Equity Markets continue to trade heavy driven by the Dollar making new 10-month highs and Bond Yields trading at levels not seen since 2007. The NASDAQ 100 led yesterday’s decline closing lower by 1.51%. The across-the board sell-off saw the VIX end Tuesday with a 12% gain at price of 18.94. According to a recent Federal Reserve study, most Americans outside of the wealthiest 20% have exhausted their extra savings and have less cash than they did before the pandemic. The study compared Americans’ finances in June 2023 against March 2020, adjusted for inflation. The Fed found that the bottom 80% of income earners were making smaller bank deposits and had reduced liquid assets. While all groups experienced a decline in balances since the 2021 peak, the top 20% still saw an 8% increase in cash savings over the pre-pandemic level. In contrast, the bottom 40% of earners saw an 8% decrease in savings. As excess savings continue to dwindle, analysts have begun to warn of a potential economic downturn. Ford Motor (F) believes there are still “significant gaps to close” on labour negotiations with the United Auto Workers (“UAW”) union. The UAW is seeking wage increases, shorter workweeks, pensions with defined benefits, and to close the wage gap between newer and older employees. Union officials believe they have made real progress with Ford while expanding their strike against General Motors (GM) and Stellantis (STLA). Despite the progress, Ford stated that the issues are interconnected and must be resolved with an overall agreement for mutual success. As negotiations continue, layoffs and shortages will take their toll on both the workers and the automakers. Amazon (AMZN) is set to invest as much as $4 billion in Anthropic, an artificial-intelligence (“AI”) startup, to strengthen its position in the generative-AI field. Under the agreement, Anthropic will migrate the majority of its software to Amazon Web Services (“AWS”) and use AWS’s chips to train its AI models. In addition to being backed by Amazon’s computing power, Anthropic will receive a cash infusion to help pay the high costs associated with AI. The move is seen as a win-win for both parties as the race for superior AI models heats up. European Markets again closed lower. European Central Bank (“ECB”) President Christine Lagarde reaffirmed the bank’s commitment to keeping rates higher as it combats inflation. She emphasised that the ECB would keep the rate sufficiently restrictive for as long as necessary. She also reiterated the importance of quickly getting inflation back down to the central bank’s 2% target. While President Lagarde was steadfast in her comments about inflation, she did recognise the economic challenges posed by high rates, especially for folks with variable-rate mortgages. Global trade volumes have experienced their most significant annual decline in nearly three years. Trade volumes fell 3.2% in July compared with the previous year, marking the largest decrease since August 2020. This follows a contraction of 2.4% in June, exacerbating worries of a slowdown in global economic growth. Higher inflation, prolonged interest-rate hikes, and increased spending on domestic products have all added pressure on global trade volumes. Sentiment indicators suggest that global trade will struggle in the coming months. In Asia, The Chinese property market has taken a turn for the worse as concerns have grown about defaults and liquidity. Year to date, the sector has lost nearly $56 billion. Property stocks saw their largest decrease in nine months, with a Bloomberg Intelligence measure of developer shares falling 7.1%. In particular, shares of Chinese property developer Evergrande (3333.HK) dropped 22% as the company postponed an important creditor meeting to reassess its restructuring plan. Chinese officials are scrambling to mitigate fallout from the property sector to prevent it from affecting commercial banks and home prices. Elsewhere, Oil closed 0.79% higher while Gold closed 0.9% lower at $1900.
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For anyone following my Platinum Service it lost 94 points yesterday and is now down by 397 points for September, after finishing August with 1485 points gain 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 3164 points in February, 4687 points in January 2054 points in December, 4789 points in November and 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 1.47% lower at a price of 4274.
The Dow Jones Industrial Average closed 388 points lower for a 1.14% loss at a price of 33,618.
The NASDAQ 100 closed 1.51% lower at a price of 14,545.
The Stoxx Europe 600 Index closed 0.64% lower.
This morning, the MSCI Asia Pacific closed 0.5% lower.
This morning, the Nikkei closed 1.02% lower at a price of 32,343.
Currencies
The Bloomberg Dollar Spot Index closed 0.18% higher.
The Euro closed 0.2% lower at $1.0570.
The British Pound closed 0.4% lower at 121.54.
The Japanese Yen fell 0.1% closing at $149.01.
Bonds
Germany’s 10-year yield closed 2 basis points higher at 2.82%.
Britain’s 10-year yield closed 4 basis points lower at 4.30%.
U.S.10 Year Treasury closed 2 basis points higher at 4.55%.
Commodities
West Texas Intermediate crude closed 0.79% higher at $90.39 a barrel.
Gold closed 0.9% lower at $1900.10 an ounce.
This morning on the Economic Front we already had the release of German GFK Consumer Confidence for October which came in at -26.5 versus -26.0 expected. Next, we have Euro-Zone Money Supply at 9.00 am. This is followed by U.S. MBA Mortgage Applications at 12.00 pm and Durable Goods Orders at 1.30 pm. Finally, at 6.00 pm we have a Five-year Treasury Auction.
Cash S&P 500
The correlation between the rising Dollar and Higher Bond Yields and the sell-off in the S&P has risen to 90%. There is no doubt that this correlation is keeping the medal to the downside for Equity Markets, but with each passing day the sustainability question increases as does the likelihood of a coming reversal in the both the U.S. Dollar and Treasury Yields. My buy set up is clearly being challenged here in a similar way to last September/ October before the S&P embarked on a 30% rally. In my opinion it is intervention that can flip sentiment as we saw last October when the Bank of Japan bought the Japanese Yen aggressively against the Dollar. Japan’s Finance Minister Suzuki said yesterday ‘’I am watching market trends with a high sense of urgency’’. It was a similar story last October when USD/YEN was also trading at 149 as it is this morning when the BOJ intervened. The S&P tagged its 150 MA at 4267 before a late rally sees the S&P trading at 4289 this morning. I am still long the S&P at an average rate of 4302 after my second buy level at 4293 was triggered. The risk is if the 150 MA does not hold by month-end on Friday with the next risk zone at the 200 MA which comes in at a price of 4195. The $BPSPX RSI closed at 15 which is also a typical buy signal even last year, but now still with positive divergence. As I mentioned yesterday the $NYSI is also maximum oversold while the $NYMO also continues to show positive divergence. These are all the signs one wants to see for a coming sustained low but in the here and now (as we have seen all September) it certainly feels ugly and scary for long positions. I will leave my 4279 ‘’Closing Stop’’ unchanged while lowering my T/P level slightly to 4330. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
No Change. The Euro is trading unchanged this morning at 1.0570. I am still long at an average rate of 1.0621 with the same 1.0525 ‘’Closing Stop’’. The Euro has now fallen over 700 points in the past three months. This is an enormous move resulting in the Daily Sentiment Index closing again last night with a nine print. History tells us that single digit DSI prints leads to strong rallies. I will leave my 1.0675 T/P level unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September Dollar Index
The Dollar hit a 10-month high at 106.32 yesterday. I am still short at 106.00 with the same 105.50 T/P level. I will continue to look to add to the position at 106.60. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
My DAX plan worked well as the market traded lower to my 15270-buy level before rallying to my 15345 T/P level and I am now flat. The recent sell-off in the DAX has been relentless with the market again trading lower this morning at a price of 15220. The DAX is now severely oversold, has support from 15080/15170 where I will be a strong buyer with a lower 14995 ‘’Closing Stop’’.
Cash FTSE
The FTSE is the one market that continues to hold it 200-day Moving Average which is positive. Gilt Yields have fallen over the past week which is a positive divergence in comparison to bond yields in the U.S. and Germany. I am still flat the FTSE and will now raise my buy level to 7500/7570 with a higher 7435 ‘’Closing Stop’’.
Dow Rolling Contract
No Change. I am still long at an average rate of 33910 with the same 34060 T/P level. I will leave my stop at a ‘’Closing Price’’ at 33595. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Wrong! Yesterday’s late sell-off saw my 14765 long position stopped at 14595. However, as bad as it seems the NDX is trading the market continues to hold its August lows even as most indicators are screaming oversold. Subtle but notable: New Highs and New Lows improved as the NDX made slight new lows. As a result of all of the above I have bought the NDX here again this morning at 14585. I will add to this position at 14435 with a 14295 ‘’Closing Stop’’. I will have no T/P level on this position for now. If this view changes, I will be back with a new update for my Platinum Members.
December BUND
The Bund just missed yesterday’s 128.60 buy level before having a small rally into the close. Given how oversold the Bund is trading I have bought the Bund here this morning at 128.90. I will add to this position at 128.10 while leaving my wider 127.35 ‘’Closing Stop’’ unchanged. I will have a T/P level on this position at 129.70. 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 Gold. This morning Gold is trading lower at 1897. We have strong support from 1867/1882 where I will be an aggressive buyer with an 1853 ‘’Closing Stop’’.
Silver Rolling Contract
Despite the stronger Dollar, Silver continues to hold the 23.00 support area. I am still long at 24.05 and I will leave my 24.25 T/P level unchanged. I have had this position for over two weeks now which is too long and I will reassess if this level is triggered. Meanwhile, I will now raise my stop to a ‘’Closing Stop’’ at 22.45. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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