U.S. Indexes ended Wednesday’s session with notable gains after a downbeat start as initial AMD weakness post-earnings weighed with investors touting lofty valuations, but this soon pared. Sectors were mainly green with Communication Services and Consumer Discretionary sitting atop of the pile, with Consumer Staples, Tech, and Real Estate sitting in the red, albeit marginally. US data came via ADP and ISM Services, both of which came in hotter than anticipated, with both garnering a Dollar bid and pressuring the Treasury Market. ADP, which is receiving more attention due to the US government shutdown and lack of data, rose to 42k from -29k, and above the expected 28k. ISM Services rose to 52.4 (exp. 50.8, prev. 50.0), and above the top end of the analyst forecast range, while prices paid saw an unwelcome rise to a three-year high. Following the hotter-than-expected data, the Dollar Index rose to session highs, while both US indices and Treasuries sold off. In FX, after the aforementioned peak, the Dollar sold to be more-or-less flat at pixel time and paused its recent rally to the benefit of high beta FX amid the broader risk environment. The Japanese Yen was the clear laggard. Oil swung from gains to losses in a choppy day of trade amid a lack of much oil-specific newsflow. Overall, T-Notes were sold after ADP and Services ISM beat, while the Treasury began preliminary discussions on boosting future auction sizes, which was disclosed at QRA. Precious metals strengthened, albeit with spot gold not giving a real test to USD 4k/oz, and Bitcoin lifted back above USD 100k. The ISM Services PMI headline rose to 52.5, above the expected 50.8 and the highest estimate of 52.3, after being 50.0 in September. Business activity moved into expansion, 54.3 from 49.9. Employment contracted at a lesser rate (48.2 from 47.2), New Orders accelerated to 56.2 from 50.4, and Prices Paid hit 70.0 from 69.4, the highest reading in three years. Respondents cited tariffs behind the move higher in Prices Paid, while there was no indication of widespread layoffs or reductions in force, but the government shutdown was mentioned several times as impacting business activity and generating concerns for future layoffs. Eleven industries reported growth in October, one more than in September, while the number reporting contraction decreased from seven to six. On prices paid, Oxford Economics says the move higher does not alter their assumption that the tariff-related hit to activity and inflation is close to peaking for the year, but “is a reminder of the upside risks to inflation and another reason for the Fed to be more cautious lowering interest rates from here”. The ADP National Employment for October rose to 42k from -29k, above the expected 28k. Median change in job stayers was unchanged at 4.5%, with job changers rising to 6.7% from 6.6%. Given the US Government is on shutdown, which means a halt to the majority of data, the private ADP report garners more attention and comes under greater focus as the FOMC committee looks to gain a clear picture of the economy. In wake of the metrics there was a marginal hawkish shift in pricing, but nothing dramatic. ADP chief economist Nela Richardson noted that private employers added jobs in October for the first time since July, but hiring was modest relative to what was reported earlier this year. Meanwhile, Richardson adds, pay growth has been largely flat for more than a year, indicating that shifts in supply and demand are balanced. Elsewhere, Oil closed lower by 1.6% while Gold rebounded, ending the day with a gain of 1.4%.
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For anyone following my Platinum Service it made 300 points yesterday and is now ahead by 1235 points for November, 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 0.37% higher at a price of 6796.
The Dow Jones Industrial Average closed 225 points lower for a 0.48% gain at a price of 47,311.
The NASDAQ 100 closed 0.72% higher at a price of 25,620.
The Stoxx Europe 600 Index closed 0.23% higher.
Yesterday, the MSCI Asia Pacific closed 0.7% lower.
Yesterday, the Nikkei closed 2.50% lower at a price of 50,212.
Currencies
The Bloomberg Dollar Spot Index closed 0.05% lower.
The Euro closed 0.02% higher at $1.1484.
The British Pound closed 0.16% higher at $1.3044.
The Japanese Yen fell 0.28% closing at $154.10
Bonds
U.K.’s 10-Year Gilt closed 4 basis points higher at 4.47%.
Germany’s 10-Year Bund Yield closed 3 basis points higher at 2.68%
U.S.10 Year Treasury closed 7 basis points higher at 4.16%.
Commodities
West Texas Intermediate crude closed 1.63% lower at $59.57 a barrel.
Gold closed 1.39% higher at $3986.10 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 Retail Sales at 10.00 am. Next, we have the Bank of England Rate Announcement at 12.00 pm followed by a press conference with Governor Bailey at 2.15 pm. Finally, we have speeches from Fed Members Barr and Williams at 4.00 pm and 4.10 pm respectively.
Cash S&P 500
The S&P 500 finished the day up 0.4%. It had been higher earlier but gave back much of those gains in the final 45 minutes of trading. On the surface, yesterday’s move higher appears to have been mostly options-related. The VIX fell sharply intraday, and it was clear that as implied volatility dropped, the market rallied. Then, as implied volatility rose into the close, the S&P 500 pulled back. It is likely we saw another one of those typical volatility crushes that have occurred frequently since early October. These usually take place on Mondays, but given the large sell-off on November 4, that was probably the main driver of Wednesday’s trading action. Perhaps more importantly, rates on the long end of the curve rose substantially, with the 30-year yield climbing about 8 basis points to close at 4.74%. It appears the 30-year has broken out of a falling wedge, while the RSI has also broken out of its downtrend. Technically, this suggests the 30-year yield could move significantly higher—potentially back toward 5% in the not-too-distant future. That may come as a surprise to many, but that is what the chart is indicating. When you factor in the stronger-than-expected ADP report, the stronger ISM reading, and early signals from the Quarterly refunding announcement suggesting the Treasury may increase coupon sizes in the coming Quarters, there is solid justification for long-end rates to rise. Additionally, based on what I heard during part of the Supreme Court hearing on tariffs yesterday, the outcome did not sound favorable for President Trump. Such a result would represent a major loss of potential revenue and could require the government to increase borrowing to maintain its budget. Overnight funding pressures have eased for now, though that could change in the coming days. The overnight repo rate fell to around 3.94%, marking the first time since the Fed cut rates that it has dropped below 4%. Today is a Treasury settlement day, which means liquidity will be drained from the system. In fact, roughly $23 billion in liquidity is expected to be pulled from the market. Looking ahead, next week could see another $40 billion or so drained from the system, suggesting that overnight repo rates may begin to tighten again as we move toward the end of this week and into next. Based on the current schedule, next week is shaping up to be a fairly sizable settlement week, though we will have better clarity this afternoon. Finally, we may soon find out whether the SoftBank (9984 JP) gamma squeeze is officially over. The stock was hit hard overnight, falling about 10% during the session. It had been down even more earlier, but what we are still waiting to see is whether implied volatility levels begin to fall meaningfully. They did decline slightly overnight, but not enough to confirm anything yet. We will have a clearer picture if the stock continues to drop while implied volatility also falls, which would signal that the gamma squeeze is unwinding. That would likely be a negative development not only for Japan but also for the broader AI trade, as it increasingly appears that this dynamic has been one of the main forces driving global markets lately in my view. Wednesday’s move higher saw the S&P hit my 6763 T/P level on my 6733 long position and I am now flat. There is no doubt that the 6750 area is key support. Today, I will be a small buyer from 6730/6750 with a higher 6705 ‘Closing Stop’. The S&P has resistance from 6850/6870 where I will again be a seller with a 6891 tight ‘Closing Stop’. If I am taken long, I will have a T/P level at 6775. If I am taken short, I will have a T/P level at 6828. If any of the above views change, I will be back with a new update for my Platinum Members.
EUR/USD
I am still flat. The Euro closed below 1.1500 for the second consecutive trading session and is oversold. Today, I will continue to be a buyer on any further dip lower to 1.1370/1.1440 with the same 1.1295 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1520. I still no longer want to be short the Euro at this time.
Dollar Index
The Dollar closed above 100 for the second time since early August. The 14-Day RSI is now approaching 70. As a result, I will be a small seller on any further rally to 100.50/101.20 with the same 101.95 ‘Closing Stop’. Meanwhile, I will continue to be a buyer on any dip lower to 98.50/99.20 with the same 97.85 ‘Closing Stop. If I am taken short, I will have a T/P level at 99.80. If I am taken long, I will have a T/P level at 99.30.
Russell 2000
The Russell never came close to Wednesday’s session before rallying over 1%. I am still flat. The Russell has support below from 2340/2400. I will now raise my buy level to this area with a higher 2285 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2440.
FTSE 100
Frustratingly, the FTSE just missed Wednesday’s buy range before rallying over 150 points. Today, I will move my buy level higher to 9630/9700 with a higher 9575 ‘Closing Stop’. I no longer want to be short the FTSE at this time. If I am taken long, I will have a T/P level at 9760. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow never came close to Wednesday’s buy range, and I am still flat. I am reluctant to chase the Dow higher, preferring to only be a buyer on any dip lower to 46600/46850 with the same 46395 tight ‘Closing Stop’. If I am taken long, I will have a T/P level at 47090.
Cash NASDAQ 100
Frustration! Just like the FTSE above the NDX also missed Wednesday’s buy range by the slimmest of margins before rallying almost 700 points. Subsequently, the NDX had a small sell-off into the close and I am still flat. Today, I will raise my buy level to 25100/25300 with a higher 24965 ‘Closing Stop’. Despite the overvalued market I no longer want to be short the market, waiting for a rebound before initiating a new short position. If this view changes, I will be back with a new update for my Platinum Members. If I am taken long, I will have a T/P level at 25460.
December BUND
The Bund had a small sell-off yesterday. I am still long at a price of 130.00. I will now lower my second buy level to 129.00 with a lower 128.35 ‘Closing Stop’ unchanged. Meanwhile, I will leave 130.20 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
No Change: I am still flat. Today, I will continue to be a buyer on any dip lower to 3865/3895 with the same 3842 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3929. If this view changes, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Frustrating! Silver missed Wednesday’s 46.60 initial buy level by just 14 points before rallying over 150 points and I am still flat. Today, I will continue to be a buyer on any dip lower to 45.60/46.60 with the same 44.45 ‘Closing Stop’. If I am taken long, I will have a T/P level at 47.80.
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