Stocks slid and Treasuries rose after a gauge of U.S. manufacturing posted the weakest reading since the end of the last recession, fuelling fears of an impending global slowdown and boosting haven assets. The S&P 500 fell the most in five weeks and pushed through a key support level after the Institute for Supply Management’s factory index slipped to the lowest since June 2009. Banks led the decline as rates moved lower, followed by industrial companies. The 10-year Treasury yield tumbled to 1.64% and the US Dollar weakened against major peers. Gold and the Japanese Yen advanced. The weak factory gauge, which came on the heels of similarly disappointing numbers out of Europe on Tuesday, renewed concerns about a global economic slump amid the U.S.-China trade war and sparked another round of speculation about how much the Federal Reserve will cut interest rates this year. Investors may get some signals from the slew of Fed speakers this week, which include Chairman Jerome Powell on Friday, when the latest jobs report will also be released. In other news, European Union governments have discussed giving the U.K. a major concession on Brexit by possibly time-limiting the contentious backstop mechanism for the Irish border, two people familiar with the matter said. A time limit — something the EU has long said was out of the question — would only be on offer if the U.K. accepted a backstop which would keep Northern Ireland in a Customs Union with the bloc. Prime Minister Boris Johnson, who is planning to reveal his own proposals this week, has said he won’t allow the U.K. to be trapped in the backstop, which was agreed to by his predecessor Theresa May but opposed by the British Parliament.
To mark my 1925th 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 lost 89 points on the first trading day for October, having made 1620 points in September, 2387 points in August, 1153 points in July, 1346 points in June,1722 points in May, 955 points in April and 1027 points in March. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Equities
We are clearly seeing a very weak backdrop for manufacturing. The concern is the contagion effect into the services economy, which is the driving force of the U.S. economy. We cannot take this lightly and I think the Fed shouldn’t take it lightly either.
The S&P 500 Index fell 1.2% to close at 2940 which is below its 2947, 50 Day Moving Average.
The Nasdaq Composite Index dropped 1.1%, while the Dow Jones Industrial Average lost 1.3%.
European shares fell the most in almost seven weeks following data that showed the region’s manufacturing sector slumped last month and inflation slowed with the Stoxx Europe 600 Index closing 1.3% lower.
The U.K.’s FTSE 100 Index fell 0.7%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index fell 0.1%.
The Euro rose 0.3% to $1.0929.
The British Pound fell 0.2% to $1.2270.
The Japanese Yen rose 0.4% to 107.68 per dollar.
Bonds
The yield on 10-year Treasuries fell two basis points to 1.64%.
Germany’s 10-year yield rose one basis point to -0.57%.
Britain’s 10-year yield fell one basis point to 0.47%.
Commodities
Gold rose 1% to $1,487.60 an ounce after a volatile trading session.
West Texas Intermediate crude fell 0.9% to $53.56 a barrel.
This morning on the Economic Front we have UK Markit Construction PMI at 9.30 am. This is followed at 12.00 pm by U.S. MBA Mortgage Applications. At 1.15 pm we have the ADP Employment Change followed by the ISM New York Business Conditions Index. Finally, at 3.50 pm we have a speech by Fed Member Williams.
December S&P 500
The weakest U.S. Manufacturing number in ten years turned an early S&P rebound into a bout of heavy selling. The S&P having hit a high of 2994 shortly after the U.S. Markets opened closed sharply lower at 2940 with the S&P now below its 50 Day Moving Average. The VIX rose 13% to close at 18.41 and is now two points above its 50 and 200 Day Moving Averages. We certainly do not want to see a repeat of Q4 2018 when the S&P fell 18%. Yesterday’s sharp move lower saw the S&P trade the whole of my buy range for a 2974 average long position before quickly getting stopped out of this trade at 2961. Subsequently the S&P sold off to my 2944 second buy level and as I had no desire in holding any long position overnight, I emailed my Platinum Members to exit any long position at 2948 and I am now flat. The S&P has support from 2918/2930 and I will be a buyer on any dip to this area with a 2909 stop. I have to respect yesterday’s aggressive sell-off and I will be a small seller from 2960/2970 with a 2978 stop.
EUR/USD
My 1.0895 long Euro position worked well with the market rallying to my 1.0925 T/P level and I am now flat. Given the high DSI reading I will continue to be a buyer on dips in the Euro and today my buy level will be from 1.0870/1.0910 with a 1.0835 stop.
December Dollar Index
It was frustrating to get stopped out of my short Dollar Position at 99.10 on Monday with the Dollar closing lower yesterday. Today I will lower my sell level to 99.05/99.45 with a 99.75 stop.
December DAX
As three of my buy levels in the Indices hit yesterday I did not buy the DAX as I had enough exposure. The aggressive move lower in all Indices happened within a couple of minutes after the ISM was released in the U.S. I am still flat the DAX which has strong support from 12080/12140. I will be a buyer on any dip to this area with a 12035 tight stop.
December FTSE
My FTSE plan worked well with the market trading lower to my 7235 buy level before rallying on the weaker Pound to my 7260 T/P level and I am now flat. Today I will again look to buy the FTSE from 7195/7235 with a 7155 stop.
Dow Rolling Contract
As I was already long the S&P I waited to buy the Dow which I did at the bottom of my buy range at 26750. I lowered my stop to 26650 on this position and this level was quickly hit and I am now flat. The Dow closed at its 50 Day MA of 26570 and this area must hold or we will soon accelerate lower. The fact that we broke the 26750 support area is a worry for the bulls. I have said countless times over the past six months that the U.S. in my opinion is already in recession and yesterday’s awful Manufacturing data enhances this view. Today I will be a small seller from 26760/26910 with a 27050 stop. My only interest in buying the Dow is on a further move lower to 26250/26400 with a 26155 tight stop.
December NASDAQ
My short 7815 NASDAQ position worked well with the market trading lower to my revised 7789 T/P level and I am now flat. The Dow Jones Investment Services Index got hit hard yesterday after an announcement from Charles Schwab that it would soon stop charging commissions for stocks, ETFs and options for online accounts. This pushed the stock 10% lower. Two more online brokers tumbled more, TD Ameritrade and E Trade which closed down 24% and 17% respectively. Today I will again look to sell the NASDAQ on any rally back to 7760/7810 with a 7845 stop. I still do not want to be long the NASDAQ at this time.
December BUND
My Bund plan worked well with the market trading higher to my 174.20 sell level before falling 50 points. Unfortunately I covered this position too early at 174.15 and I am now flat. Today I will again look to sell the Bund from 174.30/174.70 with a 174.95 stop.
Gold Rolling Contract
Gold reversed an earlier sell-off after the equity markets tumbled. I am still flat and today I will move my buy level higher to 1455/1463 with a 1448 stop.
Silver Rolling Contract
The equity sell-off saw Silver rally to my 17.15 T/P level on my latest 17.00 long position and I am now flat. Despite yesterday’s rally Silver is still trading over 12% lower from last month’s high. Today I will again look to buy the market on any dip lower to 16.70/17.10 with a 16.35 stop.
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