U.S. Indices closed higher on Wednesday following a choppy session that saw plenty of two-way price action, but ultimately stocks ended up in the green with T-notes sold across the curve while the Dollar plummeted as the Euro rallied. The focus of the session was on US trade updates, the German Debt brake reform, and US data. On trade, following reports the US could dial back some tariffs on US and Canada if Trump was satisfied with progress on borders and fentanyl, the US decided to delay auto tariffs on Canada and Mexico by 30 days, although Trump told Canada’s Trudeau that they have not done enough on fentanyl imports into the US, albeit progress on borders has been reasonable. The White House also noted that Trump is open to hearing about additional tariff exemptions, which helped lift stocks higher into the close. Elsewhere, US data saw a woeful ADP print ahead of the NFP report on Friday, while the ISM Services PMI beat expectations. The Fed Beige Book, compiled with info on or before Feb 24th, saw overall economic activity rise slightly since mid-January, but consumer spending was lower on balance (more below). In Europe, the reform of the debt brake drove price action with the DAX surging over 3.5% while the Euro rallied from a low of 1.0603 to 1.0791 with German bund yields rising the most in one day since the 1990s. The Euro saw notable outperformance on the debt break reform, weighing on the Dollar, while Antipodes also outperformed on the Dollar weakness and ultimate upside in equities supporting the cyclical currencies. Crude prices tumbled regarding ongoing US consumer concerns hitting the demand side of the economy, with downside extending after OPEC+ earlier in the week agreed to proceed with the planned April output hike. ISM Services surpassed expectations in February, as it printed 53.5 (exp. 52.6, prev. 52.8). Within the release, new orders and employment rose to 52.2 (prev. 51.3) and 53.9 (prev. 52.3), while business activity was more or less unchanged at 54.4 (prev. 54.5). The inflationary gauge of prices paid rose to 62.6 from 60.4. Backlog of orders and inventories lifted back into expansionary territory, while new export orders printed 52.1 (prev. 50.0) and imports 49.6 (prev. 49.8). On the report, February was the third month in a row with all four sub-indices that directly factor into the Services PMI (Business Activity, New Orders, Employment and Supplier Deliveries) were in expansion territory, with the report noting the first time it has happened since May 2022. Nonetheless, anxiety continues over the potential impact of tariffs, as many of the respondents highlighted this, shown by one by the following: 1) “There is great uncertainty about future business activity due to the risk of tariffs and other potential government actions.” 2) “Implementation of tariffs will have a significant cost impact to our projects.” 3) “Tariffs are going to have a ripple down effect that could severely harm our business.” Separately, some respondents also indicated that federal spending cuts are having negative impacts on their business forecasts. Do note, heading into the release ING noted, “in theory this services index should be less affected by tariff noise”. The ADP’s gauge of national employment, while lacking significant predictive power for the official jobs data, disappointed expectations, printing 77k against an expected 140k. The report noted that hiring slowed to the smallest level of gains since July, with trade and transportation, health care and education, and information technology showing job losses, and small business employment also fell. “Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” ADP said, “our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.” ECB policymakers are widely-expected to deliver another 25bps rate reduction at this afternoon’s announcement. Greater emphasis by the market will be placed on whether the Governing Council still views policy as restrictive and what, if any, hints are given about plans for a potential pause in the rate-cutting cycle. Elsewhere, the accompanying macro projections will be scrutinised to see how inflation is expected to align with the ECB’s 2% target. Elsewhere, Oil closed 2.86% lower while Gold was flat.
To mark my 3150th 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 70 points yesterday and is now down by 196 points for March after 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 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 1.12% higher at a price of 5842.
The Dow Jones Industrial Average closed 485 points higher for a 1.14% gain at a price of 43,006.
The NASDAQ 100 closed 1.36% higher at a price of 20,628.
The Stoxx Europe 600 Index closed 0.91% higher.
Yesterday, the MSCI Asia Pacific closed 0.3% higher.
Yesterday, the Nikkei closed 0.23% higher at a price of 37,418.
Currencies
The Bloomberg Dollar Spot Index closed 1.36% lower.
The Euro closed 1.6% higher at $1.0788.
The British Pound closed 0.7% higher at 1.2887.
The Japanese Yen rose 0.8% closing at $148.80.
Bonds
Germany’s 10-year yield closed 28 basis points higher at 2.80%.
Britain’s 10-year yield closed 11 basis points higher at 4.65%.
U.S.10 Year Treasury closed 7 basis points higher at 4.28%.
Commodities
West Texas Intermediate crude closed 2.86% lower at $66.31 a barrel.
Gold closed 0.1% higher at $2919.10 an ounce.
This morning on the Economic Front we have German, Euro-Zone and U.K. Composite PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed by Euro-Zone PPI at 10.00 am and U.S. MBA Mortgage Applications at 12.00 pm. Next, we have U.S. ADP Employment Change at 1.15 pm and Composite PMI at 2.45 pm. At 3.00 pm we have Durable Goods Orders and ISM Manufacturing. Finally, at 7.00 pm we have the Beige Book.
Cash S&P 500
The 200 Day Moving Average has become a key pivot point all year, so yes it is technically relevant and very important for bulls to defend. This week’s tag of the 200 MA is the first tag in two years and I would expect the Trump Administration to defend this key support level at all costs as a break and close below here for a few days could see a massive acceleration lower. Back 2018 you can see big bounces that followed that initially produced several roll overs, and we should not be surprised by something similar now. After all it is probably hard to expect new highs now with all the political and economic uncertainty. A lot of data will have to be absorbed in the months ahead. And note yesterday was a big 200MA day, not only on $SPX, but also on $NDX. The week obviously is far from over and headline risk will remain with us. What actually happens with tariffs and the length of time they will remain in effect will be of key consequence for the reality is this: Fed’s Williams: ‘’I see a very high pass-through of tariffs to consumers’’. Companies are already announcing significant price increases which of course is inflationary and will impact demand. Hence all this is a double-edged sword. Pressure on markets and the economy but also massive relief as soon as the right headline hits, i.e. “we made a deal”. All eyes will be on tomorrow’s NFP Report, Fed Chair Powell speaking and the Crypto Summit. I am still long the S&P at an average rate of 5838 with the same 5862 T/P level. I will continue to look to add to this position on any further move lower to 5740 while leaving my 5789 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
The return of US growth concerns has clearly been a drag on the US Dollar in recent sessions. However, the change in the fundamental drivers behind the Euro has been even more dramatic. On the back of the news that Germany is poised to change its constitution to enable more fiscal spending, the Euro has surged over 400 points this week. The market has been hoping for a change in Germany’s debt brake, but ahead of the country’s election last month it was unclear whether Chancellor-to-be Merz would support a move. After the election, the make-up of parliament suggested that it might be impossible to have such a move approved given the distribution of seats amongst the far-right and the far-left. However, last month’s announcement from the US Administration that the defence of Europe is no longer a priority and this week’s news from President Trump that he has frozen military aid to Ukraine has pushed European politicians into crisis mode. Until March 25th, Merz can reconvene the parliament elected in 2021. Yesterday’s announcement that Merz’s CDU/CSU alliance along with the SPD will jointly present a bill in parliament next week to relax the debt brake, should enable a provision to exempt defence spending above 1% of GDP from the rule – assuming the Green party adds its support. Another constitutional amendment will set up a EUR500 billion fund to tackle Germany’s infrastructure over the next 10 years. Debt rules for the various states will also be loosened. The news from Germany follows the proposal on Tuesday from the European Commission to borrow up to EUR150 billion to lend to European governments for defence projects. These plans will be discussed at an emergency summit today. While this proposal raises hopes that European leaders may be able to stand together in the face of a crisis, the news from Germany brings more tangible evidence of fresh leadership within Europe along with the promise of an uplift in economic growth. The latter will be necessary to support the weight of the extra spending on defence. EUR/USD, however, has continued to move higher in part due to expectations that room for further ECB rates cuts will be more confined and also in response to the struggling Dollar. The greenback is the weakest performing G10 currency on a 1-day view, which compounds its position as the worst performer vs. its peers in the year to date. Fears that the US economy is finally weakening have been highlighted by various US economic data releases such as retail sales and PMI data and more recently by the drop in the new order index in this week’s February ISM print. As a consequence, the market is likely to be even more sensitive than usual to Friday’s release of the monthly US payrolls data, which will be followed by an appearance later in the day by Fed Chair Powell. Even though weather could create some discrepancies in the February jobs data, a weak headline number could exacerbate the current vulnerability of the Dollar. That said, while the Fed has a dual mandate, accelerated rate cuts are unlikely if policy makers are wary about inflation. US CPI inflation data have been displaying signs of stickiness even before the impact of Trump’s tariffs takes effect. Any signs that the Fed is concerned about price pressures should therefore provide the Dollar with support. Yesterday, the Euro traded the whole of my sell range for a now 1.0725 average short position. The Euro is severely overbought with an RSI north of 70. I will leave my 1.0815 ‘’Closing Stop’’ unchanged while raising my T/P level to 1.0680. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
Wrong! I was stopped out of my 106.50 long Dollar position at 105.05 and I am now flat. The Dollar’s is now severely oversold and due a large bounce. The Dollar has support below from 103.50/104.20 where I will again be a strong buyer with a lower 102.85 ‘’Closing Stop’’. If triggered, I will have a T/P level at 105.05.
Russell 2000
Also having room for a sizable bounce are miserable small caps which dove deep below the weekly Bollinger band on Tuesday but are so far defending trend support. Small caps tend to see sizable bounces from moves below the Its Weekly Bollinger Bands, many of these pushing into near the weekly 20MA or above. I am still long the Russell at a price of 2080 with the same 2130 T/P level. I will continue to look to add to this position on any further move lower to 2030 while leaving my 1985 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE continues to trade in narrow ranges, close to all-time highs. I am still flat. Today, I will again be a seller of the FTSE from 8900/8970 with a lower 9031 ‘’Closing Stop’’. If triggered, I will have a T/P level at 8835. I no longer want to be a buyer of the FTSE at this time. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
My Dow plan worked well as the market sold off to my 42500-buy level before rallying to my 42950 T/P level and I am now flat. The Dow has support from 42460/42720 where I will again be a buyer with a higher 42295 ‘’Closing Stop’’. If triggered, I will have a T/P level at 43120.
Cash NASDAQ 100
I am still long the NDX at an average rate of 20570 as the market again fell shy of Wednesday’s T/P level. I will now lower my T/P level to 20660. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
Wrong. The Bund had its largest daily sell-off since the 1990’s as the yield rose an incredible 30 basis points on Wednesday. This move lower saw the Bund close at 4.30 pm at a price of 128.95 where I was stopped out of my latest 131.30 average long position and I am now flat. This is the biggest loss in points terms that I have ever taken on the Bund which is extremely painful. All eyes are on the ECB this afternoon. Personally given all the uncertainty I think they are mad if they cut rates as expected. TBD. Given the 70-basis point rally in Bund Yields over the past few weeks it will interesting to see what ECB President has to say in her press conference at 1.45 pm. The Bund is extremely oversold, has support below from 127.00/127.80 where I will be a strong buyer with a 126.15 wider ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 129.10.
Gold Rolling Contract
No Change: Gold continues to attract large buying on any dip, wiping out all of Friday’s sell-off in a bid only session on Monday. I am still flat. I will now raise my buy level to 2830/2846 with a higher 2817 ‘’Closing Stop’’.
Silver Rolling Contract
I am still flat. I will continue to be a buyer on any dip lower to 30.70/31.50 with the same 29.85 ‘’Closing Stop’’. If triggered, I will have a T/P level at 32.20.
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