U.S. Equity Markets finished Tuesday higher, led by the 1.02% gain in the Dow. U.S. Mid-Term elections were the main focus of the day. Investors are anticipating the real possibility of a split Congress, which could spur a rally for stocks as further government spending would be curtailed. Midday volatility was largely due to negative crypto sentiment, as Binance pushed a controversial takeover of rival FTX. Investors continue to look for positive inflation signs, especially as the Manheim Used Vehicle Value Index showed a further decline in prices. History shows that employment gains typically peak around the election cycle. Last week, Federal Reserve Chairman Jerome Powell told us the central bank is concerned by the lack of people seeking work. He said the rate-setting Federal Open Market Committee has been raising interest rates in an attempt to slow economic growth – and that below-trend output would be ideal. According to the U.S. Bureau of Economic Analysis, Gross Domestic Product grew by 5.7% last year. The average for the decade leading up to the COVID-19 pandemic was 2.3%. Thus, policymakers would like to see economic output below 2.3% for a while. This past Friday, the U.S. Bureau of Labour Statistics released Non-Farm Payroll data for October. The headline establishment survey showed a gain of 261,000 jobs. We care about this because it is the information the Fed uses to make its policy decisions. What was interesting about October’s results was the variance between the establishment survey and the household survey. The household numbers showed the economy lost 328,000 jobs last month. In fact, the two surveys showed a large margin of difference in employment gains for March through the end of October. But data over the last four election cycles point toward job gains peaking in October. If that holds true this time around, it should act as a tailwind for the S&P 500 Index. The two reports measure different variables. The establishment survey (or “payroll survey”) simply measures the number of jobs. It does not distinguish if more than one job is held by one individual. The household data records the number of people who have a job, and it does not measure whether anyone is pulling double duty. The establishment survey shows the economy has added about 2.45 million jobs over the past two quarters. Meanwhile, the household survey indicates that only 150,000 individuals have found gainful employment. That is a difference of around 2.3 million jobs, which is a bit concerning when you consider interest-rate hikes are based on those numbers, focussing on the higher number of the two. I looked back at the last four election cycles to see if we noticed any trends. Our time frame goes back to the 2014 midterm elections and covers one full presidential term under former President Barack Obama and his successor President Donald Trump. What I found was that in three of the four elections, both surveys tend to have a higher job-gain average in the six months going into the November vote. But if the current trend holds true, job gains should weaken as we head into the middle of next year. Now, that is not what we always want to see in terms of economic growth. But from a Fed policy perspective, that outcome is ideal. Chairman Powell has told us that the Fed wants to see the unemployment rate rise, boosting the supply of workers. Otherwise, it will continue to raise rates until this is achieved. So, we will want to keep a close eye on this data as a signal for when the central bank will start to slow interest-rate hikes. With the passing of this Mid-Term election, that moment could be right around the corner. The sooner Money managers get a sense that we are at peak interest rates, the sooner they will become more optimistic about risk assets like stocks. They will rush to lock in attractive yields on high-quality assets, like U.S. Treasurys before it’s too late. Then, those same Money managers will work their way down the investment food chain, looking for other opportunities and attractive returns. This in turn will support a longer-term rally in the S&P 500. Within the S&P 500 Index, 10 of the 11 sectors finished higher. European Markets closed positive. Markets ended higher as investors turned their attention to the banking sector after European Central Bank (“ECB”) top supervisor Andrea Enria said it is carefully scrutinising payout plans amid the weakening economic outlook. Also, ECB policymakers pushed back on a dovish pivot, asserting that movement by other central banks does not reflect the current economic situation in Europe. Further, there was slight optimism over a possible resolution to the Ukraine-Russia conflict, as Ukrainian President Volodymyr Zelensky said he would be open to peace talks with Russia. In Asia, Markets ended mixed as speculation continued about China pivoting away from its strict “zero-COVID” policy. Health officials have maintained that China will stick with the strategy, though markets appear to be focusing on any indication of a reopening. Elsewhere, Japan household spending fell short of expectations while wages accelerated. Rising rates and inflation drove Australian consumer confidence to the lowest level since April 2020, with an increase in household inflation expectations. Australian Business Confidence also fell amid a deteriorating economic outlook. Elsewhere, Oil fell 3.08% while Gold rallied 2.10% on a weaker Dollar.
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For anyone following my Platinum Service it made 200 points yesterday and is now ahead by 1724 points for November, after finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, 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 0.56% higher at a price of 3828.
The Dow Jones Industrial Average closed 333 points higher for a 1.02% gain at a price of 33,160.
The NASDAQ 100 closed 0.75% higher at a price of 11,059.
The Stoxx Europe 600 Index closed 0.78% higher.
Yesterday, the MSCI Asia Pacific Index rose 1.1%.
Yesterday, the Nikkei closed 1.25% higher at a price of 27,872.
Currencies
The Bloomberg Dollar Spot Index closed 0.4% lower.
The Euro closed 0.5% higher at $1.0073.
The British Pound closed 0.1% higher at 1.1541.
The Japanese Yen rose 0.7% closing at $145.67.
Bonds
Germany’s 10-year yield closed 6 basis points lower at 2.28%.
Britain’s 10-year yield closed 8 basis points lower at 3.55%.
U.S.10 Year Treasury closed 9 basis points lower at 4.13%.
Commodities
West Texas Intermediate crude closed 3.08% lower at $88.40 a barrel.
Gold closed 2.10% higher at $1708.10 an ounce.
This morning on the Economic Front we have no data of note from either the Euro-Zone or the U.K. At 8.00 am we have a speech from Fed Member Williams, followed at 10.00 am by MBA Mortgage Applications. Next, we have Wholesale Inventories at 3.00 pm. Finally, we have a Ten-Year Treasury Auction at 6.00 pm.
Cash S&P 500
The Crypto Crash added a twist yesterday which resulted in an intra-day dip that got aggressively bought as a combination of a weaker Dollar and lower Bond Yields saw the S&P build on yesterday’s break of its 50 DAY MA, hitting an afternoon high at 3859 before falling 30 Handles into the close. I hate trading political events as I do not know what the outcome of yesterday’s Mid-Term elections will show. I am more interested in tomorrow’s CPI release-where a 7 Handle will see the S&P rally further. Today, I will continue to be a strong buyer on any dip lower to 3768/3788 with the same wider 3749 ‘’Closing Stop’’. I can make a case that on a bullish outcome overnight, that the S&P could trade as high as 4020. As a result I will be a seller from 4025/4045 with a 4061 ”Closing Stop”.
EUR/USD
The Euro missed my .9970 buy level by 2 points before rallying over 100 points into the New York close and I am still flat. I am not going to chase the Euro higher leaving my .9900/.9970 buy level unchanged with the same .9835 ‘’Closing Stop’’.
March Dollar Index
My Dollar plan worked well as the market rallied to my 110.40 sell level before trading lower to my 109.85 T/P level and I am now flat. Today, I will again be a seller on any further rally to 110.25/110.95 with a lower 111.75 ‘’Closing Stop’’.
Cash DAX
Both the DAX and FTSE struggled yesterday which is no surprise given the size of the rally over the past few weeks. I am still reluctant to be a seller of the DAX despite the weak price action at yesterday’s high. I will raise my buy level slightly to 13340/13420 with a higher 13245 ‘’Closing Stop’’.
Cash FTSE
It took a while but finally the FTSE rallied to my revised 7295 T/P level on Monday’s 7260 latest long position. The FTSE has support from 7150/7220 where I will again be a buyer with a 7095 ‘’Closing Stop’’.
Dow Rolling Contract
The break and close over the 200 DAY MA on Monday was the impetus for the Dow to trade higher. I am still flat as the market never came close to my buy range. One word of caution was the 5% rally in the VIX following 16 consecutive lower closes. This may be nothing but worth keeping an eye on. I will now move my buy level higher to 32570/32820 with a tight 32395 ‘’Closing Stop’’. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
The markets are betting on the Republicans making substantial gains in yesterday’s Mid-Terms. As I go to press the market is still waiting some key results. I am still flat the NDX. I will now raise my buy level to 10770/10920 with a higher 10625 ‘’Closing Stop’’.
December BUND
My Bund plan worked well as the market sold off to my 135.80 before rallying 100 points. Unfortunately, I covered this position too early at 136.20 and I am still flat. Today, I will again be a buyer from 135.50/136.30 with a higher 134.95 ‘’Closing Stop’’.
Gold Rolling Contract
Gold soared in the past 24 hours and I am still flat. With Gold trading at 1710 I do not have an edge here, preferring to stay flat to see how Gold reacts to having risen $100 in the past few days.
Silver Rolling Contract
My Silver plan worked well with the market rallying to my 21.10 T/P level on my latest 20.40 long position. I am still flat. Silver has support from 20.20/20.90 where I will again be a buyer with no stop.
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