U.S. Equity Markets closed lower for the third consecutive trading session, led by the 1.13% fall in the NASDAQ 100. Markets turned lower Tuesday as investors grew nervous following reports of Taiwan firing live rounds at a Chinese drone flying in its sovereign airspace. Elsewhere, stronger U.S. labour-market and Confidence data helped to put some upward pressure on Bond Yields. August Consumer Confidence figures improved as fears of rising inflation lessened. The Job Openings and Labour Turnover Survey showed rare strength for the domestic economy, while home prices incurred the first monthly decline in 32 months. The transport of goods is quickly improving…Recent delivery-time data indicate the flow of goods is improving once more. Typically, that means demand for all types of goods is falling and costs should drop. You see, when transportation companies’ services are in high demand, that means their available capacity to ship goods is low. And with space usually confined, they can charge companies more to move cargo. In a strong economy, it is likely that there is always another company waiting to use that same space to ship their goods. So as a result, costs go up. Yet, high prices typically lead to a boom in the number of companies willing to ship goods. After all, with strong prices and high demand, individuals see an opportunity to make more money. In April, the International Air Transport Association (“IATA”) said North American air cargo capacity was up 5.2% compared with the year prior, despite all the headaches with travel. The problem is the change eventually leads to increased available capacity. That means prices will fall when the environment turns. Now, with economic activity slowing and so less need for their services, shippers become more willing to transport items. If demand drops far enough, transportation companies will cut margins to keep the cash flow coming in the door and employees paid. The IATA said cargo numbers fell 9.1% year over year in April, dropped another 8.3% in May, and slid 6.4% in June. As it becomes easier to send and receive items, costs for everything will fall. The change will weigh on inflation growth. A sustained move lower in cost growth will support a longer-term rally in the S&P 500 Index… During the COVID-19 pandemic, Congress and the Federal Reserve pumped the financial system and economy full of stimulus. They wanted to stave off a depression, so they threw money at the problem. With tons of dollars readily available, they became cheap to borrow and easy to access. And with no one traveling and everyone stuck in their homes, demand for all types of goods exploded. But all of that new demand came at a cost… The supply chain was overwhelmed. Manufacturers could not keep up with new orders and the delivery companies could not either. If buyers wanted something, they were going to have to pay for it. So, delivery companies and manufacturers started charging more for everything, which drove inflation growth higher. The changing dynamic forced the Fed to act. Cost increases were eating into households’ disposable incomes. The Central Bank needed to reduce liquidity and boost the buying power of the Dollar. And as the Dollar became more scarce and harder to borrow, individuals and businesses would be less willing to part with them and spend, which hurts the consumption of goods. But as the Fed has raised interest rates, demand is dropping. The change is allowing companies to work through backlogs. And as manufacturers play catch up with the amount of business to be done, it will lessen the demand for raw materials to make goods. In turn, that will reduce the need for cargo space to ship goods around the country and the world. The dynamic should result in falling costs for both the consumer and producer, leading to slowing inflation growth. That will support a long-term rally in the S&P 500. Within the S&P 500, all 11 sectors finished lower. European Markets closed lower. The European Commission’s Monthly Economic Sentiment indicator fell to 97.6 points in August from a downwardly revised 98.9 in July, more than the expected decline to 98.0. Further, economists now predict that the Euro-Zone economy is set for double-digit inflation this fall and that prices will remain higher for longer. With rising expectations for a 0.75% rate hike in September by the European Central Bank, some members are already warning that the region’s growth outlook is declining. In Asia, Japan and China’s currencies are under pressure lately after hawkish commentary from Federal Reserve Chair Jerome Powell. Japan’s Jobless Rate remains unchanged at 2.6% in July. U.S. Business Confidence in China dropped to a record low as the country’s economic outlook has been hurt by COVID-19 restrictions and geopolitical tensions. Elsewhere, Oil fell 4.86% while Gold closed with a loss of 0.80%.
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For anyone following my Platinum Service it made 496 points yesterday and is now ahead by 1602 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 1.10% lower at a price of 3986.
The Dow Jones Industrial Average closed 308 points lower for a 0.96% loss at a price of 31,790.
The NASDAQ 100 closed 1.13% lower at a price of 12,342.
The Stoxx Europe 600 Index closed 1.2% lower.
This morning, the MSCI Asia Pacific Index rose 0.6%.
This morning, the Nikkei closed 0.35% lower at a price of 28,096.
Currencies
The Bloomberg Dollar Spot Index closed 0.2% lower.
The Euro closed 0.2% higher at $1.0220.
The British Pound closed 0.2% lower at 1.1673.
The Japanese Yen fell 0.1% closing at $138.65.
Bonds
Germany’s 10-year yield closed 1 basis points higher at 1.49%.
Britain’s 10-year yield closed 13 basis points higher at 2.73%.
US 10 Year Treasury closed 2 basis points higher at 3.10%.
Commodities
West Texas Intermediate crude closed 4.86% lower at $91.88 a barrel.
Gold closed 0.80% lower at $1724.10 an ounce.
This morning on the Economic Front we already had the release of German Import Price Index for July which rose 1.4% versus +1.5% expected. Next, we have German Unemployment and GDP at 8.55 am and 10.00 am respectively. Also at 10.00 am we have U.K. GDP and Euro-Zone Inflation. This is followed by U.S. ADP Employment Change at 1.15 pm. Finally, at 2.45 pm we have the Chicago Purchasing Managers’ Index.
Cash S&P 500
Having hit a morning high at 4070, the S&P saw renewed liquidations as no one wanted to be long stocks. The selling increased after all three Indexes broke their respective 50-Day Moving Averages. The S&P traded the whole of my buy range for a 3998 average long position. As this is a seasonally strong time of the year I held on to this position and got rewarded overnight as the S&P soared after the -263 print in the McClellan Oscillator was released. This move higher saw my 4012 T/P level triggered as emailed to my Platinum Members and I am now flat. Although the Head & Shoulders Pattern has a target of 3820 in the S&P, I will continue to be a buyer of dips given the MO set-up and the early September Seasonally strong period. The S&P has support from 3965/3985 where I will be an aggressive buyer with a 3949 ‘’Closing Stop’’
EUR/USD
The Euro keeps bouncing off the now key support level from .9900/.9950. Yesterday’s bounce saw the Euro hit my 1.0030 T/P level on Monday’s .9980 long position. The equity sell-off saw me buy the Euro again at .9990 before exiting this position near the close at 1.0026 and I am now flat. Today, I will again be a buyer on any dip lower to .9930/.9990 with no stop and a T/P level at 1.0040 if triggered.
March Dollar Index
No Change. The Dollar is trading slightly weaker at 108.50 this morning. My overall view on the Dollar has not changed: 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 continue to leave my T/P level unchanged at 106.80.
Cash DAX
The weaker German Inflation data helped the DAX to outperform yesterday. I am still flat. Today, I will raise my buy level to 12810/12890 with a higher 12745 stop.
Cash FTSE
The FTSE held in reasonably well despite Gilt Yields rising 13 Basis Points after Citibank came out with a 20% forecast for inflation. This move lower saw the FTSE hit my 7350 buy level. I am still long and I will add to this position at 7290 while leaving my 7249 stop unchanged. I will now lower my T/P level to 7395 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Dow Rolling Contract
Yesterday’s aggressive sell-off saw the Dow traded the whole of my buy range for a 31880 average long position. The rally overnight saw the Dow hit my 31960 revised T/P level and I am now flat. The 50-Day MA for the Dow comes in at 32115. For Bulls to regain control the market needs to break and close over this key pivot point. Today, I will again be a buyer on any further dip lower to 31500/31700 with a lower 31385 ‘’Closing Stop’’.
Cash NASDAQ 100
My NASDAQ plan worked well as the market traded lower to my 12310 buy level before rallying this morning to my revised 12450 T/P level as emailed to my Platinum Members and I am now flat. Yesterday’s 12250 low print meant the NDX has now fallen over 1500 points in the last two weeks. This is an enormous move. As I am not bearish of Bond Yields at these levels I am happy to buy the NDX on dips especially with the MO closing at -263 last night. The NDX has support from 12150/12350 where I will again be a buyer with a 11995 ‘’Closing Stop’’.
September BUND
No Change. I am still long the Bund from Friday at 149.80 with the same 148.55 ‘’Closing Stop’’. I will now lower my T/P level to 150.15.
Gold Rolling Contract
After Gold traded lower to my 1721 buy level I had too many positions on board. Gold saw a small rally and I exited this position at 1726 and I am now flat. Today, I will again be a buy of Gold on any dip lower to 1700/1715 with a tight 1689 stop.
Silver Rolling Contract
No Change. I am still long at 18.80 with the same 19.25 T/P level. Given how oversold Silver is trading I will continue to hold this position with no stop.
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