U.S. Equity Markets finished yesterday’s session higher led by the 2.73% surge in the NASDAQ 100. This move higher saw the VIX reverse most of this week’s gains with a loss of 8.27%. Markets were higher as the Institute for Supply Management’s July Services Purchasing Managers’ Index (“PMI”) eased some concerns surrounding inflation. The PMI fell for the third consecutive month to 72.3, down from June’s 80.1. This is the largest monthly decline since May 2017. As a result, easing inflation fears sent short-term Treasury yields higher. St. Louis Federal Reserve President James Bullard said that the Fed-Funds rate will have to end the year at a range of 3.75% to 4.00% – which implies 1.50% more in rate hikes. Within the S&P 500, 10 of 11 sectors finished higher. European Markets closed higher. The Euro-Zone’s final PMI composite reading registered a 17-month low of 49.9 in July but was slightly higher than the 49.4 flash reading. This was the first time since February 2021 that overall output declined. High inflation continues to take its toll on the economic outlook as new business intake across sectors falls. German Tecrade data published for June showed export levels rose for the third straight month, hitting a new record of $134.3 billion. Boosts in exports are largely due to temporary increased demand from the European Union and U.S. as higher nominal energy prices influence the data. In Asia, China suspended imports of 2,000 food products from Taiwan as tensions between the two countries continue over U.S. diplomatic ties in the region. Taiwan said that these ramped-up economic sanctions could pose serious global trade consequences. Elsewhere, Oil fell 3.83% while Gold closed slightly higher with a gain of 0.27%.
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The S&P 500 closed 1.56% higher at a price of 4155.
The Dow Jones Industrial Average closed 416 points higher for a 1.29% gain at a price of 32,812.
The NASDAQ 100 closed 2.73% higher at a price of 13,253.
The Stoxx Europe 600 Index closed 0.9% higher.
This morning, the MSCI Asia Pacific Index rose 0.6%.
This morning, the Nikkei closed 0.62% higher at a price of 27,914.
The Bloomberg Dollar Spot Index closed 0.2% lower.
The Euro closed 0.1% lower at $1.0165.
The British Pound closed 0.1% lower at 1.2145.
The Japanese Yen fell 0.5% closing at $133.82.
Germany’s 10-year yield closed 6 basis points higher at 0.87%.
Britain’s 10-year yield closed 4 basis points higher at 1.91%.
US 10 Year Treasury closed 4 basis points lower at 2.70%.
West Texas Intermediate crude closed 3.83% lower at $91.05 a barrel.
Gold closed 0.29% higher at $1765.10 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders which came in at -0.4% versus -0.8% expected. Next, we have Euro-Zone Economic Bulletin at 9.00 am, followed by the Bank of England Rate Announcement at 12.00 pm. At 1.30 pm we have U.S. Weekly Jobless Claims and the Trade Balance. Finally, we have a speech from Fed Member Mester at 5.00 pm.
Cash S&P 500
Better than expected inflation data saw the S&P break and close above the small ‘’Double Top’’ at 4144, hitting a high at 4167, before having a small sell-off into the close. Short positions and under exposed Fund Managers are scratching their heads at the recent rally as we have never seen Economically what is happening in history before. Remember Inflation is currently 9% and the Fed Funds rate is 2.5% – a level that the Fed said will do for now as the next FOMC Meeting is not scheduled until mid-September. Despite all the bad news since the June lows, including weak earnings and deteriorating Macro Data, every dip has been bought. The NDX alone has rallied over 20% in this time and nobody is talking about it on the news wires. This has been the classic bear market rally, ripper rally, everybody is short or underexposed, then they try to short more as the markets keeps rallying before capitulating, go long sentiment improves and then just like at the end of March and May, the market gets slammed. With the McClellan Oscillator closing last night at +231, the S&P is severely overbought. We have to be careful with long positions here having bought almost every dip since the 3635 June low print. Yesterday’s surge higher saw the whole of my sell range triggered for a now 4140 average short position. I will leave my 4165 ‘’Closing Stop’’ unchanged while raising my T/P level to 4130. If any of the above levels are hit I will be back with a new update for my Platinum Members.
The Euro rallied to my tight 1.0195 T/P level on Tuesday’s 1.0185 average long position and I am still flat. The one warning sign for me in relation to been worried that the American Indexes may have rallied enough for now is the fact that the Dollar is still strong, despite having every excuse to weaken. Today, I will again be a buyer on any dip lower to 1.0060/1.0120 with a 1.0015 stop I still do not want to be short the Euro at this time.
March Dollar Index
My Dollar plan worked well with the market trading higher to my 106.60 sell level before trading lower to my 106.20 T/P level and I am now flat. I will continue to be a buyer on any further dip lower to 104.80/105.40 with the same 104.35 stop. The Dollar has short-term resistance from 106.80/107.50 where I will be a small seller with a tight 107.95 stop.
The DAX has been tricky to trade over the past week. The stronger U.S. Indexes saw the DAX rally hard yesterday, trading the whole of my sell range for a now 13615 average short position. I am never comfortable in being short the DAX. I will now raise my T/P level to 13595 while leaving my 13705 tight stop unchanged.
No Change. I am still a small seller from 7470/7530 with the same tight 7581 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
Thankfully, we were not short the Dow yesterday as the market is now trading 450 points higher from where I marked prices yesterday morning. The Dow has support from 32300/32550. I will now move my buy level to this range with a higher 32195 ‘’Closing Stop’’. Sentiment is struggling to rally as shown by the ‘’Fear & Greed Index only rose slightly again last night, closing at 44 which is still a reading of ‘’Fear’’. A 50 print is neutral and when this happens it should propel the Dow higher given the level of bearishness amongst traders and Fund Managers. I would prefer to see this reading at 70 or higher as it would then make an easier case to go short.
Cash NASDAQ 100
The NDX never came close to yesterday’s buy level before leading the stock market with a 2.73% gain. The NDX is now short-term overbought having rallied over 20% in the past few weeks with the market now trading with a 13 Handle at 13220. We have resistance from 13450/13650 where I will be an aggressive seller with a tight 13825 stop. The NDX has short-term support from 12800/12950 where I will be a small buyer with a 12695 stop.
No Change. I am still a small seller from 158.60/159.40 with the same 160.05 ‘’Closing Stop’’.
Gold Rolling Contract
Gold has traded in a narrow range after last week’s spike higher and I am still flat. I am reluctant to chase the market higher, leaving my 1727/1742 buy level unchanged with the same 1715 stop. If I am taken long I will have a T/P level at 1753.
Silver Rolling Contract
No Change. I am still long from Friday at 20.08 with a now lower 20.55 stop. I will leave my 19.55 stop unchanged and if any of the above levels are hit I will be back with a new update for my Platinum Members.