.
The NASDAQ 100 closed 0.29% lower at a price of 30,571.
The Stoxx Europe 600 Index closed 0.66% lower.
This Morning, the MSCI Asia Pacific closed 0.7% lower.
This Morning, the Nikkei closed 1.48% lower at a price of 67,392.
Currencies
The Bloomberg Dollar Spot Index closed 0.31% higher.
The Euro closed 0.28% lower at $1.1598.
The British Pound closed 0.34% lower at $1.3419.
The Japanese Yen fell 0.11% closing at $160.07.
Bonds
U.K.’s 10-Year Gilt closed 8 basis points higher at 4.94%.
Germany’s 10-Year Bund Yield closed 7 basis points higher at 3.04%
U.S.10 Year Treasury closed 3 basis points higher at 4.49%.
Commodities
West Texas Intermediate crude closed 2.42% higher at $96.03 a barrel.
Gold closed 1.02% lower at $4442.10 an ounce.
This morning on the Economic front we have German, Euro-Zone and U.K. Construction PMI at 8.30 am, 8.35 am and 9.30 am respectively. This is followed by Euro-Zone Retail Sales at 10.00 am. Next, we have U.S. Weekly Jobless Claims and a speech from Fed Member Barkin at 1.30 pm. Finally, we have a speech from Fed Member Daly and Bank of England Governor Baily at 4.40 pm.
Cash S&P 500
The S&P 500 finished Wednesday’s session lower by 0.6%, while oil prices rose by more than 2%. WTI appears to be forming an inverse head-and-shoulders pattern and, more importantly, has already broken above its neckline. If the pattern is completed, it would suggest that oil prices could rise to around $102. Meanwhile, volatility did not change much overall, even though the VIX rose slightly and the VIXEQ declined somewhat. However, we did see implied volatility in oil increase modestly today, though it remains stubbornly elevated. Currently, 21-day realised volatility in oil is around 47.7%, which means oil has been moving by roughly 3% per day over the past month. Meanwhile, the OVX is trading around 60.5, implying daily moves of approximately 3.8% over the next month. In other words, the options market is pricing in larger moves ahead than those seen over the past month, suggesting traders expect oil volatility to remain elevated for the foreseeable future. Meanwhile, the ratio of the VIX to the OVX remains elevated at around 3.8 and has shown little sign of declining. Given how much oil implied volatility has already fallen from its recent highs, the fact that the ratio has remained so elevated suggests that the decline in the VIX has largely mirrored the decline in oil volatility. In other words, equity volatility has not become materially cheaper relative to oil volatility, despite the significant retracement in the OVX. This, along with a better-than-expected JOLTS report on Tuesday and a solid ADP report yesterday, helped strengthen the Dollar against the Euro. The EUR/USD appears poised to weaken further, forming what looks like a bear flag pattern. In this case, a break below support around 1.1550 would likely trigger a move initially lower toward 1.1510. The PUT wall in the S&P 500 was around 7,550 on Wednesday, helping support the market. However, based on current positioning, the PUT wall could shift lower today, potentially moving to around 7,200. If that occurs, the S&P 500 could slip back into a negative gamma regime, which would likely be less supportive of market stability and could contribute to increased volatility. The technical chart already reflects much of this, with support concentrated between 7,500 and 7,550. However, below 7,500, support begins to thin out considerably until around 7,350, suggesting that a break of that level could leave the Index more vulnerable to a sharper decline. On top of that, Index volatility remains relatively low, and if oil volatility rises, it will likely pull the VIX higher as well. That combination could create the conditions for a meaningful market pullback, particularly if volatility rises as support levels begin to give way. There is a chance of that as well, especially with Broadcom trading roughly 15% lower after hours following its earnings results. Implied volatility for Friday had risen to around 150% ahead of the report, and the skew was heavily tilted toward a higher price, with an upward-sloping volatility curve. In other words, upside exposure was being priced much more aggressively than downside risk. As a result, we are seeing the typical post-earnings dynamic, where call options are getting hit particularly hard as implied volatility collapses and the earnings risk premium is removed from option prices. TBD. Yesterday, my S&P plan worked well as the market sold off to my 7582 T/P level on my latest 7612 short position and I am now flat. Today, I will again be a seller from 7585/7610 with a lower 7631 ‘Closing Stop’. As mentioned above, the S&P has strong short-term support at 7500. Therefore, I will be a buyer from 7485/7505 with a tight 7469 ‘Closing Stop’. If I am taken short, I will have a T/P level at 7559. If I am taken long, I will have a T/P level at 7532. If this view changes, I will be back with a new update for my Platinum Members.
EUR/USD
I am still flat as the boring sideways price action continues. The Euro has strong support below from 1.1450/1.1530. I will now lower my buy level to this area. If triggered, I will have a T/P level at 1.1605, while my ‘Closing Stop’ will be at a price of 1.1385.
Dollar Index
I am still flat. Today, I will raise my Dollar buy level to 98.50/99.20 with a higher 97.75 ‘Closing Stop’. If I am taken long, I will have a T/P level at 99.90.
Russell 2000
No Change: I am still short the Russell at an average rate of 2890. I will leave my 2975 ‘Closing Stop’ unchanged. I will also leave my T/P level unchanged at 2855. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
FTSE 100
I am still flat. The FTSE has continued to trade heavy. Today, I will lower my buy level to 10130/10210 with a lower 10055 ‘Closing Stop’. If I am taken long, I will have a T/P level at 10280.
Dow Rolling Contract
I am still flat. Ahead of Non-Farm Payrolls tomorrow I will now lower my Dow buy level to 50130/50430 with a lower 49895 ‘Closing Stop’. If I am taken long, I will have a T/P level at 50720. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
I am still short the NDX at an average rate of 30430 with the same 30705 ‘Closing Stop’. Today, I will leave my T/P level unchanged at 20250. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
I am still flat as the Bund never came close to Wednesday’s sell range. Today, I will again be a seller from 126.40/127.10 with the same 127.85 ‘Closing Stop’. If triggered, I will have a T/P level at 125.90. The Bund has short-term support below from 123.80/124.60 where I will be a strong buyer with a 123.15 ‘Closing Stop’. If I am taken long, I will have a T/P level at 125.30.
Gold Rolling Contract
I am still flat. Today, I will continue to be a buyer on any dip lower to 4250/4350 with the same 4155 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4470. If this view changes, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Overnight, Silver traded lower to my 72.60 buy level. I am still long with a now lower 74.40 T/P level. I will continue to look to add to this position at 70.00 while leaving my 68.95 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Recent Comments