U.S. Equity Markets plunged on Monday with all the main Indices closing lower by 3% as the rout from Friday’s NFP-induced weakness amid fears regarding US growth and a possible recession. Whilst risk averse sentiment and flight-to-quality was somewhat present to start the week, relevant Indices settled well off extremes, highlighted by the US 10 Year yield lower by roughly 4bps and at roughly 3.75%, vs. an earlier low of 3.6670%. In addition, the Dollar Index was lower and around 102.70 at pixel time (Mon low 102.15), with USD/JPY trading between 141.70-146.56, and currently around 145, indicating the size of the moves. WTI and Brent continued its sell off, albeit settling well off worst levels, as the aforementioned global risk-averse sentiment outweighed heightened Middle East tensions, with focus on Iran’s soon coming response to Israel. Elsewhere, Bitcoin plunged beneath 50k, while the VIX soared to 65. The aforementioned moves reversed off peaks after a better-than-expected ISM Services report, whereby the headline rose back above 50, as did business activity, which also saw Fed pricing ‘ease’ back to Friday’s levels, as it its peak money market priced in 130 basis points by year-end and 52 basis points in September. Sectors all closed in the red, with Technology lagging and weighed on by weakness in Magnificent 7 names. On the Fed footing, Goolsbee (2025 Voter) acknowledged he was forbidden to talk about the prospect of emergency cuts, when he was questioned, (implied pricing for a 25bp move in the next week at 60% in the European morning) but made clear that everything is always on the table. Meanwhile, Fed Member Goolsbee spoke on CNBC, whereby he noted the Fed has been in a restrictive position, and you only want to be that restrictive if there is a fear of overheating. On the economy, he noted data does not look like the economy is overheating, and if the economy deteriorates, the Fed will fix it. The Chicago Fed President added the economy is restrictive in real terms, and at the highest in many decades, and you only want to be there for as long as you have to. If we are not overheating, should not tighten restrictiveness in real terms. Regarding the stock market, Goolsbee stated that if the stock market moves gives the Fed indication over a longer arc that we are looking at deceleration in growth, the Fed should react to that. Further on the Fed, when asked about an emergency rate cut, he stated he is forbidden to talk about such things, and everything is always on the table including raises and cuts. Goolsbee reiterated the Fed will not overreact to one month’s data. Finally, and on the labour market, Goolsbee noted the jobs number on Friday was weaker than expected but not looking yet like a recession, must be a little careful in over-concluding about the jobs report, but he did acknowledge the Fed has to pay attention to weakness in the job market. ISM Manufacturing PMI rose back into the expansionary territory at 51.4, above the expected 51.0, and the prior 48.8. Within the report, business activity jumped to 54.5 (exp. 51.5, prev. 49.6), while employment and prices paid lifted to 51.1 (prev. 46.1) and 57.0 (prev. 56.3), respectively. Elsewhere, new orders, backlog of orders, and imports all lifted back above 50, while supplier deliveries fell back into contractionary territory. The report notes, “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for July corresponds to a 0.8-percentage point increase in real GDP on an annualised basis.” On ISM Services, Oxford Economics notes the uptick will do little to reverse market jitters of a recession in the wake of Friday’s employment report, but it aligns with their view of an economy in transition rather than one on the brink of collapse. Looking to the September 18th FOMC meeting, OxEco adds expectations for aggressive rate cuts in September are overdone, and they expect the Fed to move forward with a 25 basis points cut. Further, on the dataset, Oxford adds, as with last month’s decline, it would caution against an overreaction to a single month of data and instead focus on trend, and the six-month moving average remains well above the level that would be consistent with a recession. Elsewhere, Oil closed flat following a volatile session while Gold ended Monday with a 0.7% fall.
To mark my 3025th 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 lost 1958 points yesterday on the first trading day for August after closing July with a gain of 1918 points after closing June 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 3.0% lower at a price of 5186.
The Dow Jones Industrial Average closed 1033 points lower for a 2.6% loss at a price of 38,703.
The NASDAQ 100 closed 2.96% lower at a price of 17,895.
The Stoxx Europe 600 Index closed 2.17% lower.
This Morning, the MSCI Asia Pacific closed 1.5% higher.
This Morning, the Nikkei closed 9.14% higher at a price of 34,333.
Currencies
The Bloomberg Dollar Spot Index closed 0.53% lower.
The Euro closed 1.1% higher at $1.0958.
The British Pound closed 0.7% lower at 1.2767.
The Japanese Yen rose 3.7% closing at $143.90.
Bonds
Germany’s 10-year yield closed 12 basis points lower 2.19%.
Britain’s 10-year yield closed 10 basis points lower at 3.87%.
U.S.10 Year Treasury closed 31 basis points lower at 3.79%.
Commodities
West Texas Intermediate crude closed 0.7% lower at $73.47 a barrel.
Gold closed 0.7% lower at $2410 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders at 7.00 am which rose 3.9% versus +0.5% expected. Next, we have Euro-Zone Retail Sales at 10.00 am followed by U.S. Trade Balance at 1.30 pm. Finally, at 6.00 pm we have a three-Year Treasury Note Auction.
Cash S&P 500
Wrong! The S&P has plunged lower since Thursday’s Daily Commentary. The Japanese Nikkel was the catalyst with yesterday’s 12% fall the biggest rout since the 1987 ‘’Black Monday Crash’’. The Nikkei closed a whopping 12.4% lower as the Japanese Yen rallied to a 7-month high versus the U.S. Dollar. This was the Index’s worst showing in both points and percentage times since the 1987 October Crash which was 37 years ago. All told, since making a high at 40,426 on July 11, the Nikkei stock average is down 27% in a span of just 16 trading days. The Yen carry trade is being reversed and the leverage employed to ‘’goose’’ this trade – borrowing in zero-interest yen and using the borrowed money to buy higher-yielding assets elsewhere – is exacerbating the unwinding and selling pressure. Meanwhile in the U.S. the CBOE Volatility Index (VIX) surged to an intra-day high of 65.73 on Monday which was the highest extreme since the pandemic in March 2020, when the VIX shot up to 85.47 intra-day. The all-time record high VIX is 89.53 on October 24, 2008, during the Great Credit Cris and stock market crash. At yesterday’s low the S&P was lower by almost 470 Handles (9%) since my DC was published on Thursday. Monday was a 90% downside day, indicating heavy selling pressure. On the Big Board, 93.3% of total volume occurred as down volume, while only 6.7% occurred as up volume. In the S&P, 95.6% of the stocks comprising the Index closed the day lower while Breadth on the NYSE was negative by nearly 14 to 1, the strongest downside breadth in over two years. Nvidia the poster child for the AI mania, surged to $140.76 on June 20. Over the past 31 trading days, the stock is down 36% (intra-day Monday) while Apple and Amazon are off 21% and 25% respectively. I suppose the past weekend perfect storm gathered for yesterday’s rout with Nvidia delaying chips, Buffet announcing that Berkshire Hathaway had dumped 50% of its Apple Holding leaving Berkshire with the largest cash balance ever and of course the Bank of Japan losing complete control. This is the worst start to a month for my Platinum Service. After buying the S&P at an average rate of 5492, I was stopped out of this trade on Friday at a price of 5340 for a 1520-point loss. Yesterday, I bought the S&P again and I am now long at an average rate of 5284. I will have a T/P level on this position at 5320. I will have no stop on this position for now. If the S&P falls further, I will look to find a decent support level to add to this trade. The 200-Day Moving Average is below at 5012 which the market came close to filling. Overnight the Nikkei has rebounded over 9% helping the S&P to trade at a price of 5250 as I go to press. As I wrote to my Platinum Members yesterday events like we have seen this weekend CAN be outright bottoms, think COVID and of course the 1987 Crash. But it is not a guarantee. Until markets stabilise there remains risk lower from liquidations, margin calls and carry trade unwinds. But VIX spikes like this led to compression especially as the unspoken financial stability mandate will become front and centre for policy makers across the globe. The 9% rally in the Nikkei is a testament to that. VIX spikes like we saw on Friday and yesterday do not happen very often and is one of the main reasons why I am now long. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
Following much weaker than expected PMI data on Friday the Euro rallied to my 1.0865 T/P level on my latest 1.0820 long position and I am now flat. I am surprised by the extent of the rally in the Euro given the sell-off in risk assets. The Euro has strong resistance from 1.1020/1.1090 where I will be a small seller with a 1.1155 ‘’Closing Stop’’. The Euro has support below from 1.0800/1.0880 where I will be a buyer with a higher 1.0745 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 1.0970. If I am taken long, I will have a T/P level at 1.0930.
Dollar Index
The Dollar got hit hard over the past few days trading the whole of my buy range for a now 103.30 average long position. I am surprised how weak the Dollar is given the sell-off in Equity Markets. I will leave my 102.35 ‘’Closing Stop’’ unchanged while lowering my T/P level to 103.70. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
I was lucky with my DAX exit. After the marker hit my 18280-buy at 17020 before rallying 300 points into the New York close. This is a massive move resulting in a severely oversold market like the American Indexes. As I am now long both the NDX and S&P I will stay flat the DAX as I have no interested in initiating a short position at these levels. If this view changes, I will be back with a new update for my Platinum Members.
Cash FTSE
The FTSE traded the whole of my buy range for an 8255 average long position before rallying to my revised 8282 T/P level and I am now flat. Yesterday’s 3% fall in the FTSE sees the market trading at a price of 8035 this morning. The FTSE has strong support from 7880/7950 where I will again be an aggressive buyer with a lower 7795 wider ‘’Closing Stop’’.
Dow Rolling Contract
Wrong! The Dow traded the whole of Thursday’s buy range for a 40410 average long position before stopping me out of this position on Friday at a costly 39650 and I am still flat. Following yesterday’s continued sell-off the Dow is trading at a price of 38920 this morning. The April low at 37800 should act as strong support on any further dip. Therefore, I will be a small buyer from 37700/37950 with a37495 ‘’Closing Stop’’. If triggered, I will have a T/P level at 38380.
Cash NASDAQ 100
Wow! At yesterday’s low the NDX was a whopping 2000 points lower from where I marked prices on Thursday morning. In points terms this is the largest fall ever in the NASDAQ. I emailed my Platinum Members to buy the NDX and I am now long at an average rate of 18390. I will have no stop on this position for now. My T/P level will be at 18520. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September BUND
Lower Equity Markets saw the Bund trade the whole of my sell range for a now 134.70 average short position. Although the Bund hit a morning high at 136.25 on Monday, a late sell-off saw the Bund close at 134.90. I will now raise my T/P level on this position to 134.20 while leaving my 135.45 ‘’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
My Gold plan worked well as the market traded the whole of my buy range for a 2391 average long position before rallying to my revised 2406 T/P level and I am now flat. In comparison to Silver, buyers continue to buy every dip in Gold as the market makes a series of higher lows. Gold has support from 2370/2385 where I will again be a buyer with a 2357 lower ‘’Closing Stop’’.
Silver Rolling Contract
Silver closed lower by over 4% yesterday. Despite this sell-off Silver is cheap in my opinion. Remember in May 2011, Silver was trading over $50. This morning Silver is trading at 27.30. I am still long at an average rate of 29.80. I will add to this trade on any further move lower to 26.40. I will continue to have no T/P level or Stop on this position. If this view changes, I will be back with a new update for my Platinum Members.
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