U.S. Equity markets closed Friday lower following a dramatic and volatile trading session, led by the 2.48% fall in the Russell 2000. This latest aggressive sell-off saw the VIX close higher by 9% at 30.00. Markets continue to feel the fallout from a hawkish Federal Reserve and global growth worries. Multiple Indexes neared year-to-date lows to end the week. Meanwhile, Bank of America’s latest report described current investor sentiment as the worst since the Global Financial Crisis. Investors’ attention will be turning toward the third-quarter earnings season, with expectations that multiple companies will deliver underwhelming results. Even more, the Dollar continued to surge as global growth concerns intensify. Manufacturing costs are easing. In fact, they remain near the lowest level in two years. Last Thursday, the Federal Reserve Bank of Kansas City released its Manufacturing Activity Survey for September. The overall number showed regional output keeps slowing, with a reading of 1 compared with the expectation for 5 and August’s 3. It continued a steady decline that started in March of this year. The report is a gauge of business activity in Kansas, Colorado, Oklahoma, and Wyoming, as well as parts of Missouri and Nebraska. The Kansas City Fed began administering the survey in July 2001. It sends questionnaires out to manufacturing executives in the region, asking them about the state of current business in addition to forecasting the state of activity six months down the road. For September, new shipment orders saw a slower pace of deceleration yet hovered near their lowest level since May 2020. At the same time, production, the number of shipments, exports, delivery times, and backlogs of work all remained well below their six-month averages. Thought of another way, the data points to slowing economic activity. It also signals that supply-chain activity should be returning to normal, as businesses can complete unfinished work and demand for goods slows. The shift supports falling costs, as evidenced by the recent trends in prices paid and received. In turn, this sustained move lower in inflation metrics should act as a long-term tailwind for the S&P 500 Index. Prices paid and received are key measures of inflation growth. Both metrics showed a steady slump since peaking earlier this year. It’s the same result we saw from the New York and Philadelphia Feds’ Manufacturing Surveys earlier this month. The readings for prices paid and received tend to peak before or right around the same time as the PPI and CPI. The sub-Indexes tell us inflation growth and expectations for sustained high prices are cooling. They are returning to pre-pandemic levels as activity subsides. Federal Reserve Chairman Jerome Powell has told us the central bank will need to slow overall economic growth in order to ease inflation. The central bank started down that path in March by raising interest rates. The change in policy direction corresponds closely with the shift in prices paid and received. This is a trend that money managers who are investing for eight to 12 months down the road must see in order for them to grow more optimistic about risk assets like stocks. They realize the stimulus-fuelled growth experienced during 2021 is unsustainable. Those big-money investors want to see economic activity return to the mean. That way, they have less to worry about from a liquidity and Fed-policy perspective. It took roughly 26 months for inflation to reach current levels. It will take at least 12 months to notice a meaningful slowdown. Still, it is a step in the right direction. A sustainable move lower signals that the Fed can start to back off its aggressive rate-hike path. And again, this is a long-term trend we want to see for a steady rally in the S&P 500 Index. Within the S&P 500, all 11 sectors finished lower. European Markets closed lower. Markets continued to digest central-bank rate hikes across the region. September’s Euro-Zone Manufacturing Purchasing Managers’ Index showed the region is likely entering a recession as price pressures show no signs of yielding. The U.K. announced its largest single fiscal event since the 1970s in the form of a sweeping tax break for consumers and businesses to stimulate growth. This decision sent the Pound significantly lower compared with the Dollar. Investors are now preparing to see a 100-basis-point rate hike by the Bank of England in November. In Asia, Markets continued to process hawkish implications from the Fed’s rate-policy decision along with a slew of rate-hike announcements in the region. Currencies continue to struggle against the rising Dollar. Following Japan’s currency intervention, the Bank of Korea announced it will open a currency swap line to stabilise the Won. Hong Kong announced an end to its mandatory hotel-quarantine period for overseas visitors, starting next week, while Japan plans to remove its daily traveller entry limit in October. Elsewhere, Oil fell 5.34% while Gold closed lower by 1.80%

To mark my 2625th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details

For anyone following my Platinum Service it lost 525 points last Friday and is now ahead by 4495 points for 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 1.72% lower at a price of 3693.

The Dow Jones Industrial Average closed 486 points lower for a 1.62% loss at a price of 29,590.

The NASDAQ 100 closed 1.66% lower at a price of 11,311

The Stoxx Europe 600 Index closed 2.34% lower.

Last Friday, the MSCI Asia Pacific Index fell 1.4%.

Last Thursday, the Nikkei closed 0.58% lower at a price of 27,153.

Currencies 

The Bloomberg Dollar Spot Index closed 1.2% higher.

The Euro closed 1.5% lower at $0.9690.

The British Pound closed 3.5% lower at 1.0860.

The Japanese Yen fell 0.8% closing at $143.40.

Bonds

Germany’s 10-year yield closed 7 basis points higher at 2.03%.

Britain’s 10-year yield closed 52 basis points higher at 3.83%.

US 10 Year Treasury closed 1 basis points lower at 3.69%.

Commodities

West Texas Intermediate crude closed 5.34% lower at $78.32 a barrel.

Gold closed 1.8% lower at $1644

.10 an ounce.

This morning on the Economic Front we have speeches from ECB Members De Guindos and Panetta at 8.00 am and 8.30 am respectively. This is followed by the German IFO Survey at 9.00 am. Next, we have U.S. Chicago Fed National Activity Index at 1.30 pm and a speech from Fed Member Rosengren at 3.00 pm. Finally, we have the Dallas Fed Manufacturing Business Index at 3.30 pm.

Cash S&P 500

The main culprit for the exaggerated price action is the absolute madness in Currencies and Bonds. Friday’s 50 basis point increase in Gilt yields certainly weighed on equity markets all-day. While a new 20-year high in the Dollar killed any chance of stability in the S&P. Sentiment is supper bearish with readings at historic levels. The McClellan Oscillator closed at -376. This is one of the weakest readings ever. I have been trading the S&P since 1995. Every time the MO prints -250 or higher the market rallies. I thought Thursday’s -303 would have done the trick but no, hence Friday’s drawdown for my Platinum Members. S&P Futures Positions closed firmly bearish, suggesting even a slight change in conditions will see short positions slammed and scrambling. Current price action is correlated 90% with both the Dollar and Bond Markets. I have been saying for the past two months that we need a weaker Dollar and lower bond yields. If the Fed do not change tact they will crash the system given the level of debt out there. The Fed have now put them in a position where if they do not check the Dollar and Bond, they risk a Depression. The Monthly RSI for the Dollar is back to levels last seen in the 1980s. The Dollar is trading outside the top of its Monthly Bollinger Band-another rare event. If you are bearish the S&P now you are believing that the Dollar and Bond Yields will continue to trade higher despite both charts been vertical. My firm belief is the Dollar will reverse given all of the above. This will be followed by an unbelievable rally that will rip short positions to pieces. Although, the S&P made trade as low as 3580, I am happy to be long the S&P from Friday at 3733 with no stop. I will add to this position on any further move lower to 3580/3610, again with no stop. For now I will have no T/P level on any long S&P position, believing when this markets turns we could see an historic rally. Adding to my bullish case was the announcement on Friday that Goldman Sachs cut their year-end target for the S&P to 3600 from 4300 and before that at 5100. This is a good thing as capitulation is what is needed.

EUR/USD

I am certainly wrong on my 1.0060 long Euro position. Given the number of points made this month, I will continue to hold this position with no stop or T/P level for now.

March Dollar Index

No Change as I need a miracle. I am still short at an average rate of 108.90 with the same 108.10 T/P level.

Cash DAX

Wrong!! After I bought the DAX at an average rate of 12450, I was stopped out of this position at 12295 and I am still flat. The DAX closed below its March Low. It is severely oversold, has support again from 11900/12100 where I will again be an aggressive buyer with a 11795 ‘’Closing Stop’’.

Cash FTSE

The FTSE traded the whole of Friday’s buy range for a now 7090 average long position. I am still long with the same 6995 ‘’Closing Stop’’. I will now lower my T/P level to 7150.

Dow Rolling Contract

The Dow got slammed on Friday, breaking below its June Low before having a 350 point rally off the lows in the last hour of trading. Last week’s price action was one of historical proportions. The BoJ intervened on Thursday for the first time since 1998. Japan had a bank holiday it will be interesting to see if they try and strengthen the Yen overnight. The $NYSI closed ay -115. This is the lowest close since March 2020 before when we closed at -140. This in itself produced an historic rally. Drawdowns are part of trading but given the signal charts I just cannot bring myself to going short. With the Dollar up by 25% since January we are seeing no currency stability. The Pound alone fell a massive 3.5% versus the Dollar on Friday. This morning the Pound is getting slammed again hitting a low of 103.50 before rallying to sit at $105 as I go to press. The Pound has now fallen an incredible 15% in the past few weeks. The last time we witnessed a Sterling Crisis was after the Brexit vote in June 2016. One chart that bothers me is the VIX. It made a lower low than June despite the Dow breaking its equivalent June low. There are number of ‘’Open Gaps’’ in the VIX below. All VIX gaps get filled. This is another positive divergence, setting up the possibility of a massive move higher. As I stayed long three Indexes over the weekend I stopped myself out of Friday’s 29850 long Dow position at 29450 and I am still flat. Unfortunately, after I got stopped the Dow rallied 200 points into the close. Today I will again be an aggressive buyer from 29130/29380 with a 28895 wider ‘’Closing Stop’’.

Cash NASDAQ 100

The NDX traded the whole of my buy range for a 11380 average long position. The NDX hit a low at 11168 before thankfully bouncing 150 points into the close. I will now lower my ‘’Closing Stop’’ to 11185 while also lowering my T/P level to 11490.

December BUND

The incredible 50 basis point rise in U.K Gilts saw the Bund get hit hard on Friday, trading the whole of my buy range for a 139.25 average long position. As I wanted to reduce my weekend exposure I used the late rally in the Bund to exit this position at 139.55. The Bund is severely oversold. We have support from 137.80/138.70 where I will again be an aggressive buyer with a wider 136.95 ‘’Closing Stop’’.

Gold Rolling Contract

The stronger Dollar saw Gold fall 1.8%, trading the whole of my buy range for a now average 1646 long position. I will now lower my T/P level to 1657 while leaving my 1629 ‘’Closing Stop’’ unchanged.

Silver Rolling Contract

Silver sold off to my 19.30 buy level. I am still long with no stop and the same T/P level at 19.90. I will now add to this position on any further move lower to 18.40. If this level is triggered I will be back with a new update for my Platinum Members.