U.S Indices closed lower on Friday but well off earlier lows, which were induced after US President Trump touted a 50% straight tariff on the EU. On top of this, and weighing on stocks, was US President Trump suggesting at least 25% tariffs on Apple if it does not sell and manufacture iPhones in the US. Nonetheless, after the cash equity open and through the US session, risk sentiment improved to see US equities pare a large chunk of their losses, albeit seemingly not over a single headline driver, ahead of the long weekend due to US Memorial Day and UK May Bank holiday. Back to sectors, there were mixed but the aforementioned Tech lagged, while Utilities was the clear outperformer with names such as Constellation Energy supported in wake of Trump signing a nuclear energy executive order. Elsewhere, the Dollar plunged to the benefit of all G10 FX, snapping a four-week winning streak as fears over US economic growth reared in ugly head given fresh tariff concerns. High-beta FX outperformed, and relative underperformance was seen in the Euro due to the increased aggression from Trump. Treasuries were firmer across the curve and caught a bid on fresh Trump tariff threats, but Treasuries did pare some of the move as equities moved off lows, meanwhile, the inflationary impact of aggressive tariffs may have also been a reason for the downside. The crude complex was choppy but ultimately ended the day with gains as some desks cited short covering into the long weekend and Iran/US nuclear talks, whereby rhetoric seemed more constructive highlighted by a senior US admin official noting US-Iran talks continue to be constructive and they made further progress. There was no tier 1 data to end the week, while there was plenty of Fed speak but did little to move the dial, with more details below. New Home sales in April rose by 10.9%, accelerating from the prior 2.6% rise to 743k units from the revised down 670k, above the expected 693k. The supply of new homes fell to 8.1months worth from 9.1 months worth in March. Regarding the increase, Oxford Economics highlight how home builders have been offering price concessions to encourage sales and Y/Y new home prices declined for a fourth straight month. Looking ahead, OxEco “expect the pace of sales to weaken in the months ahead, given our forecast for the economy and labor market to soften while mortgage rates stay elevated.” Fed Member Goolsbee said businesses are telling the Fed they want consistency in policy before making big decisions; there is anxiety among firms that continued tariff announcements would disrupt the supply chain and lead to a rising price environment. In the short run, the Fed needs to wait for the dust to clear; the bar for action is higher until that happens. On the recently touted Trump 50% tariffs on the EU, Goolsbee said it is an order of magnitude different from the current situation, and tariff rates that high would be scary for the supply chain. The Chicago Fed President fears that the data is lagging, and upcoming reports will show a more serious impact from actions already taken. Thus far, he believes finance stability worries are overblown, and if there were a crisis over US fiscal stability, interest rates would be moving higher. Concerning the policy path, rate cuts are still possible over a 10-16 month horizon, but if tariffs have a stagflationary impact, then that is the Fed’s worst situation. Ultimately, Goolsbee still believes the economy remains strong, yet he is going to have to reassess his long-term views. Meanwhile, Fed Member Schmid said when deciding monetary policy, the Fed needs to be careful how much weight to put on soft data; will lean heavily on hard data when making interest rate decisions, allowing for less focus on forecasts. On rates, the Kansas Fed President noted nothing good happens when rates hit the zero lower bound, and cutting to zero again would probably mean there is a crisis; hopefully, the Fed is approaching a more range-bound, normalised rate curve. Finally, Musalem stated business execs are trying to figure out how to manage uncertainty about supply chains, inventory, and inflation. The St Louis Fed President expects higher prices for inputs and outputs, and the Fed is watching that carefully. Musalem does not want a rise in short-term inflation expectations to bleed into longer-term ones, and said GDP is close to potential, the labour market around full employment, and inflation still above target. Elsewhere, Oil closed flat while Gold was weak, ending Monday’s session with a loss of 0.5%. President Donald Trump announced just after 6pm on Sunday that the US will delay the implementation of a 50% tariff on European Union products to July 9 from June 1. Sunday’s decision to extend the tariff deadline was made after a phone call with European Commission President Ursula von der Leyen earlier in the day and comes after Trump unexpectedly threatened duties of 50% on the EU on Friday morning. The move surprised European officials who thought they were making progress with his administration on talks to avert the 20% “reciprocal” tariffs Trump announced in April, and then paused for 90 days. The S&P Futures Market rallied 1.3% on the news while the DAX ended Monday’s session with a gain of 1.6%.
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 395 points on Friday and is now ahead by 3155 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 0.67% lower at a price of 5802.
The Dow Jones Industrial Average closed 256 points lower for a 0.61% loss at a price of 41,603.
The NASDAQ 100 closed 0.93% lower at a price of 20,915.
The Stoxx Europe 600 Index closed 0.99% higher.
This Morning, the MSCI Asia Pacific closed 0.7% higher.
This Morning, the Nikkei closed 0.39% higher at a price of 36,683.
Currencies
The Bloomberg Dollar Spot Index closed 0.12% lower.
The Euro closed 0.15% higher at $1.1380.
The British Pound closed 0.12% higher at 1.3558.
The Japanese Yen rose 0.42% closing at $142.78.
Bonds
Germany’s 10-year yield closed 9 basis points lower at 2.56%.
Britain’s 10-year yield closed 8 basis points lower at 4.68%.
U.S.10 Year Treasury closed 8 basis points lower at 4.51%.
Commodities
West Texas Intermediate crude closed 0.07% higher at $61.57 a barrel.
Gold closed 0.51% lower at $3340.10 an ounce.
This morning on the Economic Front we have Euro-Zone Consumer Confidence at 10.00 am followed by the U.K. CBI Trade Survey at 11.00 am. Next, we have U.S. Durable Goods Orders and Wholesale Inventories at 1.30 pm. At 2.00 pm we have the House Price Index. Finally, we have Consumer Confidence at 3.00 pm, the Dallas Fed Manufacturing Business Index at 3.30 pm and the Atlanta Fed GDPNOW at 4.30 pm. Meanwhile Fed Member Williams is due to speak at 8.00 pm.
Cash S&P 500
The primary focus this coming week will remain on the bond market, with the Treasury auctions drawing significant attention. This evening, the Treasury will auction a 2-year note, followed by a 5-year note on Wednesday and a 7-year note on Thursday. These auctions should fare better than last week’s poorly received 20-year auction. Still, they take place at 6.00 -pm and could have a substantial market impact, especially if they go poorly. The most recent steepening in the yield curve has come from the back end, as the 10-year and 30-year yields have risen sharply. Both fundamental and technical indicators suggest these rates could climb even higher. However, short-end rates may also rise in the near term based on technical signals. The RSI on the 2-year yield is trending higher and has turned an important corner, suggesting bullish momentum. Additionally, the 2-year downtrend has broken to the upside and is now consolidating inside a wedge, which could be forming a bull pennant. A breakout above 4% could send the 2-year yield toward 4.25%. Following the Trump EU Tariff announcement the S&P got hit hard on Friday, closing below its 10 -Day Exponential Moving Average for a third consecutive trading session. This move lower saw the S&P find strong support at its 200 Day MA (5773) with a 5743 low print before rallying 60 Handles off this low into the close. This move lower saw the whole of my buy range triggered for a 5763 average long position. As I wanted to be flat over the weekend, I covered this position at my revised 5792 T/P level and I am now flat. Just as the Futures Markets opened on Sunday evening at 11.00 pm, President Trump announced an extension of his 50% EU Tariffs until July 9 and the S&P surged, trading at 5970 this morning having hit a high at 5981 yesterday. The S&P has now rallied almost 1200 Handles off its April 7 low as my theme of ‘’Nothing Matters’’ continues. No matter what the news the buy the dip mentality shows no sign of ending anytime soon. A number of my technical signals are severely overbought. For this reason I will continue to sell any rips in the market with tight stops. The aggressiveness of the rally of Friday’s low suggests that any dip to close Friday’s 5900 ‘Open Gap’ will be bought. Today, I will be a buyer from 5890/5910 with a 5969 ‘Closing Stop’. The S&P has strong resistance from 6005/6025 where I will be a seller with a a higher 6041 ‘Closing Stop’. If I am taken long, I will have a T/P level at 5935. If I am taken short, I will have a T/P level at 5987.
EUR/USD
My Euro plan worked well as the market sold off to my 1.1260 buy level before rallying to my revised 1.1310 T/P level and I am now flat. Despite the comeback rally in the American Equity Markets the Dollar continues to trade sideways near its low for the year. This morning, the Euro is trading at 1.1380. We have resistance from 1.1450/1.1530 where I will be a seller with a 1.1605 ‘Closing Stop’. If I am taken short, I will have a T/P level at 1.1380. I no longer want to be long the Euro at this time.
Dollar Index
The Dollar traded lower to my 99.20 buy level. I am still long. I will continue to look to add to this position at 98.40 while leaving my 97.75 ‘Closing Stop’ unchanged. I will now lower my T/P level to 99.60. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Russell 2000
I am still flat. The Russell just missed Thursday’s 2020 buy level by two points before rallying 60 points yesterday morning. I will not chase the market higher, leaving my 1940/2020 buy level unchanged with the same 1895 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2070. I still do not want to be short the market at this time.
FTSE 100
My FTSE plan worked well as the market sold off on Friday to my 8650-buy level before rallying to my revised 8705 T/P level and I am now flat. Trump’s U-turn on Sunday night sees the FTSE trading higher at a price of 8785 this morning. The vertical rise in the FTSE over the past few weeks is not sustainable recording a number of negative divergences over the past 10 days. The FTSE has resistance above from 8810/8890 where I will be a seller with a 8965 ‘Closing Stop’. I no longer want to be long the FTSE at this time. If I am taken short, I will have a T/P level at 8750.
Dow Rolling Contract
The Dow missed Thursday’s buy range by just 100 points before rallying over 800 points and I am still flat. I will now raise my buy level to 41200/41450 with a higher 40995 ‘Closing Stop’. The Dow has short-term resistance from 42300/42550. I will now raise my sell level to this area with a higher 40695 ‘Closing Stop’.
Cash NASDAQ 100
I am still flat the NDX. Given how overbought a number of my tech signals are currently I will continue to be a seller of the NDX on any further rally to 21340/21520 with the same 21705 ‘Closing Stop’. If I am taken short, I will have a T/P level at 21205. Despite the aggressive buying of the NDX on Friday morning, I still do not want to be long the market at this time.
December BUND
Lower Treasury Yields sees the Bund trading 11 basis points lower from where I marked prices last Thursday morning. I am still flat. I will now raise my buy level to 129.00/129.80 with a higher 128.35 ‘Closing Stop’. If I am taken long, I will have a T/P level at 130.50. I still do not want to be short the Bund at this time.
Gold Rolling Contract
I am still flat. I will not chase Gold higher as I leave my 3220/3245 buy level unchanged with the same 3199 ‘Closing Stop’.
Silver Rolling Contract
I am still flat. Silver has short-term support from 31.80/32.80. I will now raise my buy level to this area with a higher 30.35 wider ‘Closing Stop’. If I am taken long, I will have a T/P level at 33.60.
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