U.S. Equity Markets closed higher for the fourth consecutive session led by the 1.20% gain in the NASDAQ 100. Surprisingly, the VIX also rose, closing higher by 4.74%. Markets were higher as the Federal Reserve of New York’s Consumer Survey showed consumer inflation expectations continued to decline in August across all time horizons with respondents increasingly optimistic about their finances. Investors are focused on this afternoon’s August Consumer Price Index (“CPI”) report and expectations for a month-over-month headline decline. Signs of easing inflation may prompt the Federal Reserve to lean conservatively as they debate a 50 basis points or 75 basis points rate hike at the policy meeting on September 20 and 21. This week, we receive an important indicator for near-term stock market direction. The U.S. Bureau of Labour Statistics releases its Consumer Price Index (“CPI”) and Producer Price Index (“PPI”) growth metrics for August. These two measures are being closely watched by institutional money managers as an indicator of future policy direction from the Federal Reserve. You see, if the numbers tell us inflation is accelerating higher, it signals to Wall Street that the central banks need to raise interest rates faster to strengthen the Dollar and ease the rise in prices sooner. But if the rate of inflation growth is slowing, it signals price stability may be on the horizon. Recent indicators tell us inflation is slowing. And a sustained change means the Fed does not have to increase interest rates as rapidly going forward. That will support a steady long-term rally in the S&P 500 Index. Since the CPI began to rocket higher in April 2021, energy prices have played a major role. In July, overall inflation growth rose 8.5% compared with June’s 9.1% growth and May’s 8.6% growth. However, energy prices – which account for about 9% of the CPI – jumped 32.9% on a year-over-year (“YOY”) basis. The change in energy prices had the largest effect on the overall index. Food prices rose 10.9%, while all items excluding food and energy increased 5.9%. Many economists will argue food and gas prices are not representative of overall inflation because they are so volatile. But these essentials are what we want to pay the most attention to right now. Changes in food and gas prices are taking the biggest toll on households and businesses. And given the outsized jump in gas prices relative to the move in food costs, that is where we will see a shift in the inflation trend first. And recent data indicates gas prices are easing. According to the American Automobile Association (“AAA”), the national average price for a gallon of regular unleaded gasoline in August was $3.97 compared with $3.17 a year ago. That is an increase of 25.2% on a YOY basis. And the current nationwide average in September is $3.74 per gallon, signalling costs continue to slide. But it is still early in the month, so there is no discernable trend yet. However, in June, the peak daily price for gas exceeded $5 per gallon. And the national average was $4.92 per gallon compared with $3.07 per gallon during the same period in 2021. In other words, the month of June experienced 60.3% growth on a YOY basis. In July, those numbers jumped 44%. As we mentioned above, the change drove the CPI higher. You see, gas-price data is updated in real-time, while CPI data isn’t. And based on the up-to-date numbers from AAA, there has been a sharp and steady pullback in fuel costs. That would indicate easing inflation growth. When July ended, the Dallas Fed said gas prices would subtract 2.4 percentage points from the Bureau of Economic Analysis’ personal consumption expenditures (“PCE”) price index. That is noteworthy because it’s the Federal Reserve’s preferred inflation gauge. It uses the metric to make interest-rate decisions. The commentary was an early indicator that inflation measures for the month would still be high compared with last year, but that the rate of growth would ease. CPI figures come out mid-month, while PCE numbers don’t come out until the end of the month. So, on August 10, the July CPI reading was lower than expected, falling back below 9%. It was a similar story when PCE numbers were released on August 26. With August in the books, the Dallas Fed is echoing the same message. It is saying that on a seasonally adjusted rate, last month’s gasoline price index will subtract 3.2 percentage points from headline inflation metrics. All will be revealed at 1.30 pm today and tomorrow. Within the S&P 500, all 11 sectors finished higher. European Markets closed higher. Markets reacted positively to news that Ukrainian forces claimed large-scale success around Kharkiv on the weekend. Following a 0.75% rate hike by the European Central Bank last week, policymakers are becoming increasingly nervous that they will have to hike rates to 2% by the end of the year to curb inflation. Meanwhile, European Commission President Ursula von der Leyen will hold a preparatory meeting of commissioners this week to focus on ways to deal with the energy crisis. In Asia, Despite, market holidays in China and South Korea, equity markets were pushed higher following Wall Street’s strong Friday session. Global supply chains continue to ease as shipping costs sink lower on falling demand. China’s COVID-19 lockdowns worsen following new outbreaks in Beijing. And despite a surge from the Yen on Friday, doubt remains that anything other than actual policy intervention by the Bank of Japan can stop its slide. Elsewhere, Oil rose 1.34% while Gold closed 0.49% higher.
To mark my 2625th issue of TraderNoble Daiy 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 357 points yesterday and is now ahead by 2682 points for 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 1.06% higher at a price of 4110.
The Dow Jones Industrial Average closed 229 points higher for a 0.71% gain at a price of 32,381.
The NASDAQ 100 closed 1.2% higher at a price of 12,739.
The Stoxx Europe 600 Index closed 1.76% higher.
This morning, the MSCI Asia Pacific Index rose 0.4%.
This morning, the Nikkei closed 0.25% higher at a price of 28,614.
Currencies
The Bloomberg Dollar Spot Index closed 0.6% lower.
The Euro closed 0.5% higher at $1.0128.
The British Pound closed 0.6% higher at 1.1701.
The Japanese Yen rose 0.8% closing at $142.45.
Bonds
Germany’s 10-year yield closed 6 basis points lower at 1.64%.
Britain’s 10-year yield closed 3 basis points lower at 3.08%.
US 10 Year Treasury closed 2 basis points lower at 3.32%.
Commodities
West Texas Intermediate crude closed 1.34% higher at $85.44 a barrel.
Gold closed 0.49% higher at $1723.90 an ounce.
This morning on the Economic Front we already had the release of German Final CPI for August which came in as expected at 7.9% Y/Y. Next, we have German and Euro-Zone ZEW Survey at 10.00 am. This is followed by U.S. CPI at 1.30 pm. Finally, we have a 30-Year Treasury Auction at 6.00 pm.
Cash S&P 500
There is no doubt that the last four sessions have been a nightmare for anyone with bearish positions as the S&P has now rallied 245 Handles off last Wednesday’s 3886 low print. The McClellan Oscillator continues to point to higher prices, closing last night at +67. This afternoon’s CPI will give us another ‘’Open Gap’’ event with risk that we can trade as high as 4175 which also matches the 100 Day MA Zone. As inflation expectations are dropping – per my economic commentary above – the case for peak inflation is strengthening. Depending on the size of any miss on CPI, it may also impact the probabilities of a 75-basis point rate hike. This is a problem for the Fed as financial conditions are easing again so why go with anything less than 75bp which would only ease financial conditions further. The 2-hour chart is severely overbought but so far no negative divergence so we may test my 4175 resistance level before having a more meaningful correction. Yesterday my S&P plan worked well as after the market traded the whole of my sell range for a 4108 average short position we fell 20 Handless, enabling me to cover this position at my revised 4092 T/P level and I am now flat. Today, I will again be a seller on any further rally to 4155/4175 with a 4193 ‘’Closing Stop’’. I will now raise my buy level to 4075/4095 with a higher 4059 ‘’Closing Stop’’.
EUR/USD
The Euro hit a high yesterday at 1.0198 before falling 90 points. I am still flat as the market never came close to my buy range. I will now raise my buy level to 1.0030/1.0090. I will continue to have no stop on any long position. If triggered, I will have a T/P level at 1.0160.
March Dollar Index
Finally, the Dollar is weakening, trading at 107.80 as I go to press. I am still short at 107.50 with the same 107.10 T/P level. If this level is filled, I will come back with a new update for my Platinum Members.
Cash DAX
Incredible, the DAX has now rallied over 800 points since last Wednesday for a 6.5% gain as yet again anyone trying to short these markets for any length of time get crushed. I am still flat. Ahead of CPI I will now raise my buy level to 13200/13280 with a 13095 wider stop. I still do not want to be short the DAX at this time.
Cash FTSE
The FTSE rallied to yesterday’s sell range. I am now short at 7450. I will add to this position at 7510 while leaving my 7555 tight stop unchanged. I will now raise my T/P level to 7410.
Dow Rolling Contract
My Dow plan worked well but you had to be quick. After the market hit my 32420 sell level we saw a 150 point sell-off, hitting my revised 32300 T/P level and I am now flat. This morning, the Dow is trading higher at 32500. We have resistance from 32750/32950 where I will again be a seller with a 33125 ‘’Closing Stop’’. The Dow has support from 31900/32100. I will now raise my buy level to this area with a higher 31695 ‘’Closing Stop’’.
Cash NASDAQ 100
The NDX saw follow through after finally breaking its 50 Day MA last Friday (12603). This morning, we are seeing further buying with the market trading at 12780 as I go to press. I am still flat the market. I will now raise my buy level to 12500/12650 with a higher 12395 ‘’Closing Stop’’. I still do not want to be short the NDX at this time.
December BUND
The Bund hit a high yesterday at 144.53, enabling me to cover my 144.15 long position at my 144.37 revised T/P level and I am now flat. Today, I will again be a buyer on any further dip lower to 142.60/143.30 with a 141.95 ‘’Closing Stop’’.
Gold Rolling Contract
Despite the weaker Dollar, Gold is struggling to rally and has underperformed Silver over the past week. I am still flat and I will now raise my buy level to 1695/1710 with a higher 1679 ‘’Closing Stop’’.
Silver Rolling Contract
Finally, Silver rallied to my 19.25 T/P position from my two weeks ago 18.80 long position and I am now flat. We have seen many times over the past few years, that Silver was ready to breakout only to be crushed again. Silver has fallen from a high of $51 in May 2011. In my opinion, Silver is incredibly cheap. Today, I will again look to buy the market on any dip lower to 18.60/19.30 with no stop. If executed, I will have a T/P level at 20.05.
Recent Comments