U.S. Indices were predominantly green on Monday with the upside led by the NASDAQ 100. Large caps performed well while semis were bid, supported by commentary from Microsoft (MSFT) which is to spend USD 80 billion on AI data centres; attention now turns to CES this week with NVDA CEO speaking overnight. Equity futures were bid early on supported by reports in the Washington Post that US President-elect Trump’s trade policies are going to focus on certain sectors, essentially a watered-down tariff proposal from what Trump was gunning for during the election. However, Trump ultimately refuted the Post’s claims, saying the story that he will pare back his tariff policy is wrong. Initially, stocks, bonds, gold and oil were bought on the reports but had pared from peaks as Trump denied the story. The Dollar saw huge selling initially to see DXY fall from a peak of 109.06 to a low of 107.74, before ultimately paring back above 108. The Dollar was a laggard in G10 FX but the Japanese Yen was the worst performer with Sterling, Canadian Dollar and EUR outperforming alongside the CAD helped by the resignation of PM Trudeau and the Euro supported by hot German inflation. T-notes peaked on the WaPo reports but pared on Trump’s denial and ahead of supply this week with USD 50 billion of corporate issuance expected while there were c. 20 IG deals announced on Monday. The 3 Year note auction ultimately came in soft overall, tailing by 1.2bps ahead of the 10 and 30 Year supply on Tuesday and Wednesday. Elsewhere, the focus turns to the ISM Services PMI on Tuesday and NFP on Friday. There were mixed updates on upcoming Tariffs from the Trump Presidency. Initially, the Washington Post, citing sources, said that Trump aides are looking at universal import duties, but only on certain sectors – where tariffs would be applied to every country, but only cover critical imports, a shift from his promises during the Presidential Campaign which was more aggressive on tariffs. The imports or industries that would face tariffs was not immediately clear, but preliminary discussions focused largely on several key sectors that Trump wants to bring back to the US, including the defence industrial supply chain (through tariffs on steel, iron, aluminium and copper); critical medical supplies (syringes, needles, vials and pharmaceutical materials), and energy production (batteries, rare earth minerals and even solar panels). However, Trump later posted on Truth Social denying that he is going to pare back his tariff policy. The Final S&P global services PMI was revised lower to 56.8 in December from 58.5 but reached a 33-month high following November’s reading of 56.1. Within the report, employment increased for the first time in five months as a renewed rise came as output growth strengthened. In addition, it was the sharpest growth of output and new orders since March 2022 while business confidence was at an 18-month high. There were further signs of cost pressures moderating as the pace of inflation eased for the third consecutive month to the weakest since last February. Within the release, it noted that expectations of faster growth in the new year are based on the anticipation of more business-friendly policies from the incoming Trump administration. Further on the new admin, Cos. suggested that client demand had improved, with customers more willing to commit to new projects following the outcome of the Election. It adds, “survey data point to another robust expansion of the economy in Q4 after the 3.1% GDP growth seen in Q3″, and that “with growth as strong as this, it’s understandable that policymakers are taking a more cautious approach to lowering interest rates”. Fed Governor Cook said the Fed can proceed more cautiously in cutting rates given labour market resilience and stickier inflation, noting that risks to inflation and employment are roughly in balance. She stated it will be appropriate to cut towards neutral over time, noting the labour market has cooled in the past year but it remains solid. She also expects inflation to move down gradually, but unevenly, to the 2% goal. Elsewhere, Oil closed 0.66% lower while Gold was flat.
To mark my 3100th 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 184 points yesterday and is now down 189 points for January after closing December with a gain of 1997 points after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss for August 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 0.55% higher at a price of 5975.
The Dow Jones Industrial Average closed 25 points lower for a 0.06% loss at a price of 42,706.
The NASDAQ 100 closed 1.09% higher at a price of 21,559.
The Stoxx Europe 600 Index closed 0.83% higher.
This morning, the MSCI Asia Pacific closed 0.5% higher.
This morning, the Nikkei closed 1.97% higher at a price of 40,083.
Currencies
The Bloomberg Dollar Spot Index closed 0.63% lower.
The Euro closed 0.65% higher at $1.0388.
The British Pound closed 0.78% higher at 1.2421.
The Japanese Yen fell 0.22% closing at $157.66.
Bonds
Germany’s 10-year yield closed 2 basis points higher 2.45%.
Britain’s 10-year yield closed 2 basis points higher at 4.62%.
U.S.10 Year Treasury closed 2 basis points higher at 4.62%.
Commodities
West Texas Intermediate crude closed 0.66% lower at $73.47 a barrel.
Gold closed 0.1% lower at $2636 an ounce.
This morning on the Economic front we have German, Euro-Zone and U.K. Construction PMI at 8.30 am, 9.00 am and 9.30 am respectively. Next, we have Euro-Zone CPI and the Unemployment Rate at 10.00 am. This is followed by U.S. Trade Balance at 1.30 pm and ISM Non-Manufacturing PMI at 3.00 pm along with the JOLTS Job Openings. Finally, at 6.00 pm we have the Atlanta Fed GDPNOW for Q4.
Cash S&P 500
Although the S&P initially surged to an afternoon high at 6021, it was met by aggressive selling- driving the S&P lower by 60 Handles before having a small rally into its 5975 Chicago close. This close could be significant if it can maintain these highs for the rest of the week. A number of key Moving Averages are located between 5948 and 5965 which most hold for a re-test of Monday’s high. Under the Dow below I have written about the overvalued Mega-Cap stocks. Closely linked to my worry that the U.S. equity bubble may be coming to an end of its runway relates to the Japanese Yen carry trade. For those members who do not understand what the Yen carry trade is, here is how it works. Essentially, you borrow in Japanese Yen (JPY), where interest rates are low, and invest the proceeds in currencies that offer higher returns such as US Dollars (USD). If you can borrow JPY at -0.1%, invest in USD Government Bonds yielding 4-5% and at least partially hedge the currency risk as many sophisticated investors have done in recent years, it appears to be not only a very rewarding trade but also a fairly safe one. And I should stress that the Yen carry trade is not only used when investing in bonds. It also explains much of the equity rally in 2024. Now, let’s look at the implications. If JPY weakens, global liquidity increases, the reason being that investors tend to borrow more, the cheaper the currency is, leading to more capital flowing into financial markets all over the world. The side effect of this dynamic is asset price inflation, as more capital chases the same pool of investments, hence why the end-result may be a bubble. On the other hand, if JPY strengthens, global liquidity decreases. The carry trade is now less attractive, and investors typically begin to liquidate their higher-yielding investments to pay back their JPY loans, which leads to withdrawal of capital from financial markets, effectively reducing global liquidity. The impact? Declining asset prices. The bottom line is that JPY movements act like a liquidity trap and JPY fluctuations will typically affect all risk assets – not just bonds. In July 2024, the Bank of Japan raised Japanese Interest Rates for the first time in 17 years (from 0.00% to 0.25%) and JPY began to rally, which affected financial markets worldwide. Remember the mayhem in early August of last year? My concern now is that the BOJ has a long way to go with respect to its hiking plans and that Japanese Rates will be raised a number of times in 2025 to the detriment of risk assets worldwide. However, overnight the party continues as shown by the 2% rally in the Nikkei which is now back above 40,000. There is no doubt that the JPY is one of the most undervalued currencies on the planet and certainly needs to be watched closely as what happened in August may only be a fraction of a real correction. Yesterday, my S&P plan worked well with the market trading higher to my 6016 sell level before selling off to my 6002 revised T/P level and I am now flat. Today, I will again be a seller from 6015/6035 with a higher 6051 ‘’Closing Stop’’. The S&P has support below from 5930/5945. I will now raise my buy level to this area with a higher 5915 ‘’Closing Stop’’.
EUR/USD
The Euro had a nice rally yesterday trading to a morning high at 1.0436 before having a small sell-off into the New York close. This initial move higher saw my 1.0365 T/P level triggered on my 1.0281 long position and I am now flat. The Euro has support below from 1.0250/1.0320 where I will again be a buyer with a higher 1.1065 ‘’Closing Stop’’.
Dollar Index
Shortly after I posted yesterday morning the Dollar traded lower to my 108.30 T/P level on my latest 108.95 short position and I am still flat. Today, I will again be a seller on any further rally to 108.70/109.40 with a higher 110.05 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 108.20.
Cash DAX
Thankfully we had no sell level in the DAX yesterday as the market rallied over 300 points and I am still flat. It is interesting that the Euro Stoxx 50 Index, which contains 50 blue-chip European stocks, topped out in April 2024, and has not done much since then. Overall, the Euro Stoxx has tracked with U.S. Markets and now it is consolidating. What does that mean for my Market Outlook in 2025? I am not calling for a crash. But when various sectors were once leading and now the European Market is not following, it means we could start the new year with a correction which could surprise some people given the bullish sentiment among investors is still pretty high. The Euro Stoxx closed right near it’s 200-Day Moving Average which means we are now seeing resistance. If we get more follow-through to the downside, we would likely see a corrective move in March and April which no doubt will create a buying opportunity. Yesterday’s higher than expected German CPI had no adverse effect on the DAX with the market now trading at 20160 as I go to press. The DAX has short-term resistance from 20300/20400 where I will be a small seller with a 20505 ‘’Closing Stop’’. I have no interest in chasing the DAX higher from here and I will wait for a decent correction first before going long again.
Cash FTSE
I am still flat as the FTSE traded in a narrow range over the past 24 hours. This morning, the FTSE is trading at a price of 8210 as I go to press. I will leave my buy level at 8080/8150 unchanged with the same 8015 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8205. I still do not want to be short the FTSE at this time. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow hit a rebound high at 43115 before falling 500 points. Subsequently, the Dow recovered 100 points of this loss into its New York close. However, technically it was a nasty reversal as the same theme continues to play out namely a weak Dow as investors buy tech stocks. We are continuing to witness the absurd valuation of U.S. Mega Cap stocks. When I started trading in 1986 I had to listen to investment analysts keep arguing why Japanese Equities were so much better than U.S. equities and why they were not at all overvalued which they appeared to be to me. As you may remember, the Nikkei 225 Index peaked in August 1990 before the bubble burst, a downtown which led to losses of about 80% over the next 19 years. In the years after the Global Financial Crisis, the Nikkei began to recover. However, the old peak of August 1990 was only surpassed in May 2023, almost 33 years later. In other words, it took almost half a lifetime to fully recover from the large losses caused by the burst of the Japanese wealth bubble. I am not saying that the NDX is going to fall 80% but the risk/reward from here in buying these severely overvalued stocks is increasing. People are asking what surprises could happen this year and the blow up of the Mega Cap Stocks are not on anyone’s radar and needs to be watched. This is one of the main reasons why I have been telling members in their 60’s to be careful with their pensions all in one basket namely the equity market as this is no protection as shown by the Nikkei example above. Today, I will now lower my Dow buy level to 42200/42450 with a lower 41995 ‘’Closing Stop’’. The Dow has short-term resistance at its 50 Day Moving Average (43435). I will use any rally to this area (43400/43650) to be an aggressive seller with a 43805 tight ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 43160. If I am taken long, I will have a T/P level at 42640.
Cash NASDAQ 100
I am still flat the NDX as the market never came close to yesterday’s buy range. Today, I will raise my buy level to 21170/21320 with a higher 20055 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 21440. I still do not want to be short the NDX at this time.
March BUND
Wrong! Although the Bund traded in a narrow range yesterday, I was stopped out of my 133.50 average long position at 102.45 and I am now flat. The Bund is oversold having fallen over three hundred points since the beginning of December. The Bund has support below from 131.60/132.30 where I will again be a buyer with a lower 130.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 132.90.
Gold Rolling Contract
No Change: I am still flat Gold despite Friday’s volatile trading session which witnessed plenty of two-way price action. As I am still long Silver, I have no interest in chasing the price of Gold higher. Therefore, I will continue to be a buyer on any dip lower 2575/2591 with the same 2559 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2603.
Silver Rolling Contract
No Change: I am still long Silver at an average price of 30.95 with the same 28.95 ‘’Closing Stop’’. I will leave my 31.40 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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