Equity Markets closed higher on Wednesday led by new all-time highs in both the NASDAQ 100 and S&P 500 as markets digested a soft ADP, a Bank of Canada rate cut and hot US ISM Services PMI. Stocks were trending higher as US players arrived and extended to record high territory throughout the rest of the session as it reacted to the mixed data. There was a brief knock in reaction to the Services PMI data, but ultimately it was deemed a positive for stocks on encouraging growth prospects (note the weakness seen after a soft Chicago PMI last Friday and Manufacturing PMI on Monday). At the same time, although the ADP data was soft, it is usually an unreliable indicator for the NFP on Friday, which participants are looking to for a more up-to-date assessment of the labour market. Aside from the data, there was also a dovish BoC rate decision, which saw a rate cut of 25bps as expected, while Governor Macklem signalled more cuts are coming. Despite the strong PMI data, T-notes were bid in reaction to the ADP data despite a brief knock on the PMI data with yields lower by c. 4-5bps across the curve. Attention now turns to the ECB rate decision on Thursday and the NFP on Friday. The ADP’s gauge of private payrolls reported additions of 152k jobs in the month, missing expectations (exp. 175k), with the Payroll’s services provider stating that both jobs gains and pay growth are slowing going into the second half of the year. “The labour market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers,” its chief economist said. Within the ADP report, the median change in annual pay for job stayers was unchanged at +5.0% Y/Y, while the measure for job changers declined to 7.8% Y/Y from 9.3% in April; ADP said pay growth was also slowing into H2 of 2024. Pantheon Macroeconomics, while providing its usual caveats about the unreliability of ADP as a forecasting metric for the official NFP Data, said this month’s reading is consistent with private payrolls rising by around 150K in May; “We’re sticking with our Homebase model forecast for May and continue to brace for a run of sub-100K payroll prints over the summer months, given the ongoing decline in measures of vacancies and the steep drop in hiring intentions in business surveys, as well as the deterioration in leading indicators of layoffs, such as the Challenger and WARN data,” the consultancy said. (NOTE: PM looks is a touch bearish than consensus for the NFP headline, forecasting gains of 180k in the month vs the consensus 185k). The ECB is expected to lower the deposit rate from 4.00% to 3.75% for the first time since September 2019, with markets assigning a 94% chance to this outcome. With a rate reduction so widely expected, focus will be on hints over future rate cuts, with markets not fully pricing in another move until December. Changes to staff projections are likely to be minimal. Tomorrow, we have the key NFP Report. Analysts expect the rate of monthly payroll additions to tick up slightly in May, although still remain beneath recent trend rates. Wage growth is seen accelerating slightly on a monthly basis but is likely to be unchanged on an annualised basis; analysts have noted that the Quits Rate in the recent JOLTs data (for April) is consistent with a moderation in wage pressures ahead. Labour market proxies have been mixed in the month, with Jobless Claims little changed in the survey windows that coincide with the jobs report. The ADP’s gauge of payrolls disappointed to the downside, however. The ISM surveys both saw a tick up in the employment sub-index, with the manufacturing sector’s gauge back into expansion territory. Meanwhile, the consumer view of the jobs market has improved in the month. Elsewhere, Oil closed 1.12% higher while Gold ended Wednesday with a gain of 1.1%.
To mark my 3000th 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 lost 65 points yesterday and is now ahead by 489 points for June, 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 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 1.18% higher at a price of 5354.
The Dow Jones Industrial Average closed 96 points higher for a 0.25% gain at a price of 38,807.
The NASDAQ 100 closed 2.04% higher at a price of 19,035.
The Stoxx Europe 600 Index closed 0.81% higher.
This Morning, the MSCI Asia Pacific closed 0.6% higher.
This Morning, the Nikkei closed 0.55% higher at a price of 38,703.
Currencies
The Bloomberg Dollar Spot Index closed 0.17% higher.
The Euro closed 0.1% lower at $1.0870.
The British Pound closed 0.2% higher at 1.2786.
The Japanese Yen fell 0.7% closing at $156.05.
Bonds
Germany’s 10-year yield closed 3 basis points lower at 2.51%.
Britain’s 10-year yield closed 1 basis points higher at 4.19%.
U.S.10 Year Treasury closed 2 basis points lower at 4.31%.
Commodities
West Texas Intermediate crude closed 1.12% higher at $74.07 a barrel.
Gold closed 1.1% higher at $2355.10 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders for April which fell 0.2% versus +0.5% expected. Next, we have U.K. Construction PMI at 9.30 am and Euro-Zone Retail Sales at 10.00 am. This is followed by the ECB Rate Announcement at 1.15 pm and the Lagarde Press Conference at 1.45 pm. In between, we have U.S. Weekly Jobless Claims, Non-Farm Productivity and the Trade Balance at 1.30 pm.
Cash S&P 500
The Bank of Canada cut interest rates by 25bps, taking the key rate to 4.75%, in line with the majority of expectations; some however had been looking for the central bank to leave rates unchanged, while markets were assigning a mere 20% probability of an unchanged outcome. Within the statement, the BoC noted that recent data has increased its confidence that inflation will continue to move towards the 2% target. It also notes that the three-month measures suggest continued downward momentum, while indicators of the breadth of price increases across components of the CPI have moved down further, although shelter price inflation remains high and risks to the inflation outlook do remain. The BoC is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. It looks like the 2% target level for inflation is over. The Bank of Canada cut its rates yesterday as I mentioned yet Canada’s inflation is still a very sticky 2.7%. Meanwhile, the ECB will cut rates this afternoon which will be its first cut since 2016 despite core inflation in the Euro-Zone at 3%. Remember it is only eight months ago that the ECB last raised rates. The S&P surged to record highs on this news, closing over 5350. The S&P has now risen over 30% off its October lows. As I said yesterday given the continued slowdown in the Housing Market and the amount of debt financing it is only a matter of time when the Fed follow suit and cut rates despite inflation at over 3%. Yet again Central Banks are losing more credibility which I did not think was possible. Internally the market is dreadful with the McClellan Oscillator still closing in negative territory last night despite the record high close for both the S&P and NDX. I still have a target level at 5400 on the S&P and is why I have not tried to short the market over the past week. The S&P has now rallied over 160 Handles from last Friday’s 5192 low print. Despite this aggressive rally every day this week as witnessed negative internals which is a worry. We are getting closer to a more meaningful top in the market. Today I will be an aggressive seller on any further rally to 5390/5410 with a 5426 ‘’Closing Stop’’. The S&P has short-term support from 5315/5331 where I will be a small buyer with a 5299 ‘’Closing Stop’’.
EUR/USD
I am disappointed with the price action in the Euro as I would expected the market to have followed the S&P higher. As I want to be flat ahead of this afternoon’s ECB rate cut, I have now exited my 1.0865 long position here at 1.0885 and I am now flat. The Euro has support below from 1.0750/1.0820 where I will again be a buyer with a lower 1.0685 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 1.0880.
Dollar Index
No Change: I am still long the Dollar from early Monday morning at 104.10 with a now lower 104.50 T/P level. I will add to this position on any further move lower to 103.40 while leaving my ‘’Closing Stop’’ unchanged at a price of 102.95. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
Thankfully we had no sell level in the DAX yesterday with the market trading 180 points higher from where I marked prices yesterday morning. The ECB rate cut is now priced in so it will be interesting to see what ECB President has to say in her 1.45 pm press conference. I must say I think they are wrong to cut but when you see how weak Factory Orders this morning were, I can understand why they are cutting despite inflation remaining at 3%. I will now raise my DAX buy level to 18370/18470 with a higher 18295 tight ‘’Closing Stop’’. I still do not want to be short the DAX despite the heaviness of the market. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
Despite the surge in the DAX yesterday, the FTSE traded heavy all session. After the market hit my initial 8240 buy level, we had a 30-point rally. This move higher enabled me to cover this position at my revised 8260 T/P level and I am now flat. Despite how heavy the FTSE is trading I still do not want to be short the market. The FTSE has support from 8120/8180 where I will again be a buyer with a lower 8055 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8225.
Dow Rolling Contract
I am still flat the Dow as we wait for the key NFP release tomorrow. I am not going to chase the Dow higher despite the record closes in both the NDX and S&P last night. The Dow has short-term support from 38350/38600 where I will continue to be a buyer with the same 38095 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 38780. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
Wrong! One stock NVIDIA is driving the NDX to new highs almost on a daily basis. Nvidia is now up 145% in the past five months, generating a market cap above $3 trillion. Yesterday’s 5% gain saw the market cap increase by $140bn. The market cap has now risen over $100bn in four of the past nine trading sessions. This is total madness with Nvidia now surpassing Apple’s $3 trillion valuation. This move higher saw the NDX trade the whole of my sell range for a 18825 average short position before stopping me out on the close at 19005 and I am still flat. With the horrid decoupling that we are seeing in breadth this is a strong warning sign for a major top in the market. The problem as I said yesterday is the ‘’WHEN’’. The NDX has further resistance from 19170/19320 where I will again be a seller with a 19455 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 19030. I still do not want to be long the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members
March BUND
I am still flat as the Bund never came close to yesterday’s buy range. Today, I will continue to be a buyer on any dip lower to 129.80/130.60 with the same 129.15 ‘’Closing Stop’’.
Gold Rolling Contract
Gold has rallied over $40 since yesterday morning, and I am still flat. I will now raise my buy level to 2315/2330 with a higher 2299 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2343.
Silver Rolling Contract
My lates 29.75 long Silver position worked well as the market rallied to my 30.50 T/P level this morning and I am now flat. Today, I will again be a buyer of Silver on any dip lower to 29.00/29.80 with the same 28.35 tight ‘’Closing Stop’’.
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