Equity futures were choppy but ultimately closed with marginal gains in the S&P, NASDAQ 100 and Dow Jones, although the Russell 2000 again finished in the red. Sectors closed predominantly with gains but Health Care, Communication and Tech saw mild losses, while Financials were flat. The highlights of the session were the S&P Global Flash PMI data for September which saw a poor release out of Europe while the US print was mixed with manufacturing missing, and services beating but with some attention on inflationary commentary within the report. The US data saw two-way price action in T-Notes but they ultimately settled flat ahead of supply this week, as well as a plethora of Fed speak on Thursday and US PCE on Friday. In FX, the Dollar saw marginal gains, primarily supported by the weaker Euro after the aforementioned PMI data while antipodes outperformed. Crude prices ultimately settled lower on disappointing PMI data despite ongoing geopolitical escalation between Lebanon and Israel. Over two speeches on Monday, Kashkari noted that the balance of risks have shifted towards risk of further labour market weakening and higher unemployment. He said a 50bps rate cut was the right decision and reflects progress on inflation and softening of the labour market. He also told CNBC that he would not have argued against 25bps, noting that both 25 or 50bps would have been reasonable, and he thinks that 50bps was a judgement call, with the Fed policy still in a net-tight position. Kashkari’s dot plot is in line with the median, seeing the policy rate at 4.4% at end-2024, and 3.4% at end-2025. When asked about neutral, he said there is a lot of uncertainty about where the Fed will cut to, but he is pencilling in a higher neutral rate than before the pandemic. He stressed it is still too soon to declare victory on inflation, but the disinflationary process appears to be on track. The Fed rate path will depend on the totality of incoming data. He acknowledged that policy remains tight, though it is uncertain on how tight it is, noting that signals on strength of the economy are confusing with GDP and consumer spending surprisingly resilient. However, there is little evidence that recessionary forces are building, or that inflation could surprise to the upside. Kashkari said he would love to get back to a 3.5% unemployment rate, noting how the labour market has not been driving inflation, and it is a lousy forecaster of inflation. Meanwhile Atlanta Fed President Bostic said that the economy is normalising more quickly than previously thought, so monetary policy needs to as well. Bostic supported the 50bps cut as a compromise between remaining uncertainty around inflation and risks to the job market. He also noted that the economy is effectively near conditions that would be considered normal, stressing a half point cut does not lock in a cadence for future rate cuts. On the mandate, Bostic said the Fed is now facing two “largely balanced” risks (vs Fed statement of “roughly in balance”). On the economy, he said that recent data shows him convincingly that the US is on a sustainable path to price stability, noting how price increases have narrowed and become concentrated in housing. He added the low recent levels of some recent inflation indicators portends well, noting how business leaders say pricing power has all but evaporated. On employment, he said the labour market is weakening, but it is not weak. Businesses are becoming more careful in hiring, but they are not considering layoffs. Bostic warned that risks to the labour market have increased, with the possibility of broad weakness higher than a year ago. On rates, he said the disagreement over the neutral rate is inconsequential when rates are this high. In the Q&A, Bostic added the recent dots show a “fair amount” of dispersion in opinion at the Fed, noting the range of views over the path forward and debate over neutral is robust. Bostic added that the Fed is not in a mad dash to neutral and he is in favour of not rushing to judgment or assuming the job is done on inflation. Bostic feels neutral is in the 3-3.25% range (above the median Fed dot plot of 2.9%). Bostic also stated that he previously had been concerned that rate cuts would unleash pent-up demand, but that may be substantially less than thought, note how levels of excess cash has diminished for many households, but some still have cash on hand and that could fuel demand. He expects choppiness on inflation going forward, and he will wait and see what is needed on rates, but if the labour market deteriorates, that is a reason for a faster pace to neutral, but that is not the baseline. Finally, the Fed’s Goolsbee stated that many additional rate cuts will likely be needed over the next year, stressing the need for rates to be lowered “significantly”. He was comfortable with the Fed’s 50bps rate cut, noting how it shows the Fed is focused on risks to employment, not just inflation. Goolsbee acknowledged that inflation is well down from its peaks and the labour market is at full employment, stating how the Fed cannot be behind the curve if the Fed is to reach a soft landing. He said that until the recent rate cut, falling inflation meant the Fed was tightening policy, and a 50bps rate cut made sense as the Fed shifts back to normal mode. On the neutral rate, he said rates are still hundreds of basis points above neutral, but if conditions continue like this, there are lots of cuts to come over the next 12 months. He noted how the Golden path is in the books and inflation came down without a recession last year, although a 0.7% increase in the unemployment rate is usually a warning sign of a recession, adding the rise in delinquencies is also a warning sign. The Chicago Fed President added that directionally, unemployment is increasing, but the level is still low. GDP growth, consumer spending and wage growth has been strong, but they are currently in a little bit of a cautionary period. Goolsbee is monitoring office building vacancy rates and making sure banks provision for any CRE losses. S&P Global Manufacturing Flash PMI for September unexpectedly fell to 47.0 from 47.9 (exp. 48.5), while Services declined less than forecast to 55.4 (exp. 55.2, prev. 55.7), which meant Composite marginally dipped to 54.4 from 54.6. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “The early survey indicators for September point to an economy that continues to grow at a solid pace, albeit with a weakened manufacturing sector and intensifying political uncertainty acting as substantial headwinds.” He further adds, the sustained robust expansion of output signalled by the PMI in September is consistent with a healthy annualised rate of GDP growth of 2.2% in Q3, but there are some warning lights flashing, notably in terms of the dependence on the service sector for growth, as manufacturing remained in decline, and the worrying drop in business confidence. Lastly, on prices, Williamson adds “Prices charged for goods and services are both rising at the fastest rates for six months, with input costs in the services sector rising at the fastest rate for a year.” Elsewhere, Oil closed 0.80% lower while Gold was flat.
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 225 points yesterday and is now ahead by 3379 points for September 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 0.28% higher at a price of 5718.
The Dow Jones Industrial Average closed 61 points higher for a 0.15% gain at a price of 42,124.
The NASDAQ 100 closed 0.31% higher at a price of 19,852.
The Stoxx Europe 600 Index closed 0.40% higher.
This morning, the MSCI Asia Pacific closed 0.3% higher.
This morning, the Nikkei closed 0.72% higher at a price of 37,996.
Currencies
The Bloomberg Dollar Spot Index closed 0.10% higher.
The Euro closed 0.25% lower at $1.1122.
The British Pound closed 0.2% higher at 1.3351.
The Japanese Yen rose 0.3% closing at $143.31.
Bonds
Germany’s 10-year yield closed 5 basis points lower 2.16%.
Britain’s 10-year yield closed 2 basis points higher at 3.92%.
U.S.10 Year Treasury closed 2 basis points lower at 3.73%.
Commodities
West Texas Intermediate crude closed 0.79% lower at $70.44 a barrel.
Gold closed 0.1% lower at $2626 an ounce.
This morning on the Economic Front we have the German IFO Survey at 9.00 am. This is followed by U.S. Index at 2.00 pm. Next, we have Consumer Confidence and the Richmond Fed Manufacturing Index at 3.00 pm. Finally, at 6.00 pm we have a Two-Year Treasury Auction.
Cash S&P 500
The S&P made a new closing high yesterday but not a new intra-day high, which is still last Thursday. I am still seeing a number of negative divergences despite the S&P again closing higher. After the S&P hit my 5723-sell level the S&P fell 15 Handles. This move lower saw my revised 5712 T/P level triggered and I am now flat. Per yesterday’s S&P Daily Commentary I will continue to be a seller of rallies as we are now approaching the seasonally weak election timeframe. The S&P has further resistance from 5732/5752 where I will be a seller with a higher 5771 ‘’Closing Stop’’ I will continue to be a small buyer on any large dip lower to 5606/5622 with a 5589 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 5635. If I am taken short, I will have a T/P level at 5715. If I am taken long, I will have a T/P level at 5638.
EUR/USD
I am still flat the Euro as the market has surprisingly traded in a narrow range over the past four trading sessions. The Euro has resistance from 1.1210/1.1300 where I will be an aggressive seller with a 1.1375 ‘’Closing Stop’’. My only interest in buying the Euro is on a large dip lower to 1.0970/1.1050 with the same 1.0895 ‘’Closing Stop’’.
Dollar Index
My 100.50 latest long Dollar position worked well as the market rallied to my 100.90 T/P level and I am now flat. The Dollar hit an intra-day high at 101.20 before selling off to sit at 100.90 this morning. The Dollar has support below from 99.70/100.40 where I will again be a buyer with a lower 99.15 ‘’Closing Stop’’.
Cash DAX
I have never seen a market that just ignores any negative data as is the situation with the German DAX. Awful PMI data yesterday saw the DAX fall 120 points after I posted yesterday morning before rallying over 250 points off the morning low to sit at 18940 this morning. This move higher has me short at a price of 18920. I will add to this position at 19020 with a now higher 19105 ‘’Closing Stop’’. I will now raise my T/P level to 18840. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
Overnight the FTSE rallied to my 8270 T/P level on my latest 8240 long position and I am now flat. The FTSE has short-term support from 8170/8240 where I will again be a buyer with the same 8095 ‘’Closing Stop’’. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow made a new intra-day high yesterday at a price of 42190. This latest high was unconfirmed by the intra-day extremes in every other major U.S. Index. The NYSE Advance/Decline Ratio was essentially flat. The weight of evidence still points to an impending decline. The problem is the ‘’When’’ and from ‘’Where’’. This morning the Dow is trading at a price of 42124. The Dow has further resistance from 42300/42550 where I will continue to be a seller with the same 42705 ‘’Closing Stop’’. I still do not want to be long the Dow at this time. If I am taken short, I will have a T/P level at 42090.
Cash NASDAQ 100
Yesterday’s move higher in the NDX saw the market hit my sell range for a 19880 short position. I am still short and I will add to this position on any further move higher to 20040. I will now raise my T/P level to 19800 while leaving my 20155 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
No Change: Bond yields are higher following the Fed’s 50bp rate cut. I am still flat the Bund as the market again fell shy of last week’s buy range. I will continue to be a buyer from 132.50/133.30 with the same 131.85 ‘’Closing Stop’’. I will now raise my sell level to 135.10/135.90 with a higher 136.55 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 133.80. If I am taken short, I will have a T/P level at 134.60.
Gold Rolling Contract
There is just no end to the Gold rally. Gold is now up over 28% for the year. I have no interest in chasing the Gold market higher why the risk/reward in being short is not worth it give the insane appetite for investors and traders to buy every dip. Gold has support from 2540/2556 where I will be a small buyer with a higher 2528 tight ‘’Closing Stop’’.
Silver Rolling Contract
My Silver plan worked well as the market sold off to my 30.40 buy level before rallying to my revised 30.85 T/P level and I am now flat. Silver has support below from 29.60/30.40 where I will again be a buyer with the same 27.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 31.05
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