U.S. Equity Markets finished Wednesday higher after a late comeback. The S&P led the gains closing higher by 0.75% as the VIX closed lower by 4% at a price of 24.01. Markets ended higher, although early gains were diluted upon the midday release of the Federal Open Market Committee’s (“FOMC”) December meeting minutes. The FOMC members’ comments were largely consistent with Federal Reserve Chairman Jerome Powell’s hawkish rhetoric. Additional macroeconomic news painted a mixed picture of economic conditions. The Institute for Supply Management’s (“ISM”) Manufacturing Index for December showed easing price pressures, while the latest Job Openings and Labour Turnover Survey (“JOLTS”) from the U.S. Bureau of Labour Statistics showed a still-tight labour market. Minneapolis Fed President Neel Kashkari said he sees increasing evidence inflation may have peaked and forecasts the Fed target interest rate to also peak at 5.4% before pausing. Within the S&P 500 Index, all the 11 sectors finished higher. European Markets surged. Euro-Zone markets ended higher, extending the early gains for the year. On the heels of Tuesday’s cooler-than-expected inflation data from Germany, yesterday’s unexpected drop in France’s December inflation rate boosted the markets. Falling prices continue to emerge in other macro indicators as German import prices fell again as well as European natural gas prices. However, easing pricing pressures have so far done little to influence the European Central Bank’s narrative of continued rate hikes. Recent data from Europe shows that inflation is cooling. This could foreshadow the European Central Bank (“ECB”) cutting back on its aggressive rate-hike plans. In November, Euro-Zone inflation came in at 10% on a year-over-year basis which is just below the all-time high of 10.7% set in October. ECB policymakers have warned they must see a more rapid decline in prices toward their 2% target. Otherwise, they may get even more aggressive with interest-rate hikes. In fact, Governing Council member Klaas Knot said the ECB is only halfway done with rate hikes, and it will continue raising interest rates in half-point increments before reaching peak yields in mid-summer. To put that into perspective, the ECB has raised its benchmark Deposit Facility Rate by 2.5% since July. This brought interest rates back up to 2% and ended an eight-year experiment with negative yields. But the rate hikes are killing regional economic growth. Third-quarter Gross Domestic Product only expanded a paltry 0.3%, which is the worst number since the first quarter of 2021 when the region was dealing with a new wave of COVID-19 infections. So, if something does not change soon, the rate-hike outlook could grow even worse. However, recent data point toward additional downside in price growth. This should support a rally in European stocks. On Tuesday, Germany’s Federal Statistical Office released its preliminary Consumer Price Index (“CPI”) figures for December. Year over year, the number rose 8.6%, which was lower than the expectation for a 9% increase and November’s 10% gain. This marked the lowest reading since the 7.9% jump reported in August, and it was the second straight contraction on a month-over-month basis. Even more, price growth for goods slowed to 13.9% compared with the 17%-plus growth experienced in the prior three months. The Statistical Office said that government assistance on energy bills helped to drive the cost savings in December. Energy prices grew 24.4% for the month compared with the recent peak of 43.9% in September. At the same time, food costs were up 20.7% compared with the 21.1% growth seen in November. This is important for the regional outlook. You see, Germany makes up about 30% of Euro-Zone economic output. As Germany’s economy fares, so does the rest of Europe. The European Union’s statistical office, Eurostat, is scheduled to release its CPI figures on today. Based on Tuesday’s numbers, it is likely that regional price growth could come in below estimates, which are currently for 9.5%. But it is not just Germany that is seeing inflation ease. Late last week, Spain’s Statistical Office released preliminary CPI figures for December. The CPI grew 5.8% compared to the 6.1% expectation and November’s 6.8% increase. This was the lowest rate of price growth since the 5.5% expansion seen in November 2021. According to the Spanish government, the largest driver for the slowdown in price growth was energy costs. It said electricity prices rose less than they did a year ago, while those for fuel contracted. At the same time, prices for footwear and clothing fell, though not as quickly as they did a year ago. Spain is the region’s fourth-largest economy, making up roughly 10% of Euro-Zone economic output. However, EU members were successful in finding ample supplies. In fact, energy storage hit the highest level on record ahead of the winter. According to Bloomberg, Germany’s current gas storage level sits at 90% – well above the average of 73% for this time of year. European storage levels are at 84% across the board compared to just 52% last year, according to the New York Times. In addition, Germany has been able to generate record amounts of wind energy. Europe has experienced milder winter temperatures. So, while inflation is still high, this development is encouraging for ECB policymakers. If this trend continues, it could begin to take pressure off the central bank to aggressively raise interest rate As prices stabilise, households will feel less worried about how far their future earnings will go. That means they will save less and start spending more, which will boost regional economic output. As Consumer Confidence begins to grow, European investors will want to put some of that extra money back to work in the markets. In Asia, Hong Kong and South Korea’s markets exhibited major gains thanks to supportive announcements out of Beijing and a tax break announced for chipmakers in Seoul. The Chinese government reiterated its pledge to expand fiscal spending as it attempts to charge economic output this year. However, it also warned of retaliatory measures against other global nations that are imposing stricter COVID-19 testing requirements for travellers from China. Elsewhere, Bank of Japan Governor Haruhiko Kuroda reiterated the central bank’s commitment of maintaining stimulus to achieve lower inflation alongside healthy wage growth. Elsewhere, Oil fell a huge 4.82% while Gold closed higher by 0.79%.
To mark my 2700th 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 220 points yesterday and is now ahead by 553 points for January, after finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 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 0.75% higher at a price of 3853
The Dow Jones Industrial Average closed 133 points higher for a 0.40% gain at a price of 33,269.
The NASDAQ 100 closed 0.48% higher at a price of 10,914.
The Stoxx Europe 600 Index closed 1.38% higher.
This morning, the MSCI Asia Pacific rose 0.4%.
This morning, the Nikkei closed 0.02% higher at a price of 26,094
Currencies
The Bloomberg Dollar Spot Index closed 0.2% lower.
The Euro closed 0.3% higher at $1.0601.
The British Pound closed 0.3% higher at 1.2023.
The Japanese Yen fell 1.5% closing at $132.06.
Bonds
Germany’s 10-year yield closed 9 basis points lower at 2.28%.
Britain’s 10-year yield closed 16 basis points lower at 3.49%.
U.S.10 Year Treasury closed 1 basis points lower at 3.70%.
Commodities
West Texas Intermediate crude closed 4.82% lower at $72.94 a barrel.
Gold closed 0.79% higher at $1852.10 an ounce.
This morning on the economic front we have U.K Global Composite PMI at 9.30 am followed by Euro-Zone PPI at 10.00 am. Next, we have U.S. MBA Mortgage Applications at 12.00 pm. This is followed by the Trade Balance and the Weekly Jobless Claims at 1.30 pm. Finally, at 2.45 pm we have the S&P Composite PMI.
Cash S&P 500
A volatile session which saw every dip again bought by traders. This was apparent after the Fed released its FOMC Minutes. The Fed stated that it will not cut rates in 2023 no matter what. I disagree with this jawboning bravado. Unfortunately, we will have to listen for the next three weeks as Fed speaker after Fed speaker will echo the same sentiment. Remember, the next FOMC Meeting is on Feb 1. Although every dip got bought yesterday, the $NYSI remains max oversold implying you just cannot be a seller at this time while sentiment is near all-time lows. We still remain in a dreadful chop range. I will continue to be an aggressive buyer against a 3790 ‘’Closing Price’’ while the S&P needs to break and close over 3900 for bulls to regain short-term control. Shortly, after I posted yesterday morning the S&P hit my 3838 T/P level on Tuesday’s 3824 average long position and I am still flat. The S&P is not far off yesterday’s exit level, trading at 3841 this morning. We have support from 3808/3826 where I will be an aggressive buyer with a 3789 wider ‘’Closing Stop’’.
EUR/USD
No Change. The boring sideways action in the Euro shows no sign of ending. I will still be a strong buyer on any further dip lower to 1.0480/1.0560 with a higher 1.0395 ‘’Closing Stop’’.
March Dollar Index
The Dollar just missed my 103.40 buy level with a 103.53 low print before rallying to sist at 104 this morning. I will now raise my buy level to 103.00/103.60 while leaving my 102.15 ‘’Closing Stop’’ unchanged.
Cash DAX
The DAX surged yesterday helped again by Tuesday’s much weaker than expected CPI print. Europe continues to outperform despite the horrid backdrop. The bullish price action means you cannot be short the DAX at this time. The DAX has support from 14280/14360. I will now raise my buy level to this area with a higher 14195 ‘’Closing Stop’’.
Cash FTSE
The FTSE never came close to yesterday’s buy range, and I am still flat. I will leave my 7460/7530 buy level unchanged with the same 7395 ‘’Closing Stop’’.
Dow Rolling Contract
Frustrating! The Dow missed my 33000-buy level by 30 points before rallying to an overnight high at 33245 and I am still flat. Today, I will move my buy level slightly higher to 32800/33050 while leaving my 32595 ‘’Closing Stop’’ unchanged. I still do not want to be short the Dow at this time especially as internally yesterday’s session was strong as shown by the McClellan Oscillator which closed at +107
Cash NASDAQ 100
I continue to be a buyer of dips in the NDX. The brutal tax loss selling of tech stocks that we saw into year-end which saw some of the biggest tech stocks hit new lows for 2022, should have produced news lows for the NDX. They did not as we saw a major trendline hold as it has done for the previous four months. Most of these key stocks showed positive divergence on these new lows. In my opinion this is a short-term positive like we saw after the Global Financial Crisis. After the NDX hit my 10970 T/P level I emailed my Platinum Members to buy the NDX again which I did at a price of 10930. I will add to this position at 10780 while leaving my 10595 ‘’Closing Stop’’ unchanged. I will have a T/P level on this position at 11030. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
March BUND
No Change. I am still a buyer on any dip lower to 134.50/135.30 with the same tight 133.85 ‘’Closing Stop’’.
Gold Rolling Contract
No Change. I will not chase the market higher from here, leaving my 1817/1832 buy level unchanged with the same 1799 wider ‘’Closing Stop’’.
Silver Rolling Contract
Silver traded in a narrow range yesterday. I am still long at 24.00 with no stop and the same 24.60 T/P level.
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