Higher Bond Yields saw Equity Markets get hit hard yesterday. The NASDAQ 100 again led the declines, closing lower by 1.84%. This move lower saw the VIX end Thursday with a near 8% gain. The Federal Reserve decided to keep interest rates at their current levels but adopted a more hawkish stance. This means we could see another rate increase before year’s end. The Fed expects inflation to fall to 3.3% by the end of 2023, to 2.5% in 2024, and to 2.2% in 2025. The central bank also estimates that inflation will reach its 2% target by 2026. These projections suggest that rates will remain tighter than expected through 2024. The Fed will next meet in November to reassess the effectiveness of its current monetary policy and data-driven approach. Bank of America (BAC) Chief Financial Officer Alastair Borthwick believes a U.S. recession is now unlikely due to strong consumer spending. With this metric up 4% year over year, Borthwick said he cannot envision an economic downturn. He also noted that because credit- and debit-card payments remain elevated, consumers still seem financially healthy overall. The positive outlook extends to Bank of America’s financial performance as well, with net revenue forecast to come in around $14.2 billion for the third quarter. Borthwick’s comments suggest that he and Bank of America are confident in the economy’s direction and the strength of consumer spending. Half of U.S. small-business owners believe that high interest rates have negatively affected their businesses. This is according to a recent survey from Alignable, a referral network for small businesses. The survey found that business owners have experienced margin erosion, reduced revenue, and slowed growth due to rate increases over the past 18 months. Two-thirds of the surveyed owners stated they would need rates to drop by at least 3 percentage points for their businesses to improve. In addition to high rates, the owners cited labour issues, rent increases, inflation, and insufficient price growth as factors hurting their businesses. European Markets closed lower. Yesterday, the Bank of England opted to maintain the current interest rates, after a series of 14 consecutive rate hikes that elevated the benchmark rate to 5.25% — the highest since 2008. Policymakers made this decision in a 5-4 vote, in response to a cooler than expected inflation figure as core inflation figures declined further in August. Andrew Bailey, the central bank governor, expressed his belief that inflation will persist on a downward trajectory, emphasising the importance of remaining vigilant despite the current situation. In Asia, Yi Gang, the former governor of the People’s Bank of China, said that China should “appropriately” increase support measures to achieve its economic growth target of 5% for the year. He recommended using monetary policy to boost the housing sector since the country’s economy is still in the recovery phase. China’s government has been rolling out various support policies since July, aiming to bolster growth and stabilize the real estate sector. While there have been some signs of stabilisation – like increased consumer spending and factory output – the property sector is still a cause for concern. Overnight, the Bank of Japan surprisingly left rates unchanged with no changes to forward guidance. Both the Japanese Yen and Nikkei have sold off on this news. Elsewhere, Oil closed 0.25% lower while Gold fell 0.6%.
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For anyone following my Platinum Service it lost 668 points yesterday and is now down by 226 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
The S&P 500 closed 1.64% lower at a price of 4330.
The Dow Jones Industrial Average closed 370 points lower for a 1.08% loss at a price of 34,070.
The NASDAQ 100 closed 1.84% lower at a price of 14,694.
The Stoxx Europe 600 Index closed 1.29% lower.
This morning, the MSCI Asia Pacific closed 0.7% lower.
This morning, the Nikkei closed 0.52% lower at a price of 32,402.
The Bloomberg Dollar Spot Index closed 0.20% lower.
The Euro closed 0.1% higher at $1.0663.
The British Pound closed 0.4% lower at 122.90.
The Japanese Yen rose 0.4% closing at $147.60.
Germany’s 10-year yield closed 4 basis points higher at 2.74%.
Britain’s 10-year yield closed 5 basis points higher at 4.30%.
U.S.10 Year Treasury closed 9 basis points higher at 4.49%.
West Texas Intermediate crude closed 0.25% lower at $89.60 a barrel.
Gold closed 0.6% lower at $1919.10 an ounce.
This morning on the Economic Front we already had the release of U.K. Retail Sales which rose 0.4% versus +0.5% expected. Next, we have German, Euro-Zone, U.K. and U.S. Composite PMI at 8.55 am, 9.00 am, 9.30 am and 2.45 pm respectively. Finally, we have the Baker Hughes Oil Rig Count at 6.00 pm.
Cash S&P 500
Following on from my criticism of Fed Chair Powell yesterday: The FOMC raised their economic projections for 2023 and 2034, sees no recession and a steady decline toward their 2% inflation target with Unemployment barely rising. That is a soft landing. So Why? 30 minutes later would Powell be stating that a soft landing is not their baseline when they just published a soft landing in their statement. Markets hate inconsistencies and subsequently sold of over 3% in the past 36 hours. To get a soft landing we need lower bond yields. This is not the case with 10-year Treasuries hitting 4.50% overnight. Global debt cannot cope with yields this high as it is guaranteed to cause a recession. Powell has now unsettled the entire market landscape with his comments. The immediate effect of this you-turn from Powell is that all my bullish patterns died and caused a lot of pain to my margin account. I was stopped out of my 4413 average long position for a large loss at 4339 and I am now flat. The S&P hit the June and August pivot lows. Unless we get some relief in both the Dollar and Yields there is risk of cross-asset selling to the lower support zones. The 100-Day Moving Average at 4373 did not offer any support and will now be strong resistance on any bounce. The S&P has now closed well below its Daily Bollinger Band while the $BPSPX RSI closed at a severely oversold 22 print. This move lower sees the two-hour RSI at its lowest level for the year to date. The tape is extremely weak with no sustained bid given the fear of higher yields. The 10-Year bond chart is widely stretched meaning a reversal can come at any stage. We saw some positive divergences into the Chicago close and Futures are slightly higher this morning. The S&P has support from 4303/4323 where I will be an aggressive buyer with a 4289 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 4358.
No Change. I am still long at 1.0652 following a quiet session for the Euro yesterday. I will continue to look to add to this position at 1.0590 while leaving my ‘’Closing Stop’’ unchanged at 1.0525. I will now lower my T/P level to 1.06.95. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
September Dollar Index
No Change. I am still a seller on any further rally 105.80/106.50 with the same 107.05 ‘’Closing Stop’’.
After the DAX traded lower to my 15570 buy level we had a small bounce to the 15600/15620 area where we traded for a few hours. This small rally enabled me to exit any long position at my revised 15610 T/P level and I am still flat. This morning, the DAX is trading lower at 15520. We have support from 15340/15420 where I will again be a buyer with a lower 15275 ‘’Closing Stop’’.
The Bank of England as expected left Interest Rates unchanged at yesterday’s MPC Meeting. The Committee voted by 5 votes to 4 to leave rates unchanged for the first time in two years at a rate of 5.25%. The MPC Committee indicated that it wanted to leave rates unchanged for some time to ensure that it can bring inflation back down to its 2% target. This stance by the MPC saw the FTSE again outperform the other main Indexes. Just before the New York close, the FTSE hit my 7640 buy level. We have had a small bounce this morning and I have now exited this long position here at 7672 and I am now flat. Today, I will again be a small buyer from 7550/7620 with the same 7495 ‘’Closing Stop’’.
Dow Rolling Contract
The Dow sold off into the close hitting my second buy level at 34160 for a now 34295 average long position. I will now lower my T/P level to 34380. I will also lower my stop to a ‘’Closing Price’’ at 33995. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
A late sell-off in tech stocks saw the NDX trade the whole of my buy range for a now 14765 average long position. This has been a brutal sell-off with the NDX falling nearly 6% in two weeks. I will leave my 14595 ‘’Closing Stop’’ unchanged while lowering my T/P level to 14910. If any of the above levels are hit, I will be back with a new update form my Platinum Members.
No Change. I am still long at an average rate of 130.05 with the same 129.25 ‘’Closing Stop’’. I will now lower my T/P level to 130.25. 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. Given the strength of the 1960/2000 resistance area I am reluctant to chase the price of Gold higher. Meanwhile, I have no interest in being short despite the strong resistance above. Therefore, I will stay flat until we see how the price action plays out.
Silver Rolling Contract
Despite the stronger Dollar, Silver is trading higher at 23.65 this morning. 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.