U.S. Indices sold off on Tuesday, with weakness led by the mega-cap tech stocks, seeing the NASDAQ underperform, with the Financial Times citing the tech weakness to a MIT paper questioning returns from new technology, which has punctured Wall Street enthusiasm. Within the paper, it notes “95 per cent of organisations are getting zero return” from their investments in gen AI”. However, breadth was positive with the equal weight S&P seeing gains, with upside led by Real Estate, Consumer Staples and Utilities – all defensive sectors. Tech and Communication were the clear laggards weighing on the market, although small caps still were hit with the Russell closing red, too. In the risk-off trade, T-Notes trended higher throughout the session, while the data highlights saw a strong beat in Housing Starts but a miss in Building Permits. Meanwhile, in Canada, inflation was softer than expected, seeing traders boost rate cut bets for the Bank of Canada. The focus today remained on Russia/Ukraine progress, although little new information was found, but reports suggest the bilateral meeting between Putin and Zelensky will take place in Budapest, Hungary. Crude prices sold off in a gradual move lower ahead of inventory data, while Gold prices pared early gains as the Dollar moved slowly higher, but gains were capped by strength in the Japanese Yen. Attention turns to Jackson Hole this week, particularly Fed Chair Powell’s speech on Friday, but before that there is the latest FOMC Minutes on Wednesday. US Housing Starts rose 5.2% to 1.428 million from the upwardly revised 1.358 million, above the 1.29 million forecast and the top end of analyst expectations, 1.351 million. Building Permits, which are more forward-looking, fell 2.8% to 1.354 million from 1.393 million, below the 1.386 million forecast. According to the data, Oxford Economics suggest the July pace of permits suggests the pace of starts will not be sustained, but the increase in Housing Starts lends upside risk to their forecast for housing starts and residential investment in Q3. Although housing starts can be volatile, single-family housing starts in July were at a rate of 939,000; 2.8% above the revised June figure of 913,000. The July rate for units in buildings with five units or more was 470,000. OxEco notes that the multistarts can be volatile but have clearly been trending higher in the last few months. Elsewhere, both Oil and Gold closed lower by 1.66% and 0.5% respectively.
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For anyone following my Platinum Service it made 192 points yesterday and is now ahead by 2524 points for August after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 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 0.58% lower at a price of 6411.
The Dow Jones Industrial Average closed 10 points higher for a 0.02% gain at a price of 44,922.
The NASDAQ 100 closed 1.39% lower at a price of 23,384.
The Stoxx Europe 600 Index closed 0.69% higher.
This Morning, the MSCI Asia Pacific closed 0.6% lower.
This morning, the Nikkei closed 1.59% lower at a price of 42,852.
Currencies
The Bloomberg Dollar Spot Index closed 0.05% higher.
The Euro closed 0.07% lower at $1.1651.
The British Pound closed 0.17% lower at $1.3482.
The Japanese Yen rose 0.25% closing at $147.49
Bonds
U.K.’s 10-Year Gilt closed 1 basis points lower at 4.75%.
Germany’s 10-Year Bund Yield closed 3 basis points lower at 2.74%
U.S.10 Year Treasury closed 5 basis points lower at 4.30%.
Commodities
West Texas Intermediate crude closed 1.66% lower at $62.37 a barrel.
Gold closed 0.49% lower at $3316.10 an ounce.
This morning on the Economic Front we already had the release of U.K. July CPI which rose 3.8% versus +3.7%y/y expected. Next, we have German PPI at 8.00 am followed by Euro-Zone CPI at 10.00 am. This is followed by U.S. MBA Mortgage Applications at 12.00 pm. Finally, we have the FOMC Minutes at 7.00 pm and a speech from Fed Member Bostic at 8.00 pm.
Cash S&P 500
The S&P missed Tuesday’s sell range before following the other American Indexes lower. Not a pretty day for the NASDAQ 100 or many of its prominent names. The index fell nearly 1.4%, but in some cases, such as Palantir, the losses were much worse as the stock fell over 9% on heavy volume. The move appeared to be a de-leveraging event, at least from what I could see, and what it looked like, with many of the high-flyers that had driven the Index higher in recent weeks take a hit. I have been telegraphing the liquidity drain hitting the market since mid-July. To be frank, if Tuesday’s decline is tied to that drain—as I believe it is, based on the optics—then this selloff is likely just the beginning of a larger liquidity-driven event. The reverse repo facility is empty, as we have discussed, and the TGA needs to rise back to $850 billion, with $300 billion coming out of reserves and draining liquidity from the system. The other factor is that as the Treasury continues to issue debt over the balance of the year, there will be no reverse repo facility to offset the drain. That means funding will have to come from other sources, one of which could be primary dealer balance sheets. Primary dealers are major participants in overnight repo, but if their balance sheets become saturated with Treasuries, they will prioritise funding those positions, leaving less capacity and higher costs for equity repo. The next big settlement date is on Thursday, which can serve as confirmation of yesterday’s price action or not. As very little is happening in these markets I am of course relegated to talking about theoretical targets for now, but I also think it is good to have a plan for while this market is lulling everybody into numb complacency I have done this long enough to know things could change dramatically on a dime. In spirit of having a plan ready I then note the curious intersection of 3 MA’s in the 5930 area. Currently FAR below the compressed Daily Bollinger Bands such a congregation of key MA’s is quite rare I have to say. The daily 100MA, 150MA, and the 200MA. For now a pure theoretical area, but if we get a trigger they would present a very solid line of support I suppose. And if the S&P were to drop to the 5900 area the quarterly 5EMA would drop lower also into the 5910-5930 area then meeting the daily MA’s. And guess what? A move to there would be a basic 8.5% pullback, WHICH is not even a correction. I know, the very fact it seems entirely unreachable given the current environment says a lot about how skewed sentiment is. Really? Suggesting an 8.5% pullback in the highest valued market in history is somehow out of reach? Yes, I do not buy that for a second. My sense is it could happen very fast; it just needs a trigger. Hence, I want to have at least have the plan ready in case it happens. Given the number of negative divergences in the market at recent highs a sell-off to the 5900/5950 area is due. Before that we have short-term support at the August 1 low of 6208 and the February highs at 6147. I will be a short-term buyer on any dip to the above support levels for a quick bounce. Meanwhile, I will continue to be a seller of rallies. Today, I will lower my S&P sell level to 6438/6458 with a 6473 ‘Closing Stop’. If I am taken short, I will have a T/P level at 6412.
EUR/USD.
The Euro just missed Tuesday’s initial 1.1710 sell level with a 1.1694 high print before trading sideways to lower for the rest of the session. This morning as I went to post the Euro is trading at 1.1625. I will now lower my sell level to 1.1670/1.1750 with a lower 1.1825 ‘Closing Stop’. If I am taken short, I will have a T/P level at 1.1600. I still do not want to be long the Euro at this time.
Dollar Index
Overnight the Dollar finally rallied to my 98.40 T/P level on my latest 98.00 long position and I am now flat. Today, I will again be a buyer on any dip lower to 97.40/98.10 with the same 96.75 ‘Closing Stop’. If I am taken long, I will have a T/P level at 98.70. Given how oversold the Dollar is trading I still do not want to be a seller of the market at this time.
Russell 2000
No Change: I am still short the Russell from last week at an average rate of 2280. Just like the other three main American Indexes, last Thursday’s recovery high in the Russell came with a large negative divergence. Today, I will leave my 2365 ‘Closing Stop’ unchanged while raising my T/P level to 2250. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
FTSE 100
Despite the American Indexes trading lower the FTSE is unchanged from where I marked prices yesterday morning. I am still short at 9185 with the same 9130 T/P level. I will add to this trade at 9255 while leaving my 9305 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
My Dow plan worked well as the market rallied to my 45190-sell level before falling over 400 points. This move lower saw my revised 45068 T/P level triggered and I am now flat. This morning the Dow is trading at 44800. We have short-term resistance from 45100/45350 where I will again be a seller with a lower 45505 ‘Closing Stop’. Given how overbought the Dow is trading I still do not want to be long the market at this time. If this view changes, I will be back with a new update for my Platinum Members. If I am taken short, I will have a T/P level at 44870.
Cash NASDAQ 100
The NDX was hit hard on Tuesday, hitting my 23590 T/P level on my 23620 latest short position and I am now flat. The NDX was weak all-day closing near the lows and is trading at a price of 23300 this morning. This is the type of price action that I am looking for before the market gives its next buy signal. The NDX has resistance from 23500/23650 where I will again be a seller with a lower 23755 ‘’Closing Stop’. If I am taken short, I will have a T/P level at 23350.
December BUND
I am still long the Bund from last Friday at a price of 128.95. I will add to this position on any further move lower to 128.25 while leaving my 127.75 ‘Closing Stop’ unchanged. I will now lower my T/P level to 129.40. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
I am still flat. I will continue to look to buy Gold on any further dip lower to 3275/3295 with a the same 3259 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3318. If this view changes, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Overnight, Silver traded lower to my 37.20 buy level. I am still long and I will add to this position at 36.40 while leaving my 35.25 ‘Closing Stop’ unchanged. I will now lower my T/P level to 37.90. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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