Surging commodity prices are threatening to bring inflation back through a door that investors thought central banks had slammed shut. This is bringing yields higher, Commodities this year already erased much of 2023’s declines, perhaps the most obvious sign that the steepest global interest-rate hikes in a generation failed to substantially slow down the world economy. Little wonder that is accompanied a serious reversal in bets on rapid monetary easing, but investors should be facing up to the potential that any rate cuts that do come will be late and shallow. Economists are again being forced to boost growth forecasts. I looked at the evolution of forecasts for developed-world GDP going back to 2016, in each case looking at projections for the then-current year and running through to late May. Both 2023 and 2024 saw the most rapid upgrades in developed-world GDP estimates over the past decade, outside 2021’s pandemic-stimulus-inspired surge. The shift in forecasting by May for each of those years sustained through to the end, except for 2018, when analysts’ initial optimism unwound in the face of Fed hikes plus trade wars. The regularity with which a range of raw materials has spiked higher this year underscores the way that markets underestimated demand across the global economy. Onshoring, the green transition and increased defence spending all require more raw materials, and they are all also price-inelastic to at least some degree. China’s demand for such things has held up surprisingly well even as its imploding real estate sector hamstrings economic growth — but then it is engaged in a truly massive effort to switch to renewables for power generation. It is also among the many that are boosting military spending, after the post-Covid world fully fractured the ever-closer globalization that first started to crack with Trump-era tariffs. The switch back toward a multipolar world also adds to commodities-driven inflation via supply shocks, like the reduction from Russia and Ukraine of various classes of raw materials and tensions in the Middle East. The reflationary impact of commodities driven by these trends helps explain the pivot toward hawkish holds across key central banks this month. And increased government spending — actual and potential — underscores the upside skew for yields. The continuing supply shock for bond markets is the bulging pipeline of issuance. Even if demand from aging savers is able to absorb the extra debt — and there are those who are turning toward stocks, gold or even crypto instead — more bonds will mean a higher floor for yields absent savage recessions. While there are signs of soft patches across most economies, central banks are mostly insistent they can achieve something close to the soft landing they are aiming for. Add in all that fiscal largess, and the best bonds can hope for is to avoid outcomes that lead to fresh rate hikes. Elsewhere, Oil closed 1.22% higher while Gold ended Monday with a gain of 0.8%.
To mark my 3000th 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 45 points yesterday and is now ahead by 1581 points for May, having finished April with a gain of 4010 points 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 points, 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 0.70% higher at a price of 5304.
The Dow Jones Industrial Average closed 4 points higher for a 0.01% gain at a price of 39,069.
The NASDAQ 100 closed 0.99% higher at a price of 18,808.
The Stoxx Europe 600 Index closed 0.32% higher.
Yesterday, the MSCI Asia Pacific closed 0.3% lower.
Yesterday, the Nikkei closed 0.66% higher at a price of 38,900.
Currencies
The Bloomberg Dollar Spot Index closed 0.13% lower.
The Euro closed 0.1% higher at $1.0857.
The British Pound closed 0.2% higher at 1.2769.
The Japanese Yen rose 0.1% closing at $156.85.
Bonds
Germany’s 10-year yield closed 3 basis points lower at 2.55%.
Britain’s 10-year yield closed 3 basis points higher at 4.27%.
U.S.10 Year Treasury closed 5 basis points higher at 4.47%.
Commodities
West Texas Intermediate crude closed 1.22% higher at $78.67 a barrel.
Gold closed 0.8% higher at $2354.10 an ounce.
This morning on the Economic Front, Fed Members Mester and Bowman are speaking at the early time of 5.55 am. Next, we have German Wholesale Price Index at 7.00 am. At 2.00 pm we have U.S. Housing Price Index and Consumer Confidence at 3.00 pm. Finally, we have a speech from Fed Member Kashkari at 3.05 pm and the Dallas Fed Manufacturing Business Index at 3.00 pm, followed by a speech from Fed Members Daly at 6.00 pm and Cook at 6.05 pm.
Cash S&P 500
I am still flat the S&P as the market never came close to yesterday’s buy/sell levels. When the $NYSI chart is updated later this morning we should see a maximum overbought reading which is another warning sign for bulls. This is not the time for new long positions in my opinion as I prefer to wait for selloffs to position long. The closer we get to the 5400-target level the weekly divergence keeps screaming major caution. This may trigger something sinister if it triggers. I am not necessarily calling for this scenario to play out, but the S&P is potentially setting up for a major risk-off event. One question to ponder: Cash is earning 5% plus in U.S Banks. Risk free. Is it really worth chasing the S&P higher from here with the VIX at 12 and the market trading at 188% Market Cap to GDP. I don’t think so. Ahead of the four Fed speakers today, I will now raise my sell level to 5330/5346 with a higher 5361 ‘’Closing Stop’’. The S&P has short-term support from 5244/5260 where I will be an aggressive buyer with a 5229 ‘’Closing Stop’’.
EUR/USD
Understandably the Euro traded in a narrow range yesterday and I am still flat. I will not chase the market higher, leaving my 1.0740/1.0810 buy level unchanged with the same tight 1.0695 ‘’Closing Stop’’. If triggered, I will have a T/P level at 1.0860.
Dollar Index
I am still flat the Dollar. This morning the Dollar is trading slightly lower at 104.60. I will continue to be a small buyer on any dip lower to 103.60/104.30 with the same 103.15 tight ‘’Closing Stop’’. I still do not want to be short the Dollar at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash DAX
The DAX built on Friday morning’s early sell-off, trading at 18780 this morning as I go to press. I will now raise my buy level to 14550/14650 with a higher 14465 ‘’Closing Stop’’. I still do not want to be short the market at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE is massively overbought, showing a small reversal off the top trend from last week. This could turn out to be a massive wedge which if correct could see strong downside price action. The FTSE has resistance from 8380/8460 where I will be a seller with an 8525 tight ‘’Closing Stop’’. The FTSE has short-term support from 8170/8250 where I will be a small buyer with a wider 8095 ‘’Closing Stop’’.
Dow Rolling Contract
No Change: The Dow ended last week with a loss of 2.33%. This is the first down week for the Dow in six weeks. On Thursday, I discussed short, intermediate and long-term non-confirmations between the Dow Industrials and the Dow Transports. Last week’s closing price in the Transports is the lowest weekly close since Mid-November of last year, 27 weeks ago. The September 2022 closing low were confirmed by both Indexes, which at the time constituted a Dow Theory Bear Market Signal. The new high in the Dow Industrials since then has not been confirmed by the Transportation Average, keeping intact that key signal. This does not convey a healthy and long-lasting uptrend despite the new highs been made in the NASDAQ 100. Thursday’s 800-point fall in the Dow was the largest one-day fall since March 2023. I am still flat as the Dow never came close to my sell range as thankfully, I had no buy level in the Dow. The Dow has strong support from 38600/38850 where I will be a buyer with a 38395 ‘’Closing Stop’’. Given the fact that I am still short the NDX, I will have no sell level in the Dow today despite the number of negative divergences in the Industrials. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
No Change: Despite the aggressive sell-off in the Dow, the NDX reversed Thursday’s sell-off, by closing 1% higher on Friday at a price of 18808. With the NDX having rallied almost 11% in just three weeks I just cannot be a buyer of the market at these levels. I am still short at an average rate of 18385. I don’t normally add to a position that is ‘’offside’’ but I will look to sell the NDX again on any further move higher to 18980 with the same no stop policy for now. I will leave my T/P level on this position unchanged at 18320. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
March BUND
The Bund rallied yesterday, closing at 130.44. I am still long the Bund from last week at an average rate of 130.95. Today, I will leave my T/P level the same at a price of 131.10 while leaving my 129.85 ‘’Closing Stop’’ unchanged. If any of the Above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold just missed Thursday’s buy range before rallying 1% yesterday, sitting at 2350 as I go to press. I will now raise my buy level to 2312/2328 with a higher 2299 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2342.
Silver Rolling Contract
Silver had a nice rally, hitting my 31.30 latest T/P level on last week’s 30.85 average long position and I am now flat. Silver has support from 30.00/31.00 where I will again be a buyer with a lower 29.15 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 31.80.
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