U.S. Equity Markets closed mixed on Tuesday with underperformance in the NASDAQ with Tech and Consumer Discretionary sectors weighing while the Russell 2000 and Dow Jones outperformed. The S&P closed red with the tech downside hitting the index, while the equal weight S&P gained and the majority of sectors were in the green, showcasing the downside was largely concentrated in tech. The selling pressures emerged after JOLTS came in above expectations with the prior revised up while Consumer Confidence also beat expectations. The data briefly weighed on T-Notes although the move later pared, and more, with T-Notes pushing to session highs on reports of an explosion in Beirut, Lebanon, which was later confirmed to be the retaliatory attack from Israel, targeting the commander who organised the Golan Heights attack. The news helped oil off lows while gold pushed back above USD 2,400/oz. Oil prices remained in the red despite the geopolitical escalation with demand fears continuing to weigh on the crude complex. The Dollar was flat on Tuesday ahead of key risk events while the Japanese Yen outperformed after several Japanese sources articles suggested the Bank of Japan is to consider a 15bp hike at the upcoming meeting. This rate hike was confirmed overnight. Equity Markets have reacted favourably to this news wiping out earlier losses on the release of Microsoft earnings. Looking ahead, there are plenty of earnings still due this week while the macro focus turns to the FOMC, ISM Manufacturing PMI, Bank of England, OPEC+ JMMC, US NFP, and mega-cap earnings as well as any further geopolitical developments. Headline JOLTS fell to 8.18 million from the prior 8.23 million, within the 7.8-8.2 million forecast, with the prior revised up from 8.14 million. The vacancy rate was unchanged at 4.9%, while the quits rate was also unchanged at 2.1%, but the prior saw a revision lower from 2.2%. Job Openings increased in accommodation and food services (+120,000) and in state and local government, excluding education (+94,000). The number of job openings decreased in durable goods manufacturing (-88,000) and in the federal government (-62,000). Oxford Economics highlight that the quits rate of 2.1%, the lowest since early months of the pandemic, is a level that is consistent with further moderation in wage growth to a pace consistent with the Fed’s 2% inflation target. Oxford Economics also highlight that the number of unemployed increased by 157k in June, while the decline in job openings pushed the ratio of job openings to unemployed workers down to 1.20 from 1.24 in May and sharply down from the 1.96 peak in May 2022. However, it remains above 1.00, a level the consultancy previously viewed as being consistent with a balanced labour market. OxEco note that now they believe labour market conditions may be balanced at a higher ratio, due to lower costs of posting jobs online, employers may maintain job listings longer than they did previously, which would allow them to develop a pool of job candidates even if they have no immediate plans to hire.
CONSUMER CONFIDENCE: Rose in July to 100.3 (exp. 99.7), from a downwardly revised prior of 97.8. The Present Situation index declined to 133.6 from 135.3, with the Expectations improving to 78.2 (prev. 72.8). Elsewhere within the release, consumers’ assessment of current business conditions was slightly less positive in July, while consumers’ appraisal of the labour market deteriorated, highlighted by jobs plentiful declining to 34.1% (prev. 35.5%), and hard to get lifting to 16.0% (prev. 15.7%). The Chief Economist of the Conference Board said, “Confidence increased in July, but not enough to break free of the narrow range that has prevailed over the past two years.” He added, “Even though consumers remain relatively positive about the labour market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future; things that may not improve until next year.” Moreover, compared to last month, consumers were somewhat less pessimistic about the future. Looking ahead, average 12-month inflation expectations remained stable at 5.4%, and July’s write-in responses showed that elevated prices, especially for food and groceries, and inflation remain the key drivers of consumers’ views of the economy, followed by the US political situation and the labour market. The Fed is expected to hold the Federal Funds Rate at 5.25-5.50% at its 31st July meeting at 7.00 pm this evening. Note, there are no new SEPs due at this meeting. As such, market participants will be looking out for any commentary or guidance laying the groundwork for a September cut, although there is unlikely to be any explicit commitment, and there is plenty of data between now and the September 18th confab as the Central Bank continues its data-dependent approach. As a result, traders will be attentive to the statement to see if they adjust their language on guidance or inflation. Chair Powell – whose presser begins at 7.30 pm – will also be in focus, and he may offer similar comments to his recent appearances, whereby he noted the last three inflation readings do add confidence that inflation is returning to target. The Treasury will announce next quarter issuance on Wednesday 31st July. At the last refunding, the Treasury announced USD 125 billion of refunding for May, comprising USD 58 billion in 3 Year notes, USD 42 billion in 10 Year notes and USD 25 billion in 30 Year bonds. It also noted the “Treasury believes these cumulative changes leave it well positioned to address potential changes to the fiscal outlook and to the pace and duration of future SOMA redemptions”. Adding that “Based on current projected borrowing needs, Treasury does not anticipate needing to increase nominal coupon or FRN auction sizes for at least the next several quarters.” Analysts at Wells Fargo expect coupon auction sizes to remain unchanged for the second consecutive quarter. Providing the Treasury keeps monthly auction sizes unchanged as expected, it is expected to maintain 2-yr supply at USD 69 billion, 3yr at 58 billion, 5yr at 70 billion, 7yr at 44 billion, 10yr at 42 billion, 20yr at 16 billion, 30yr at 25 billion and FRNs at 28 billion for August. Elsewhere, Oil closed a further 1.42% lower while the increased geopolitical risk saw Gold end Tuesday with a 1.2% gain.
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For anyone following my Platinum Service it made 310 points yesterday and is now ahead by 1918 points for July after closing June with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 to 4 updated emails throughout the trading day to demonstrate this value, a points, after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, 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 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 0.50% lower at a price of 5436.
The Dow Jones Industrial Average closed 203 points higher for a 0.50% gain at a price of 40,743.
The NASDAQ 100 closed 1.38% lower at a price of 18,796.
The Stoxx Europe 600 Index closed 0.45% higher.
This Morning, the MSCI Asia Pacific closed 0.8% higher.
This Morning, the Nikkei closed 1.49% higher at a price of 39,101.
Currencies
The Bloomberg Dollar Spot Index closed 0.03% lower.
The Euro closed 0.1% lower at $1.0811.
The British Pound closed 0.2% lower at 1.2830.
The Japanese Yen rose 0.8% closing at $152.77.
Bonds
Germany’s 10-year yield closed 2 basis points lower 2.34%.
Britain’s 10-year yield closed 1 basis points lower at 4.04%.
U.S.10 Year Treasury closed 3 basis points lower at 4.14%.
Commodities
West Texas Intermediate crude closed 1.42% lower at $74.73 a barrel.
Gold closed 1.2% higher at $2410 an ounce.
This morning on the Economic Front we already had the release of German Retail Sales which fell versus expected. Next, we have German Unemployment at 8.55 am and Euro-Zone CPI at 10.00 am. This is followed by U.S. MBA Mortgage Applications at 12.00 pm and the ADP Employment Change at 1.15 pm. At 2.45 pm we have the Chicago Fed Purchasing Managers’ Index, followed by Pending Home Sales at 3.00 pm. Finally, we have the FOMC Statement at 7.00 pm and the key Powell Press Conference at 7.30 pm.
Cash S&P 500
We cannot complain about the lack of volatility as yesterday again witnessed a session with plenty of two-way price action. It is so difficult to be short as no matter what the news buyers keep buying the dips. Post the S&P close, Microsoft reported weaker than expected earnings, driving the S&P to a low at 5396. Yet we wake up this morning and the S&P is trading above 5480 as we wait for the FOMC Statement and Powell press conference this evening. Although both the NDX and S&P are oversold the rest of the market is overbought making it tricky to have an edge. The $NYSI closed maximum overbought on Tuesday. In a typical market functioning this is a major red flag. While the reading can persist for a couple of weeks it certainly is not a buy signal, rather the recent reading of max oversold in April and June were. I suppose the irony would be a rotation back into tech stocks out of small caps while would help to improve the oversold condition of the NDX and help the $NYSI to correct. Yesterday after the S&P traded the whole of my buy range for a 5434 average long position the market hit a low at 5402 before rallying to my revised 5440 T/P level before the close and I am now flat. I tried to buy the S&P below 5400 but I was too slow as we just spiked higher, and this surge has continued overnight. We have had an excellent week and I do not want to take huge risk ahead of month-end this evening. My only interest in buying the S&P today is on a move lower to 5440/5436 with a 5423 ‘’Closing Stop’’. I am expecting plenty of volatility this evening. However, I do not want to be short the markets. If this view changes I will be back with a new update for my Platinum Members.
EUR/USD
I am still long the Euro from Monday at a price of 1.0820. The market traded in a narrow range which is no surprise as traders wait for the FOMC Statement at 7.00 pm. I will add to this position at 1.0760 with the same 1.0695 ‘’Closing Stop’’. I will now lower my T/P level to 1.0865. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
No Change: This morning the Dollar is trading slightly lower at 104.45. I have no interest in chasing the market higher especially given how little volatility there is in the Dollar. I am still flat the Dollar as I continue to be a buyer on any dip lower to 103.20/103.90 with the same 102.45 ‘’Closing Stop’’. I still do not want to be short the Dollar at this time.
Cash DAX
Despite GDP growth in Europe coming in at a very meagre 0.2%, the DAX rallied as the DAX continues to take any weakness in its stride. The chart is getting tighter and tighter between 18300 and 18600 and is begging for a decision to come. With European growth so weak I suppose the ECB can ill afford and policy mistake as the path is getting very narrow. Despite the sell-off in both the NDX and S&P, I have no interest in pressing the downside in the DAX. Ahead of the FOMC Meeting this evening my only interest in buying the DAX is still on a dip lower to 18230/18310 with a higher 18145 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 18390.
Cash FTSE
My latest 8270 long FTSE position worked well as the market rallied to my 8310 T/P level overnight and I am now flat. The FTSE has support from 8210/8270 where I will again be a buyer with the same 8145 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8315.
Dow Rolling Contract
The Dow missed yesterday’s buy range by 100 points before rallying 400 points to sit at a price of 40,820 this morning. The Dow has support from 40300/40550. I will now raise my buy level to this area with a higher 40095 tight ‘’Closing Stop’’. Ahead of this evening’s FOMC Meeting I still do not want to be short the Dow at this time.
Cash NASDAQ 100
My NDX plan worked well. The NDX traded the whole of my buy range for an 18860 average long position before rallying to my unchanged 19070 T/P level overnight and I am now flat. Given how oversold the NDX is I believe there is a good chance that yesterday’s post Microsoft earnings low of 18600 will be at least a temporary low for the market. The NDX has left a large gap to yesterday’s Chicago low. If the market decides to close some or all of this gap, then I will be a buyer. Therefore, my NDX buy level today will be from 18720/18870 with an 18575 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 19050.
September BUND
This evening the Fed will announce their next decision with respect to the Fed Funds Rate. The yield on the 6-month U.S. T-bill is 51.4%, the lowest since May 2023, while the yield on the 3-month T-bill is 5.29%, the lowest since late July of last year. The market is pressuring the Fed to lower their Funds Rate to align with market rates, which have already moved away from the Funds Rate to the downside. Market rates are declining because demand is weakening, which indicates that the economy is too. The longer the Fed resists, the more they will have to drop the Funds Rate to play catch up to the market, which is signalling economic weakness ahead. Despite all of above I expect the Fed to hold off cutting rates which in my opinion will be a mistake. I am still flat the Bund as the market traded in a narrow range yesterday which is no surprise ahead of the FOMC this evening. This morning the Bund is trading at a price of 133.54 as I go to press. I am still flat. I will now raise my sell level to 134.10/134.80 with a higher 135.45 ‘’Closing Stop’’ unchanged. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold spike on increased tension in the Middle East and I am still flat. I will now raise my buy level to 2367/2382 with a higher 2353 ‘’Closing Stop’’.
Silver Rolling Contract
Silber had a nice rally late yesterday, that has continued overnight, trading at a price of 28.60 this morning. I am still long Silver at a price of 29.80. I will continue to have no T/P level or Stop on this position. If Silver continues to make new lows, I will look for a spot to add to my Silver portfolio over the coming days. If this view changes, I will be back with a new update for my Platinum Members.
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