U.S. Indices saw two-way price action on Monday and ultimately closed little changed, albeit the Russell 2000 underperformed. The session started rather sombre with downside in US stocks, bonds and the Dollar in the wake of Moody’s downgrading the US credit rating. This sparked selling in Asia and European sessions, but the downside had largely rebounded throughout the US session to see equities close mixed. T-Notes settled well off the earlier lows while the Treasury curve steepened. There was little US data to digest on Monday, with the focus on the US downgrade, but there were several Fed speakers to digest. The wait-and-see message is still clearly the consensus, but highlights saw Williams describe policy as “slightly” restrictive, while Bostic reiterated he sees one rate cut this year. Crude prices settled green in a very choppy session. Initially, crude was sold on the risk-off conditions, before paring to peaks as risk sentiment improved. However, the conclusion of the Trump/Putin phone call saw pressure in the crude space, with talks between Ukraine and Russia set to begin immediately. In FX, the Dollar was sold, but Antipodes outperformed on the equity rebound. AUD traders’ attention turns to the RBA overnight. New York Fed President Williams noted how recent data has been very good and the labour market is pretty much in balance, noting how the Q1 growth was unusual due to trade issues. He noted it will take some time to get a good read on the economy, and that policy is in a good place. The FOMC Vice Chair said that the Fed policy is “slightly restrictive”. The “slightly” language is a tweak from the “modestly” language he used in April, and also at odds with the “moderately” language others, including Powell, use on the FOMC to describe the state of policy. Although subtle, this might imply that Williams thinks we are now closer to neutral than before, and that rates may need to stay higher for longer at current levels to bring inflation down to target. Williams also repeated that the Fed can take its time to get a good read on the economy, he warned the path forward on policy might not become clearer for months, noting it is not going to be that in June, they are going to understand what is happening, or July. Stressing that it will be a process of collecting data to get a better picture. Meanwhile, Fed Member Bostic speaking on the Moody’s downgrade, said it will cut across economics and financial markets, and it will have implications for the cost of capital and could ripple through the economy. The Atlanta Fed President said they will have to wait between 3-6 months to see how things settle and will have to wait and see about the impact of the downgrade on demand for US debt. Ahead, Bostic added the number of rate cuts this year depends on how things turn out, and the details of the tariffs will matter. He is leaning much more towards only one cut this year because it will take time to understand tariffs. However, it depends on how the trade situation unfolds. Note, in March he pencilled in one rate cut from two in December. On the Fed’s mandate, he added that right now he sees more risk of higher inflation than the employment side, and inflation expectations are moving in a troubling way. On data, he said may be at a point where the distance between sentiment and data starts to narrow, but not there yet, and inventory rundown may be nearing an end. Elsewhere, both Oil and Gold closed higher on Monday by 0.68% and 1% respectively.
To mark my 3175th 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 50 points on Friday and is now ahead by 2335 points for May 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 0.09% higher at a price of 5963.
The Dow Jones Industrial Average closed 137 points higher for a 0.32% gain at a price of 42,792.
The NASDAQ 100 closed 0.09% higher at a price of 21,447.
The Stoxx Europe 600 Index closed 0.13% higher.
This Morning, the MSCI Asia Pacific closed 0.4% higher.
This Morning, the Nikkei closed 0.17% higher at a price of 37,561.
Currencies
The Bloomberg Dollar Spot Index closed 0.58% lower.
The Euro closed 0.61% higher at $1.1226.
The British Pound closed 0.49% higher at 1.3347.
The Japanese Yen rose 0.42% closing at $145.07.
Bonds
Germany’s 10-year yield closed 1 basis points lower at 2.58%.
Britain’s 10-year yield closed 2 basis points higher at 4.67%.
U.S.10 Year Treasury closed 2 basis points higher at 4.47%.
Commodities
West Texas Intermediate crude closed 0.68% higher at $62.84 a barrel.
Gold closed 0.98% higher at $3233.10 an ounce.
This morning on the Economic Front we already had the release of German PPI which fell 0.6% versus -0.3% expected. Next, we have Euro-Zone Construction Output at 10.00 am, followed by Canadian CPI at 1.30 pm. Finally, we have speeches from Fed Members Barkin, Bostin, Collins and Daly at 2.00 pm, 2.05 pm, 2.30 pm and 7.00 pm respectively.
Cash S&P 500
While the recovery in equity valuations over the past five weeks has been impressive, the U.S. Bond Market is seeing something different. Instead of yields falling as equity valuations have recovered, the fixed income market has focused on the shaky and incoherent foundation of the trade conflict, the unimpressive revenues earned from trade taxes and the growing probability that tax legislation will feature a large cut funded by government debt. Given the risks to the economy – a recession still a coin flip this year- and recovery in the equity markets, bond yields should be falling. They are not, and that is because fixed-income investors are sniffing out the logic of economic populism amid a move toward trade protectionism, which strongly implies higher inflation and rising long-term yields. Should Congress approve a large tax cut that is not paid for, do not be surprised if the bond market pushes yields back to the mid-April highs, which captured the pushback against the trade conflict. If investors are looking for a reason to sell in May and go away, it would appear that the bond market might be providing an important forward-looking signal given the plans of the fiscal authority, trade and tax policy. With Money Managers having missed this incredible rally off the April 7 lows they are buying every dip despite equity valuations close to all-time highs. I just cannot be a buyer at these levels without a meaningful Moving Average Tag. However, trying to be short is extremely difficult and stressful. The 14-Day RSI closed at 70 last night while a host of my technical signals are severely overbought as alluded to over the past two weeks. Yesterday, the S&P traded the whole of my sell range for a now 5643 average short position. I emailed my Platinum Members to raise their ‘Closing Stop’ to 5671. This morning, the S&P is trading lower at 5940 as I go to post. I will now have a T/P level on this position at 5932. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
I am still flat the Euro. Today, I will raise my buy level to 1.1080/1.1160 with a higher 1.0995 wider ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1230. I no longer want to be short the Euro at this time.
Dollar Index
The Dollar continues to trade in a narrow range and I am still flat. I will leave my 101.60/102.40 sell level unchanged with the same 103.05 ‘Closing Stop’. If I am taken short, I will have a T/P level at 101.10. I will not chase the market higher as I continue to be a buyer on any dip lower to 98.70/99.50 with the same 96.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 100.20.
Russell 2000
I am still flat. The Russell is trading higher at 2102 this morning. I will continue to be a buyer on any dip lower to 1960/2040 with the same 1895 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2080. I still do not want to be short the market at this time.
FTSE 100
Frustratingly, the FTSE just missed Monday’s buy level by 22 points before rallying 100 points and I am still flat. I will now raise my FTSE buy level to 8560/8640 with a higher 8495 ‘Closing Stop’. If I am taken long, I will have a T/P level at 8695. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Frustrating! The Dow hit a low of 42237 just above my 42220-buy level before surging over 500 points into the close. Today, I will raise my buy level to 42200/42450 with a higher 41995 ‘Closing Stop’. If I am taken long, I will have a T/P level at 42640. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
My NDX plan worked well. The NDX rallied to my 21390-sell level before falling 100 points. This move lower saw my revised 21340 T/P level triggered and I am now flat. Given how overbought the NDX is trading I just cannot be a buyer at these levels. The NDX has short-term resistance from 21500/21700 where I will again be a seller with a higher 21855 ‘Closing Stop’.
December BUND
The Bund rebounded off a low at 129.90 and is trading at a price of 130.70 this morning. I will now raise my buy level to 129.10/129.90 with a higher 128.45 ‘Closing Stop’. I still do not want to be short the Bund at this time. If I am taken long, I will have a T/P level at price of 130.50
Gold Rolling Contract
No Change: Gold fell shy of Thursday’s buy range before rallying back above 3200. I will now raise my buy level to 3120/3145 with a higher 3099 ‘Closing Stop’.
Silver Rolling Contract
I am still long Silver from last week at 32.20. l will add to this position at 31.40 while leaving my 29.95 ‘Closing Stop’ unchanged. I will now lower my T/P level to 32.50. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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