U.S. Equity Markets ultimately closed slightly firmer on month/quarter end with the S&P leading the gains following a volatile trading session that witnessed plenty of two-way price action. The majority of sectors closed green with outperformance in Energy, Communication Services, and Real Estate, while Materials, Consumer Discretionary and Staples underperformed. The highlight of the session was Fed Chair Powell, who hinted at a return to 25bp rate cuts after the 50bp move in September. The Fed Chair said the Fed is not in a rush to cut rates quickly, adding that if the economy evolves as expected, that will mean two rate cuts by year-end for a total of 50bps, implying 25bp in November and December. The downplaying of another 50bp cut saw Stocks and Bonds tumble while the Dollar rallied. T-notes settled around lows but stocks managed to claw back the Powell-induced weakness, likely on month-quarter end rebalancing ahead of the close. In FX, the Dollar was bid post-Powell, taking cyclical currencies (NZD, AUD, GBP) off their highs while the Japanese Yen and Swiss Franc saw further weakness. Meanwhile, the Euro was softer vs the Dollar after a cool German inflation report ahead of the Euro-Zone CPI this morning, adding to the string of soft inflation reports out of Spain and France on Friday. Crude prices ultimately settled flat despite geopolitical escalation with a ground invasion from Israel into Lebanon seemingly imminent while it was confirmed over the weekend that Hezbollah leader Nasrallah was killed in the recent strikes. However, despite geopolitical escalation Libyan oil is expected to come back online, offsetting some of the geopolitical risk premium Crude, while Russia’s Deputy Prime Minister Novak suggested that Middle Eastern geopolitical risk is already priced in. Fed Chair Powell largely reiterated his remarks from the September FOMC Press Conference in prepared remarks to the NABE. However, in his interview, he stated that the Fed is not in a rush to cut rates quickly and that if the economy evolves as expected, that will mean two more cuts this year, for a total of 50bps – implying a 25bp rate cut in September and December, leaning back against expectations for another 50bp rate cut. Elsewhere, Powell said that revisions of GDI removed a downside risk that the Fed was considering. He added that upward revisions of Personal Income also removed a possible downside risk, while the savings rate revisions suggest spending can continue at a healthy level. The Fed Chair said he is watching productivity closely, but it is too early to say if the recent improvements will be sustained. On the labour market, he said the level of job creation may not be quite at the point to keep the unemployment rate level in light of rising supply. He also repeated that the labour market is still solid, but it “really has cooled”, and he does not think the labour market needs to cool further to lower inflation. In an exclusive Reuters interview, Atlanta Fed President Bostic said that he is open to another 50bp rate cut if the labour market shows an unexpected weakness. His baseline case is for an ‘orderly’ easing with inflation expected to continue slowing and the job market to hold up. He does not want to get overconfident on inflation given core PCE remains at 2.7%. However, the recent data does show that disinflation is still on track. Bostic added he will be watching upcoming jobs data closely, noting if employment growth slows much below 100,000 jobs, it would warrant closer questioning of what is happening, but he added that business contacts continue to note they do not expect layoffs. Regarding the Dot Plots, Bostic stated he pencilled in just a single further 25bp rate cut this year, beyond the 50bps in September. Meanwhile, his baseline outlook through the end of 2025 would see a policy rate between 3.00-3.25% (vs Fed median of 3.4%), a level that he believes would have a neutral impact on the economy (vs Fed median of 2.9%). Finally, in an interview with FBN, the Chicago Fed President said the Fed is cutting rates because the economy has normalised. He noted the job market is in a steady state and sustainable. Goolsbee sees ‘cautionary’ indicators on the job market, stressing the Fed cannot wait for the job market to weaken before acting. He noted the most important thing about rate cuts is the process of easing, and there will be a lot of rate cuts. Goolsbee acknowledged that inflation is coming close to their target, while the case for cutting rates has been clear and has nothing to do with politics. Goolsbee also said he was worried about the possible continued port shutdown. Elsewhere, Oil closed flat while Gold finally saw some profit-taking closing lower by 0.9%.
To mark my 3075th issue of TraderNoble Daily Commentary I am offering a special 2-Year rate of Euro 2750 for my Platinum Service which includes 1 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 40 points yesterday, ending September with a gain of 4402 points having ended August with a loss of 301 points after closing July with a gain of 1918 points while June closed with a gain of 2074 points, 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 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 0.42% higher at a price of 5762.
The Dow Jones Industrial Average closed 17 points higher for a 0.04% gain at a price of 42,330.
The NASDAQ 100 closed 0.26% higher at a price of 20,060.
The Stoxx Europe 600 Index closed 0.98% lower.
This morning, the MSCI Asia Pacific closed 0.4% higher.
This morning, the Nikkei closed 1.93% higher at a price of 38,651.
Currencies
The Bloomberg Dollar Spot Index closed 0.38% higher.
The Euro closed 0.3% lower at $1.1132.
The British Pound closed 0.1% lower at 1.3370.
The Japanese Yen fell 0.8% closing at $143.55.
Bonds
Germany’s 10-year yield closed 1 basis points lower 2.13%.
Britain’s 10-year yield closed 3 basis points higher at 4.01%.
U.S.10 Year Treasury closed 2 basis points higher at 3.77%.
Commodities
West Texas Intermediate crude closed 0.01% lower at $68.17 a barrel.
Gold closed 0.9% lower at $2634 an ounce.
This morning on the Economic Front we have German, Euro-Zone and U.K. Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. Next, we have Euro-Zone CPI at 10.00 am, followed by U.S. Manufacturing PMI at 2.45 pm. This is followed by JOLTS Job Openings, ISM Manufacturing PMI and Construction Spending at 3.00 pm. Finally, we have the Dallas Fed Manufacturing Index at 3.30 pm and speeches from Fed Members Bostic and Cook at 4.00 pm.
Cash S&P 500
Despite the slew of nearly daily China stimulus announcements, rate cuts, mandated buybacks, bank injections and mortgage reductions not much progress has been made on new highs. The purpose of all of the above is to enhance confidence in the Global Economies resulting in ever widening wealth inequality. All this injection of liquidity completely erased any possible September downside with the late spike in the S&P saw the market rally over 50 Handles into the Chicago close. This move higher saw my sell range triggered for a now 5760 short position. I will add to this trade at 5780 with a now higher and wider 5801 ‘’Closing Stop’’. I will now raise my T/P level to 5742. If any of the above levels are hit, I will be back with a new update for my Platinum Members. Meanwhile, I will continue to be a strong buyer on any aggressive sell-off to 5628/5648 with the same 5606 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5669.
EUR/USD
The Euro continues to find resistance above 1.1210 and I am still flat. However, I will not lower my sell range as I continue to be an aggressive seller from 1.1230/1.1300 with the same 1.1375 ‘’Closing Stop’’. My only interest in buying the Euro is on a large dip lower to 1.0980/1.1060 with a higher 1.0915 ‘’Closing Stop’’.
Dollar Index
To bank some points for yesterday I used the small Dollar rally in the afternoon to exit my 100.30 long position at my revised 100.70 T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 99.60/100.30 with the same 98.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 100.70.
Cash DAX
Yesterday the DAX traded in a narrow range, and I am still flat. Ahead of ECB President Lagarde’s speech this afternoon I will now raise my DAX sell level to 19520/19620 with a higher 19705 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 19450. I still do not want to be long the DAX at this time.
Cash FTSE
The weakness in the FTSE saw the market finally hit my initial 8230 buy level. I am still long with the same 8280 T/P level. I will add to this position on any further move lower to 8150 while leaving my 8065 wider Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow gapped lower at yesterday’s ‘’Open’’, hitting a low at 41929. Subsequently we saw a ferocious buy surge at day’s end which carried the Index back above 42300. The Dow has further trendline resistance at a price of 42628 which may well be tested ahead of a more meaningful sell-off. As a result, I will now raise my sell level to 42600/42850 with a higher 43105 wider ‘’Closing Stop’’. I still do not want to be long the Dow at this time. If this view changes I will be back with a new update for my Platinum Members. If I am taken short, I will have a T/P level at 42380.
Cash NASDAQ 100
I am still flat the NDX as the market has so far fallen 30 points of Monday’s sell range. Today, I will continue to be a seller from 20150/20250 with the same higher 20405 ‘’Closing Stop’’. Despite the positive price action over the past two weeks I still do not want to be long the NDX at this time.
December BUND
No Change: The boring sideways price action in the Bund shows no sign of ending. I am still flat. Given how weak the Dollar is I will now raise my Bund sell level to 135.30/136.10 with a higher 136.75 ‘’Closing Stop’’. I no longer want to be a buyer of the Bund at this time. If I am taken short, I will have a T/P level at 134.80.
Gold Rolling Contract
Gold closed 0.9% lower yesterday as the market tries finally to work off some of its overbought strength. I am still flat. Gold has short-term support from 2570/2588. I will continue to be a buyer on any dip to this area with the same 2559 tight ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2602.
Silver Rolling Contract
No Change: I am still long Silver from early yesterday morning at a price of 31.30. I will continue to look to add to this position on any further move lower to 31.40. I will now lower my T/P level to 31.80. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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