Weaker than expected Housing Starts saw the U.S. Equity Markets close lower yesterday. A late comeback saw markets erase most of their afternoon sell-off helping the VIX to close unchanged. Brent crude approached $95 a barrel on Tuesday as investors eye the possibility of an extended fourth-quarter supply deficit. Supply cuts from Saudi Arabia and Russia have driven Brent crude and West Texas Intermediate (“WTI”) oil prices to record their third consecutive week of increases. Thanks to the rally, crude has now reached its highest level since November. Analysts predict that prices could reach over $100 per barrel. The decisions by Saudi Arabia and Russia could fuel a deep supply deficit and drive prices even higher into 2024. According to the National Association of Home Builders (“NAHB”), U.S. homebuilder sentiment dropped to a five-month low in September and recorded the largest back-to-back decrease in nearly a year. The NAHB/Wells Fargo Housing Market Index fell five points in September, following a six-point slide in August due to increasingly high mortgage rates. The heightened lending rates have forced many potential buyers to reconsider entering the market, significantly impacting the demand for new homes. Homebuilders continue to anticipate a rocky path as the Federal Reserve is expected to keep rates high for the foreseeable future. Yesterday, Housing Starts plunged in August as the renter nation collapses, falling over 11%, This leaves Starts at their lowest level since June 2020. Over the past nine weeks, investors have withdrawn nearly $500 million from cryptocurrencies. And that is despite recent good news for the industry: Grayscale’s courtroom win against the U.S. Securities and Exchange Commission that tried to block the crypto asset manager’s mission to create a bitcoin (BTC) exchange-traded fund. The crypto market saw a $54 million exit last week, marking the fifth-straight week of sell offs. Bitcoin fared the worst, suffering 85% of the withdrawals totalling $45 million. Withdrawals have also plagued Ethereum and smaller alternative coins, albeit to a lesser degree. The massive outflow suggests investors are concerned with a lack of movement amid crypto’s recent victories in the regulatory arena. European Markets closed mixed. European Central Bank (“ECB”) Vice President Luis de Guindos believes that the costs of core goods in the Euro-Zone have peaked and are expected to slow in the following months. Guindos stated, “Underlying inflation’s worst moments have passed, and it should moderate” during his speech late Monday. The ECB Vice President also noted that rising energy prices add an extra layer of uncertainty and that tighter lending conditions have yet to be fully reflected in the economy. This suggests that the central bank will diligently observe market behaviours as it continues its data-backed approach. In Asia, Mercedes-Benz CEO Ola Källenius is worried healthy competition and global automotive supply chains could be in trouble as talks of disassociation with China have risen. In an interview with Bloomberg TV, the Mercedes executive emphasised the importance of open markets and free competition. Källenius’ comments come as tensions rise between the European Union and China over an investigation of electric vehicle subsidies. The luxury carmaker has a particular interest in the investigation since a third of its sales comes from China. Källenius cautioned against splitting the automotive industry into separate regions as it relies on components from all five manufacturing continents. Elsewhere, Oil fell 0.33% following a late sell-off into the close while Gold again closed flat.
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For anyone following my Platinum Service it made 180 points yesterday and is now ahead by 556 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 0.22% lower at a price of 4444.
The Dow Jones Industrial Average closed 106 points lower for a 0.31% loss at a price of 34,517.
The NASDAQ 100 closed 0.22% lower at a price of 15,191.
The Stoxx Europe 600 Index closed 1.13% lower.
This morning, the MSCI Asia Pacific closed 0.3% lower.
This morning, the Nikkei closed 0.66% lower at a price of 33,023.
The Bloomberg Dollar Spot Index closed 0.2% lower.
The Euro closed 0.1% lower at $1.0680.
The British Pound closed 0.1% higher at 123.99.
The Japanese Yen fell 0.2% closing at $147.88.
Germany’s 10-year yield closed 4 basis points higher at 2.74%.
Britain’s 10-year yield closed 5 basis points lower at 4.35%.
U.S.10 Year Treasury closed 2 basis points higher at 4.34%.
West Texas Intermediate crude closed 0.33% lower at $91.05 a barrel.
Gold closed 0.1% lower at $1931.10 an ounce.
This morning on the Economic Front we already had the release of U.K. CPI which rose 6.7% y/y versus 7.0% expected. Next, we have Euro-Zone Construction Output at 10.00 am, followed by U.S. MBA Mortgage Applications at 12.00 pm. Finally, we have the FOMC Statement at 7.00 pm and the Powell Press Conference at 7.30 pm.
Cash S&P 500
My S&P pan eventually worked well. The S&P got hit hard yesterday afternoon, trading the whole of my buy range for a 4431 average long position. The low was 4417 before the S&P subsequently rallied over 30 Handles into the close. This move higher saw my 4439 revised T/P level triggered and I am now flat. The S&P had every excuse to break lower given the awful Housing Starts Report but found support in the 4390/4430 area that I mentioned yesterday. The market is even further oversold as despite the late comeback, the $BPSPX RSI closed at 22. History tells us you have to be buyer against this oversold signal. The S&P may continue to fall for the next two to four weeks given the seasonality, I have zero interest in pressing the downside. While I am not telling you to be short, personally I do not like the risk/reward here in being short. All eyes will be on the FOMC Statement at 7.00 pm and the Powell press conference 30 minutes later. I do not expect the Fed to hike rates today given the recent weakness in housing. They need to let the aggressive rate hikes implemented to work through the system. Today, I will be an aggressive buyer on any further weakness to 4406/4421 with a wider 4389 ‘’Closing Stop’’. If this view changes I will be back with a new update for my Platinum Members.
The Euro rallied yesterday morning, hitting my revised 1.0709 T/P level with a 1.0721 high print and I am now flat. Today, I will again be a buyer on any dip lower to 1.0590/1.0660 with a lower 1.0525 ‘’Closing Stop’’. Given how oversold the Euro is trading I have no interest in being short.
September Dollar Index
No Change. I am still short at an average rate of 105.00. This morning, the Dollar is trading lower at 105.11. I will leave my 105.85 ‘’Closing Stop’’ unchanged while raising my T/P level further to 104.85 as I want to try and be flat ahead of the Fed this evening. If any of the above levels are hit, I will be back with a new update for my Platinum Members
The DAX was weak yesterday, hitting my second buy level at 15650 for a 15690 average long position. Even when the S&P started to rally last night the DAX struggled. However, better inflation data from the U.K. saw the DAX hit my 15721 revised T/P level as emailed to my Platinum Members this morning and I am now flat. Today, my only interest in buying the DAX is on a further move lower to 15500/15580 with a lower 15425 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 15650.
Shortly after I posted yesterday the FTSE had a small rally, enabling me to cut my 7640 long position at my revised 7670 T/P level and I am now flat. Much better-than-expected U.K. CPI this morning sees the FTSE trading higher at 7690 as I go to press. Everyone should now be flat. The FTSE has had a successful back test of lasty week’s breakout. A break and close over 7720 would add further weight to the bullish case. This CPI print should see the Bank of England hold off hiking rates tomorrow. Markets now believe that the rate hiking cycle is close to an end, and this will help equity markets to rally into year-end. Today, I will again be a buyer on any dip lower to 7560/7640 with a lower 7495 ‘’Closing Stop’’.
Dow Rolling Contract
Yesterdays across the board sell-off saw my second Dow buy level at 34440 triggered for a now 34560 average long position. Ahead of the FOMC Statement this evening we should see a further rally. I will now lower my T/P level on this position to 34640 while leaving my 34295 ‘’Closing Stop’’ unchanged. We should see plenty of two-way price action once we get the Statement and then the Powell press conference at 7.30 pm. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Higher Treasury Yields and much weaker than expected Housing Starts saw the NDX get hit hard yesterday, falling to my next buy level at 15110 for a now 15254 aggressive long position. Subsequently, the NDX rallied 130 points into the close, sitting at 15200 this morning. I am impressed how well the NDX is holding in against a backdrop of so much negativity in the press. As I have said consistently over the past two weeks, I cannot justify any short positions given the technical setup with these massively oversold charts. I will have a ‘’Closing Stop’’ at 15045 on this position while lowering T/P level to 15330. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Higher Treasury Yields saw the Bund fall to my second buy level at 129.70 for a now 130.05 average long position. I will now lower my T/P level to 130.65 while leaving my 129.25 ‘’Closing Stop’’ unchanged. 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 as the market again traded in a narrow range yesterday. This morning, Gold is trading at 1931 as I go to press. Ahead of the FOMC, I will continue to be a buyer of Gold on any dip lower to 1898/1913 with the same 1889 ‘’Closing Stop’’.
Silver Rolling Contract
I have never seen such a small trading range for both Gold and Silver. Yesterday’s Silver’s range was just 30 points. I am still long at an average rate of 24.05. Buying the dip has worked almost every time in Silver over the past two years. However, just like Gold finding strong resistance from 1960/2000, Silver is seeing a lot of selling between 24.00 and 25.00. I will leave my ‘’Closing Stop’’ unchanged at 21.95. If Silver drops from here, I will come back with a new level to add to my existing long position. I will leave my T/P level unchanged at 24.25. If any of the above levels are hit, I will be back with a new update for my Platinum Members.