U.S. Equity Markets closed lower on Tuesday with Tech the only sector in the black amid rising yields and recurring geopolitical risk. Fed’s Waller tapered expectations for a deep cutting cycle, giving his first set of public remarks since the end of November, where he said rate cuts could occur “in 2024” – a noted lack of explicitness on timing – whilst also saying the strong economic backdrop means rate cuts should be done “methodically and carefully”, with “no reason” to cut as quickly as in the past, seeing Treasury yields and Fed rate expectations rise, supporting the U.S. Dollar, despite the lowest New York Fed Manufacturing Survey reading since COVID reported earlier in the session. Despite Waller’s comments, a March implied cut remains at c. 70%, although the decline in cuts priced across 2024 is more notable. Oil prices were choppy but ultimately little changed as the surging Dollar and broad risk-averse conditions outweighed escalating geopolitical tensions and further Chinese stimulus reports. In stocks, Morgan Stanley failed to sustain its initial bid after its earnings, while PNC and Goldman Sachs shares traded subdued with neither indicating anything too out of consensus after last Friday’s big bank reports. Apple was weighed on amid reports of iPhone price cuts in China, an unusual move for the Company. BA continues to dip as regulator pressure heightens. Governor Waller gave his first remarks since November in a speech at the Brookings Institution, saying the data received in the last few months – citing Core PCE running close to 2% in the past six months – is allowing the Fed “to consider cutting the policy rate in 2024.” However, he caveated, “concerns about the sustainability of these data trends [low inflation with strong growth and low unemployment] requires changes in the path of policy to be carefully calibrated and not rushed.” Waller previously laid the groundwork for an early 2024 rate cut in November with his comment that there are good economic arguments that if inflation were to continue falling for several more months, then the Fed could lower the policy rate. Thus, his reference here in January to rate cuts being “in 2024” – rather than something more explicit/imminent – was perceived to be a bit of a hawkish backtrack, at least in the immediacy by markets. In addition to his comment that because of the strong economic backdrop, rate cuts should be done “methodically and carefully”, with “no reason” to cut as quickly as in the past, tapering expectations on how deep a rate cut cycle could be. However, some speculate that a March cut could still be in play for Waller, but he is just not tying himself down to it publicly as he awaits the next set of inflation figures, nor to set up a public dissent vs his colleagues – note in his Q&A Waller said the timing of cuts will be up to the deliberations of the FOMC. He said in his speech he will be watching closely the scheduled revisions to the annual CPI inflation due on Feb. 9th, “In mid-February, we will get the January CPI report and revisions for 2023, potentially changing the picture on inflation. My hope is that the revisions confirm the progress we have seen”. Waller said, “When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully.” He concluded, “The healthy state of the economy provides the flexibility to lower the (nominal) policy rate to keep the real policy rate at an appropriate level of tightness. But I will end by repeating that the timing and number of rate cuts will be driven by the incoming data.” Thus, Waller remains wedded to his targeting of stable real rates, which he expressed last year, but those will continue to drift higher if the Fed does not cut rates soon, giving the grounds for speculation that Waller could be in favour of a March cut, data permitting. Elsewhere, Oil fell 0.5% while a surging Dollar, saw Gold closed lower by 1.1%.
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For anyone following my Platinum Service it made 185 points yesterday and is now ahead by 2196 points for January. 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 0.37% lower at a price of 4765.
The Dow Jones Industrial Average closed 231points lower for a 0.61% loss at a price of 37,361.
The NASDAQ 100 closed 0.01% lower at a price of 16,830.
The Stoxx Europe 600 Index closed 0.24% lower.
This morning, the MSCI Asia Pacific closed 0.7% lower.
This morning, the Nikkei closed 0.40% lower at a price of 35,477.
Currencies
The Bloomberg Dollar Spot Index closed 0.90% higher.
The Euro closed 0.7% lower at $1.0875.
The British Pound closed 0.8% lower at 1.2636.
The Japanese Yen fell 0.8% closing at $147.18.
Bonds
Germany’s 10-year yield closed 3 basis points higher at 2.26%.
Britain’s 10-year yield closed 3 basis points lower at 3.79%.
U.S.10 Year Treasury closed 12 basis points higher 4.06%.
Commodities
West Texas Intermediate crude closed 0.5% lower at $72.40 a barrel.
Gold closed 1.1% lower at $2028.10 an ounce.
This morning on the Economic Front we already had the release of U.K. December CPI which came in at +4% versus +3.8% expected. Next, we have Euro-Zone CPI at 10.00 am followed by a 30-year German Bund Auction at 10.30 am. At 12.00 pm we have U.S. MBA Mortgage Applications and Retail Sales at 1.30 pm. This is followed by speeches from Fed Members Bowman and Barr at 2.00 pm. At 2.15 pm we have Capacity Utilisation and Industrial Production. Next, we have the NAHB Housing Market Index at 3.00 pm followed by a speech from ECB President Lagarde at 3.15 pm. Finally, we have the Beige Book at 7.00 pm and a speech from Fed Member Williams at 8.00 pm.
Cash S&P 500
The S&P saw plenty of two-way volatility since yesterday’s commentary. Shortly before lunch the market rallied to my 4767 T/P level on yesterday’s 4757 average long position and I am still flat. Higher Bond Yields on the back of comments from Fed Member Waller sees the S&P trading lower at 4738 this morning. It is worth watching the VIX which surged 9% yesterday, closing at a price of 13.84. I still have a price target for the VIX over the coming weeks above 17. Patience will be the key for Q1. We have a nice start to January by waiting for our buy levels to hit rather than chasing the market. Internally the market is extremely weak as shown by the McClellan Oscillator which closed at -154 last night. The S&P has further support from 4705/4720 where I will be a small buyer with a wider 4689 ‘’Closing Stop’’. Ahead of the Beige Book this evening I will not look to have a short position especially as the MO is only one or two more down days from generating a buy signal. If I am taken long, I will have a T/P level at 4736.
EUR/USD
I am still long the Euro from yesterday morning at a price of 1.0910. I will continue to look to add to this position at 1.0840 while leaving my 1.0795 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 1.0950. If any of the above levels are hit, I will be back with a new update form my Platinum Members.
Dollar Index
The Dollar surged yesterday, and I am still flat as the market never came close to my buy range. This morning, the Dollar is trading higher at 103.50. We have resistance from 104.10/104.80 where I will be a seller with a 105.35 ‘’Closing Stop’’. I no longer want to be long the Dollar at this time. If this view changes, I will be back with a new update for my Platinum Members.
Cash DAX
This morning, the DAX finally hit my buy range for a now 16390 long position. The DAX is oversold having fallen over 700 points in the past 10 days. I will add to this trade at 16310 with a now lower 16265 ‘’Closing Stop’’. I will now lower my T/P level to 16460. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
The price action from a bullish point of view has been dreadful for all of January so far. This morning’s much higher than expected 4% CPI print saw the FTSE hit my buy level at 7480. Given how oversold the FTSE is trading at this time, I will add to this position on any further move lower to 7410, with a now lower 7365 tight ‘’Closing Stop’’. I will lower my T/P level to 7540. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
As I had to go to a work dinner last night, I cancelled my buy range in the Dow in an email to my Platinum Members. For those of you who did buy the Dow the market hit my buy range with a 37200 low print before rallying to 37365 close. Subsequently, we have sold off, trading at 37240 this morning. The Dow has further support lower from 36730/36980 where I will be a strong buyer with a lower 36595 ‘’Closing Stop’’. I no longer want to be short the Dow at this time.
Cash NASDAQ 100
My latest long 16695 NDX position worked well as just before lunch the market rallied to my 16770 T/P level and I am now flat. The NDX has short-term support from 16470/16620 where I will again be a buyer with a now lower 16385 ‘’Closing Stop’’. I still do not want to be short the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members.
March BUND
Higher Treasury Yields saw the Bund hit my buy range this morning. I am now long here at 134.45. The Bund is now short-term oversold. I will add to this trade at 133.75 with a now lower 133.15 ‘’Closing Stop’’. I will now lower my T/P level on this position to 135.00. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
After Gold hit my 2027 buy level I had too many open positions looking for a weaker Dollar. As a result, to reduce risk I covered this long Gold position at my revised 2029 T/P level as emailed to my Platinum Members and I am now flat. Gold has support below from 1990/2005 where I will be an aggressive buyer with a lower 1979 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I still believe in the bull case for this precious metal. I will continue to hold my 24.40 average long position with no stop or T/P level for now. If this view changes, I will be back with a new update for my Platinum Members
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