U.S. Equities fell the most in two months, while two-year Treasury yields rose as Jerome Powell dented hopes that the Federal Reserve is poised to continue easing after delivering the first Interest-Rate cut in over a decade. The S&P 500 Index fell as much as 1.8% after the Fed chairman said the Quarter-point cut amounted to a “mid-term policy adjustment,” fuelling speculation the central bank is not necessarily at the start of an easing cycle. The measure rebounded after Powell said the Fed has not ruled out further cuts, closing down 1.1%. President Donald Trump said in a tweet “Powell let us down” with the size of the rate cut. The 10-year yield fell to below 2.01%, while the two-year rate jumped to 1.88%. The US Dollar advanced to the highest in two months, and Gold slid. Fed Fund Futures showed less easing is now being priced in by markets that had been expecting almost three quarter-point cuts this year prior to the meeting. The hope for a cycle of cuts had pushed stocks to all-time highs and sent 10-year rates dipping below 2%. Markets turned volatile as Powell signalled the Fed is in no rush to continue with easing, unless warranted by data. The central bank earlier voted, with two officials dissenting, to cut rates as predicted by most investors and economists.
To mark my 1875th 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 firstname.lastname@example.org for details
For anyone following my Platinum Service it made 80 points yesterday to finish July with a gain of 1153 points, having made 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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With two of the week’s key events — the Fed and trade talks — over for now, investors still have an ongoing slew of corporate results and Friday’s U.S. Jobs data to contend with. American delegates wrapped up negotiations with their Chinese counterparts in Shanghai on Wednesday with little evidence of progress toward ending the year-long trade dispute. The S&P 500 Index fell 1.1%, closing at 2980, the most since May 31. The Dow Jones Industrial Average lost 1.2% and the Nasdaq 100 Index fell 1.2%. Meanwhile the Stoxx Europe 600 Index gained 0.2% as European Markets closed two hours before the FOMC Statement was released.
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.4%.
The Euro decreased 0.7% to $1.1077.
The British Pound was little changed at $1.2158, having hit an intra-day high of $1.2250.
The Japanese Yen fell 0.2% at 108.80 per dollar.
The yield on 10-year Treasuries fell four basis points at 2.02%. The two-year rate spiked three basis points to 1.88%. In Europe, Germany’s 10-year yield dipped one basis point to -0.41% which is new all-time low in yield terms while Britain’s 10-year yield rose less than one basis point to 0.63%.
West Texas Intermediate crude fell 0.1% at $57.99 a barrel.
Gold fell 1.1% to $1,425.40 an ounce.
The Bloomberg Commodity Index fell 0.2%
This morning on the Economic Front we have German, Euro-Zone and U.K Markit Manufacturing at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 12.00 pm by the Bank of England Rate Decision and Bank of England Minutes. At 1.30 pm we have U.S Weekly Jobless Claims, followed by Manufacturing PMI at 2.45 pm. Finally, at 3.00 pm we have ISM Manufacturing and Construction Spending.
September S&P 500
As most Members know when we have a major announcement such as yesterday’s FOMC Statement and Powell Press Conference I try where possible to be flat the riskier contracts. Upon announcing a 0.25% rate cut the market did nothing. However, when Powell stated that this rate cut was not the start of a series of cuts the S&P fell 50 Handles in a straight line from 3010 to 2960 before bouncing back to a rebound high of 2998. This aggressive move lower saw my whole of my buy range and stop hit in a few minutes and I did nothing and I am still flat. The S&P has strong support from 2952/2962 and today I will be a buyer on any further dip to this area with a 2945 tight stop. I have to respect the fact that the S&P closed below 2990 and today I will lower my sell level to 2986/2996 with a 3003 stop. Worrying for the bulls was the 14% spike in the VIX which closed just below 16. The VIX is now on a buy signal having closed above 14 and must be watched closely.
I am on my way to Vancouver to see my daughter as I write this commentary. On my first flight to Toronto there was no WIFI available and as a result I missed all the FOMC and Powell drama. With the Euro now trading at 1.1075 I have bought the market here with a 1.1025 stop and a now lower 1.1125 T/P level. Interestingly the Daily Sentiment Index for the Euro has dropped below 10% bulls.
September Dollar Index
Last night the DSI for the Dollar closed at 91% bulls with the market closing at a two-year high. As I am now long the Euro I did not sell the Dollar but with the DSI getting to extreme levels I will now look to sell the Dollar on any further rally to 98.75/99.15 with a 99.45 stop.
I still have no edge in the DAX and today I am again going to stay on the sidelines. The weaker Euro helped the DAX from falling further yesterday.
Unfortunately the FTSE just missed my 7620 sell level before following the US Indices lower. The long overdue rebound in the Pound also weighed on the FTSE yesterday. Today I will lower my sell level to 7580/7620 with a 7655 stop.
Dow Rolling Contract
Similar to the S&P above the aggressive sell-off in the Dow did not give me a chance to buy the market and I am still flat. The Dow’s decline from the July 16, high at 27398 is the largest since the June 3 low and in my opinion has to be respected. The recent negative divergence between the Dow and both the S&P and NASDAQ was an early warning sign. On top of this we had the weak internals and the recent spike higher in the VIX despite most US Indices trading close to all-time highs. Today I will look to sell the Dow from 26950/27100 with a 27180 tight stop. I no longer want to be long the Dow at this time.
I am still flat the NASDAQ which also just missed my sell range before getting hammered after the Powell Press Conference. Yesterday’s move lower was the biggest sell-off since the June 3 low at 6969. The character of the market has changed as reality finally hits this overvalued market. Today I will lower my sell level to 7900/7960 with a 8005 tight stop.
Shortly before the FOMC Statement was released the Bund traded higher to my 175.10 sell level. I am still short and I will leave my 175.55 stop on this position as emailed yesterday to my Platinum Members. I will also raise my T/P level on this position to 174.82.
Gold Rolling Contract
My fears of a sell-off in Gold certainly proved correct yesterday with the market falling over $30 from its intra-day high. I am still flat the market and today I will now lower my buy level to 1388/1394 with a 1381 stop.
Silver Rolling Contract
After Silver traded lower to my 16.30 buy level I emailed my Platinum Members to exit any long position at my revised 16.40 T/P level and I am now flat. The recent 91% DSI reading was an early warning sign to exit any long position. Silver has short-term support from 15.50/15.90 and I will be a buyer on any dip to this area with a 15.20 tight stop. If I am taken long I will have a T/P level at 16.10.
My latest 1.2140 long Cable position worked well with the market rallying to a rebound high of 1.2250. This move higher enabled me to cover this position at my 1.2210 T/P level. Subsequently I emailed my Platinum Members to buy Cable again at a price of 1.2150. I am still long and I will leave my wider 1.2055 stop unchanged for now. I will now lower my T/P level on this position to 1.2205.