U.S. Equity Markets closed lower for the fourth consecutive trading session, led by the 0.47% fall in the Dow. Markets were lower Tuesday as investors grow anxious ahead of Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium on Friday. August’s preliminary Manufacturing Purchasing Managers’ Index (“PMI”) came in at 51.3, suggesting softening inflation. New Home Sales fell 12.6% in July as new home inventory climbed to nearly 11 months’ supply. U.S. natural gas prices topped $10 for the first time since 2008. Traders and Investment Managers hate uncertainty. You see, when the environment becomes difficult to predict, it is harder for portfolio managers and analysts to model what a company’s earnings power will look like. So those investors have trouble placing a fair-value price-to-earnings multiple on a stock or sector. And when they cannot value an investment, those money managers tend to do one thing… sell first and ask questions later. That way, they have funds to invest when the market turns rather than doing nothing and watching prices drop. They would rather chase an idea higher than sit still and be forced to sell lower. Right now, fund managers are uncertain of the tone Federal Reserve Chairman Jerome Powell will strike during his speech Friday morning. That has led to caution ahead of the event. But the speech is likely to remove a near-term overhang, allowing those money managers to invest once more…Powell is scheduled to speak at 3.00 pm. that day, kicking off the Federal Reserve Bank of Kansas City’s annual Economic Policy Symposium in Jackson Hole. The venue has been used in the past to signal shifts in central-bank policy. Powell’s speech this year will focus on the economic outlook. And that is where the uncertainty lies…The media is saying he will strike a hawkish (inclined to raise rates) tone and use the opportunity to recentre the central bank’s message on fighting inflation. The Bureau of Labour Statistics’ Consumer Price Index reading for July was 8.5%. That is right around 40-year highs. At the same time, U.S. companies added 528,000 new employees last month. That’s not a sign of an economy that is struggling. So, it is understandable why the media has taken a hawkish bent. But hedge-fund positioning has become increasingly cautious ahead of the event. For evidence, we can look at the Commodity Futures Trading Commission’s most recent Commitment of Traders report. The data is released every Friday afternoon. It is a breakdown of ‘’Open Interest’’ held by traders in futures and options positions. In particular, we want to look at the net non-commercial positions because they show us what the speculators are doing. In other words, the bet is made to profit and not to hedge out other activity. This past week’s report is very telling…Speculators are the most long the Dollar since late 2019, the most short the S&P 500 Index since June 2020, and most short 10-year U.S. Treasury futures since this past March. That tells us they are worried about central-bank policy rhetoric growing more aggressive at Jackson Hole. Bond yields and prices have an inverse relationship. If you are worried about yields going up, then you would want to be short bonds because prices will fall. Thought of another way, the coupon payment does not change, but the underlying Dollar price falls – meaning the interest payment as a percent of the value rises. The Dollar is also a play on rising yields. If the Fed is worried about inflation, it will raise interest rates to drive the value of the Dollar higher. By doing so, it encourages foreign investors to buy higher-yielding sovereign debt. U.S. Treasurys are considered one of the safest investments in the world. And as foreign funds and individuals clamour for Dollars to invest, their scarcity increases, driving the value up. Within the S&P 500, seven of 11 sectors finished lower. European Markets closed lower. Euro-Zone business activity declined for second straight month as service sector growth stagnates. Belgian Prime Minister Alexander De Croo said Europe could face consecutive difficult winters and warned of a breakdown within the region’s economic and political alliances. Energy prices remained elevated as Russia says the Nord Stream pipeline will undergo maintenance for three days. In Asia, China announced additional stimulus to ensure support for the struggling housing market. Indonesia’s central bank raised rates by 0.25%. Japanese manufacturing PMI fell to 51 in August, marking the slowest growth in its current 19-month growth period. Experts believe the Bank of Korea will raise rates again on Thursday as inflation remains above 6%. Elsewhere, Oil rose 3.61% while Gold closed 0.69% after the Dollar fell.
To mark my 2600th issue of TraderNoble Daiy 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 45 points yesterday and is now ahead by 578 points for August, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 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 0.22% lower at a price of 4128.
The Dow Jones Industrial Average closed 154 points lower for a 0.47% loss at a price of 32909.
The NASDAQ 100 closed 0.07% loss at a price of 12,881.
The Stoxx Europe 600 Index closed 0.6% lower.
This morning, the MSCI Asia Pacific Index fell 0.5%.
This morning, the Nikkei closed 0.44% lower at a price of 28,328.
Currencies
The Bloomberg Dollar Spot Index closed 0.3% lower.
The Euro closed 0.4% higher at $0.9985.
The British Pound closed 0.4% higher at 1.1795.
The Japanese Yen rose 0.4% closing at $136.85.
Bonds
Germany’s 10-year yield closed 2 basis points higher at 1.33%.
Britain’s 10-year yield closed 6 basis points higher at 2.56%.
US 10 Year Treasury closed 1 basis points lower at 3.04%.
Commodities
West Texas Intermediate crude closed 3.61% higher at $92.66 a barrel.
Gold closed 0.69% higher at $1748.10 an ounce.
This morning on the Economic Front we have German Bund Auction at 10.30 am. This is followed by U.S. Durable Goods Orders at 1.30 pm. Finally, we have Pending Home Sales at 3.00 pm and a Five-Year Treasury Auction at 5.00 pm.
Cash S&P 500
The S&P traded in a narrow range yesterday which was a welcome relief after the drubbing of the previous three sessions. All eyes are on Fed Chair Powell’s speech on Friday. Markets are nervous that rate hikes will be accelerated but my own view is he will slow the pace of tightening given the slowdown in the economy over the past few months. On top of this the market will not be able to take rates higher than 3% going on past experience. This scenario has now been exacerbated by the increase in global debt since the start of COVID. I am still flat the S&P. Today, I will continue to be a buyer on any dip lower to 4092/4112 with the same 4079 ‘’Closing Stop’’. If I am taken long I will have a T/P level at 4140. Remember the Dollar is severely oversold and is trading over 10% lower on a Purchasing Parity Basis. A weaker Dollar is key as it will lead to a rally in both Bond and Stock Markets going forward.
EUR/USD
The Euro made a new 20 year low yesterday, trading below the 2002 low, with a .9901 print. Subsequently we rallied back above ‘’Par’’ before selling off into the New York close and again overnight. With long Euro positions at multi-year lows as mentioned in my Economic Commentary above, I am happy to be long the Euro at a price of 1.0009. The Euro has suffered a peak- to- trough decline of over 20% from its 2021 peak highs to last month’s move lower through parity for the first time since the early 2000s. The Euro is now trading 1.5 Standard Deviations below its 200-Day Moving Average, implying there is a lot of negativity reflected in the price. If you are long Dollars I would certainly look to take your long-term gains at current prices. Given how oversold the Euro is trading I will continue to hold this position with no stop. I will now lower my T/P level to 1.0060. If any of the above levels are hit I will be back with a new update for my Platinum Members.
March Dollar Index
No Change. The last time the Dollar was this overvalued, at the end of 2016, we quickly saw a 10% decline in the Dollar over the following 12 Months. I am expecting a similar outcome, I just do not know what the catalyst will be. Based on a longer-term outlook, the risk/reward is skewed to the downside. In my view, a key source of prior support has disappeared (strong economic growth) and another is fully discounted and may be on the verge of reversing which of course is a divergence in Central Bank rate hike expectations. I am still short the Dollar at an average rate of 107.50. Given how overbought the Dollar is trading I will have no stop on this position, fully believing that we are close to a reversal in the Greenback. I will leave my T/P level unchanged at 106.80 for now.
Cash DAX
No Change. I am still long the DAX at 13270 from Monday with the same 13175 ‘’Closing Stop’’. Meanwhile, I will leave my T/P level the same at 13350.
Cash FTSE
The FTSE again traded in a narrow range. I am still long at 7490 with the same 7540 T/P level. I will add to this position on any further move lower to 7430, with a 7375 stop. If any of the above levels are hit I will be back with anew update for my Platinum Members.
Dow Rolling Contract
Wrong!!. Although the Dow rebounded to a high at 33200, a late sell-off saw the market stop me out at 32995 and I am now flat. The Dow is oversold and approaching key support from 32500/32750 where I will again be a buyer with a 32295 stop. Ahead of Friday’s key Powell speech I certainly do not want to be short the Dow at this time. If I am taken long I will have a T/P level at 32980.
Cash NASDAQ 100
The NDX was the strongest of yesterday’s American Indexes. The NDX had a nice rally to my 12990 T/P level on Monday’s 12925 long position and I am now flat. The NDX has strong support from 12650/12800 where I will be an aggressive buyer with a 12555 tight ‘’Closing Stop’’.
September BUND
The Bund continues to sell-off almost every day since peaking at 160 10 days ago. The Bund has fallen almost 1000 points which is an enormous move. Yesterday’s move lower saw the whole of my buy range filled for a now 150.70 average long position. I will leave my 149.75 ‘’Closing Stop’’ unchanged while lowering my T/P level to 151.35.
Gold Rolling Contract
My Gold plan worked well as the market rallied to my 1751 T/P level on my latest 1739 long position and I am now flat. Today, I will again be a buyer on any dip lower to 1720/1735 with a 1709 ‘’Closing Stop’’. Members.
Silver Rolling Contract
No Change. I am still long from yesterday morning at 18.89 with the same 19.70 T/P level. I will add to this position on any further drop to 18.30 while leaving my 17.95 stop unchanged.
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