U.S. Equity Markets again closed lower, led by the 1.11% fall in the Dow. This move lower saw the VIX finally break 30, closing 8% higher at a price of 32.26. Markets extended last week’s losses with another day of negative economic sentiment and tightening financial conditions dominating market narratives. Bond yields and the Dollar continue to rally, solidifying negative investor sentiment. With the market repricing for a higher terminal rate, focus has shifted toward upcoming quarterly earnings reports to provide market direction. Meanwhile, the Chicago Fed Manufacturing Index showed that prices paid and received continue to fall, albeit at a slower rate. The real Federal Funds rate could turn positive sooner than you think. Last week, Federal Reserve Chairman Jerome Powell fielded questions from reporters. This Q&A session came on the heels of the Federal Open Market Committee raising rates another 0.75%. A primary topic of discussion was whether or not the central bank is tightening interest rates too much in its fight against inflation growth. After all, over the last three meetings, it has increased the Federal-Funds target range by 2.25%. At the same time, it is guiding for an increase of another 1.25% over the next two meetings in November and December. During this Q&A, Powell was asked, “What is it going to take for rate hikes to slow or even stop?” Right away, Powell discussed the obvious solution in boosting the supply of available workers and houses. But another detail that garnered far less attention was the real Fed-Funds rate. The number is the difference between the Federal-Funds rate and inflation growth. The central bank chief said it needs to get back into positive territory. After last week’s rate increase, the real Fed-Funds rate sits at negative 5.05%. However, if the economy is about to experience more pain as Powell suggested, the real Fed-Funds rate could go decidedly positive as soon as February. That would bode well for the long-term outlook for the economy and the S&P 500 Index. Wednesday’s change increased the Federal-Funds target from a range of 2.25% to 2.50% to a range of 3.00% to 3.25%. And as part of its quarterly summary of economic projections release, policymakers forecast rates will end the year at around 4.4% compared with their June forecast of 3.4%. For 2023, the Fed guided for interest rates of 4.6% compared with the prior 3.8% projection, 3.9% for 2024 compared with the previous 3.4%, and it anticipates interest rates of 2.9% for 2025. We are starting to see inflation growth slow, but it is still nowhere near the 2% goal. So, more rate hikes should be expected. But the real questions here are about the pace at which those increases happen and how long the Fed maintains peak interest rates. We can see the policy changes are shrinking the gap between interest rates and Consumer Price Index. In other words, the real Fed-Funds rate is already moving closer to positive. Remember, the central bank is focused on the long term. It is not just looking for one or two months of slowing data. It is going to maintain high rates until it sees a sustainable and significant decline in inflation. Within the S&P 500 Index, ten of the 11 sectors finished lower. European Markets closed lower. Markets were roiled with volatile foreign exchange trading. The Pound Sterling fell to a record low against the Dollar amid heightened concerns of future unfunded government tax cuts. The Bank of England made a statement following a sharp sell-off in the sterling, saying that it will assess the current situation and would not rule out aggressive rate hike intervention. European Central Bank President Christine Lagarde said to expect interest-rate hikes over the next several meetings to guard against surging inflation expectations. And the German IFO Business Climate Index worsened in September, suggesting the economy is on the path toward a winter recession. In Asia, Regional currencies came under further pressure as equity selling intensified. The People’s Bank of China took action to support the struggling Yuan. One of the measures increased the risk-reserve requirement on foreign currency sales to 20% from 0% – in other words, making it more expensive to short the Yuan. Bank of Japan Governor Haruhiko Kuroda says the central bank will continue with monetary easing to support aggregate demand. But he did not provide any indication of imminent intervention for a falling Yen. Elsewhere, South Korea’s finance minister said that further currency stabilising measures for the won were in the works. Oil closed 2.84% lower while Gold fell 1% after a quiet session.

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 made 330 points yesterday and is now ahead by 4825 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 1.03% lower at a price of 3655.

The Dow Jones Industrial Average closed 329 points lower for a 1.11% loss at a price of 29,260.

The NASDAQ 100 closed 0.51% lower at a price of 11,254

The Stoxx Europe 600 Index closed 0.42% lower.

Yesterday, the MSCI Asia Pacific Index fell 1.1%.

Yesterday, the Nikkei closed 2.66% lower at a price of 26,431.

Currencies 

The Bloomberg Dollar Spot Index closed 0.8% higher.

The Euro closed 0.6% lower at $0.9615.

The British Pound closed 1.4% lower at 1.0692.

The Japanese Yen fell 0.8% closing at $144.63.

Bonds

Germany’s 10-year yield closed 9 basis points higher at 2.12%.

Britain’s 10-year yield closed 45 basis points higher at 4.28%.

US 10 Year Treasury closed 19 basis points higher at 3.88%.

Commodities

West Texas Intermediate crude closed 2.84% lower at $76.10 a barrel.

Gold closed 1.1% lower at $1631.10 an ounce.

This morning on the Economic Front we have Euro-Zone Money Supply at 9.00 am followed by a speech from ECB President Lagarde at 12.30 pm. Next, we have U.S. Durable Goods Orders at 1.30 pm and the Housing Price Index at 2.00 pm. Finally, we have New Home Sales and the Richmond Fed Manufacturing Index at 3.00 pm.

Cash S&P 500

The Currency and Bond chaos remains in play. Both Gilt and 10-year Treasuries surged yesterday with Gilts having risen 100 basis points since Friday morning. This is an enormous move and is guaranteed to cause a major recession in Britain. It is no surprise that equities remain under pressure as we saw yet another flush into the close. We still cannot fill a single ‘’Open Gap’’ while the oversold readings are now becoming historic. The $NYMO CLOSED AT -128 LAST NIGHT. To put this into context, the lowest ever reading was -142.48 in 2011 and -136.48 during the COVID Crash. Meanwhile in the Global Financial Crisis we had a -129.1 print in 2008. The VIX still cannot break its trendline and now has six ‘’Open Gaps’’ below. The Daily Chart shows that any further spike in the VIX from here will get overbought. The 3580/3600 remains the risk zone and at last night’s close we are not too far from this support area. I will continue to look to add to my existing 3733 position on any dip to this area with no stop. My own gut is that a tradeable low will come in the overnight session hence why I am long all three Indexes at this time. There is every chance we can wake up to a large gap higher. Price stability is the bedrock of a stable economy. When central banks lost control of inflation they tried to fix it with tightening and raising rates. They are now foolishly piling into rate hikes in a slowing economy as they continue to underestimate the slowdown in growth. The Fed in my opinion have again demonstrated this year that they have no clue what they are doing. They employ 18,000 people with nearly 400 PhD economists and they still cannot produce a single forecast that is even close to reality.  The McClellan Oscillator closed at -420. This is one of the weakest if not the weakest reading ever. I have been trading the S&P since 1995. Every time the MO prints -250 or higher the market rallies. The Monthly RSI for the Dollar is back to levels last seen in the 1980s. The Dollar is trading outside the top of its 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. 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.

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. The Euro will have strong resistance at .9900 and any move to this level will see me reduce my exposure as I want to try and be flat ahead of Friday’s month-end.

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

No Change. The DAX is severely oversold, has support again from 11930/12130 where I will again be an aggressive buyer with a 11795 ‘’Closing Stop’’.

Cash FTSE

I am still long the FTSE from Friday at 7090 average with the same 6995 ‘’Closing Stop’’. The FTSE had every chance to sell-off given the back-drop but a late rally saw the market again close over 7000. Therefore, I will leave T/P level unchanged at 7150.

Dow Rolling Contract

My Dow plan worked well with the market trading lower to my 29350 buy before rallying to my 30620 T/P level. Subsequently, the Dow fell 400 points into the close. I bought the Dow again at 29240. I will add to this position at 29000 with a lower 28795 ‘’Closing Stop’’. I will have a T/P level at 29550 and if any of the above levels are filled I will be back with a new update for my Platinum Members.

Cash NASDAQ 100

The NDX rallied to my revised 11450 T/P level on Friday’s 11390 long position. Subsequently, I bought the NDX again into the close at 11280. I will add to this position at 11100 with no stop. I will have a T/P level on this position at 11520.

December BUND

The incredible 50 basis point rise in U.K Gilts saw the Bund get hit hard again yesterday, trading the whole of my buy range for a now 138.10 average long position. I will now lower my T/P level to 139.00 while leaving my wider 136.95 ‘’Closing Stop’’ unchanged.

Gold Rolling Contract

No Change. I am still long Gold at 1646 with the same 1629 ‘’Closing Stop’’. I will now lower my T/P level to 1652.

Silver Rolling Contract

Silver fell 3% yesterday, hitting my second buy level at 18.40 for a now 18.85 average long position. I will now lower my T/P level to 19.60 with no stop. If this level is triggered, I will be back with a new update for my Platinum Members.