A 40% fall in First Republic Shares saw the U.S. Equity Markets get hit hard across the board. The Bank Index led yesterday’s declines, closing lower by 4%. Better earnings from both Microsoft and Google have helped Futures Markets to rally overnight. This is an important week as earnings season kicks into high-gear as many companies deliver first-quarter results. Crucially, investors will be using all the information to get a glimpse of what the rest of the year has in store for both the markets and the economy. But investors might – as author Lewis Carroll once put it – find themselves peering through the looking glass. That means things may suddenly appear unfamiliar but recognisable at the same time, just inside out or upside down. This is exactly what we are seeing in the economy right now. Importantly, for the first time in a year, stocks rallied leading up to the current earnings season. The S&P 500 Index surged more than 6% in the final three weeks of the first quarter. Morgan Stanley Chief Investment Officer Mike Wilson sees this as a major near-term risk for stock prices. In a note on Monday morning, Wilson said the regional banking crisis triggered an unusual surge in liquidity that elevated stock prices prior to earnings seasons. But he also asserted that the business cycle is slowing rapidly and that earnings remain far too high. Wilson pointed out that when forward earnings-per-share (“EPS”) growth goes negative (as it is currently), the Federal Reserve usually cuts rates, not hikes them. But with four-decade-high inflation, the Fed has hinted that cutting rates won’t be in the conversation until 2024. If earnings continue to slide, the near-term outlook for equities declines. According to FactSet, overall earnings for the first quarter are projected to be among the weakest since the start of the pandemic. In fact, of the nearly 20% of S&P 500 companies that have already reported, earnings for the quarter have dropped more than 6% from a year earlier. But beyond market performance, investors are closely monitoring the many companies whose earnings will provide insight into how well the consumer is doing financially. So, as we enter the bulk of earnings season, it is important to remember one thing: This economy and this business cycle is unlike any we have seen before. Sure, we can recount past accounts of similar macroeconomic events. But the past does not repeat itself. Rather, it reinvents itself. Investors seem to have conflicting views when it comes to the U.S. Dollar’s path this year. The landscape paints a murky picture of the greenback as investors struggle to weigh the Fed’s imminent end to rate hikes, recent turmoil in the banking sector, and a record number of short contracts held on the 10-year Treasury. European Markets closed lower. The Swiss bank’s first quarter turmoil was highlighted in its earnings report which showed an outflow of $69 billion in deposits. The report proved that UBS – which bought Credit Suisse in a rescue deal – has a lot of work ahead of them. European Central Bank Executive Board member Isabel Schnabel said that another 50-basis point rate hike next week is still on the table. Analysts continue to believe that the ECB has more runway on rate hikes than the Fed. In Asia, Bank of Japan Governor Ueda said it is extremely important for FX rates to move stably and reflect fundamentals. Elsewhere, Oil fell 2.15% while despite a stronger Dollar, Gold closed higher by 0.5%.
For anyone following my Platinum Service it made 132 points yesterday and is now ahead by 2784 points for April after closing March with a gain of 6168 points, while finishing February with a gain of 3164 points, after closing January with a gain of 4687 points, while finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while finishing October with a record gain of 9619 points, making 6660 points in 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 1.58% lower at a price of 4072.
The Dow Jones Industrial Average closed 344 points lower for a 1.02% loss at a price of 33,530.
The NASDAQ 100 closed 1.89% lower at a price of 12,725.
The Stoxx Europe 600 Index closed 0.40% lower.
This morning, the MSCI Asia Pacific closed 0.30% lower.
This morning, the Nikkei closed 0.71% lower at a price of 28,416.
Currencies
The Bloomberg Dollar Spot Index closed 0.6% higher.
The Euro closed 0.7% lower at $1.0963.
The British Pound closed 0.5% lower at 1.2402.
The Japanese Yen rose 0.4% closing at $133.60.
Bonds
Germany’s 10-year yield closed 13 basis points lower at 2.39%.
Britain’s 10-year yield closed 6 basis points lower at 3.70%.
U.S.10 Year Treasury closed 13 basis points lower at 3.39%.
Commodities
West Texas Intermediate crude closed 1.14% higher at $78.76 a barrel.
Gold closed 0.4% higher at $1989.10 an ounce.
This morning on the Economic Front we already had the release of German GFK Consumer Confidence which came in at -25.7 versus -27.9 expected. At 1.30 pm we have U.S. Wholesale Inventories and Durable Goods Orders. Finally, at 6.00 pm we have a five-year Treasury Auction. After the close Facebook reports its earnings.
Cash S&P 500
Yesterday’s 1.50% fall in the S&P saw the VIX hold support at 16 by surging 12.5%, to close at price of 19.01. The 50-Day Moving Average for the VIX is just above here at 20.24. A break and close over this level will see the S&P fall further. The $BPSPX finally rolled over from overbought and was one of the main reasons why I had a low buy level in Tuesday’s Daily Commentary. This move lower saw my 4083-buy level triggered before closing on the lows at 4072. Better earnings saw the NDX surge 200 points after the close helping the S&P to rally to my revised 4091 T/P level and I am now flat. It is looking more and more likely that last week’s 4173 high is proving to be significant especially as we approach the seasonally weak My time frame. The S&P is short-term oversold having fallen 100 handles in the past few days. The 15 Minute chart got severely oversold into the close with a positive divergence. That been said the market is trading like liquidity was coming back out as banks again got hammered, led by the 40% fall in First Republic Shares. The Bank Index fell 4%, closing below the key 80 support line. The S&P has support from 4053/4068 where I will be an aggressive buyer with a lower 4039 ‘’Closing Stop’’. Ahead of month-end on Friday, I do not want to be short the S&P.
EUR/USD
The Euro reversed all of Monday’s rally, falling 0.7% yesterday. This move lower has me long at 1.0980. I will add to this position at 1.0900 with a now lower 1.0845 ‘’Closing Stop’’. I will now lower my T/P level on this position to 1.1030.
June Dollar Index
Just as I posted the June Dollar Index was trading at my 101.10 initial buy level. Subsequently, the Dollar rallied to sit higher, trading at 101.65 as I go to press. This move higher enabled me to cover this long position at my 101.60 T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 100.50/101.10 with the same 99.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 101.70.
Cash DAX
Despite the American Indexes falling yesterday, the DAX traded in a narrow range. I am still flat as lower Bund Yields probably helped the DAX to outperform. I am reluctant to chase the DAX lower, moving my sell level to 15930/16010 with a lower 16085 ‘’Closing Stop’’. Given how overbought the DAX is trading I still do not want to be long the market at this time.
Cash FTSE
The boring action price action in the FTSE with the market stuck in a 70-point range for most of the last 10 days. As I want to better deploy my capital, I emailed my Platinum Members to exit their 7885 average short position at my revised 7858 T/P level and I am now flat. The FTSE has support below from 7770/7830 where I will be a buyer with a 7725 tight ‘’Closing Stop’’
Dow Rolling Contract
I am still flat as the Dow fell shy of yesterday’s buy range. I will continue to be a buyer on any dip lower to 33180/33430 with the same 32995 ‘’Closing Stop’’. Until the Dow breaks and closes below its 50-Day Moving Average (33089) I have no interest in having a short position.
Cash NASDAQ 100
My NDX plan worked well. The NDX traded lower to my 12780-buy level before closing right on the lows at 12725. After the close better earnings from Microsoft and Google saw the NDX rally 200 points overnight. This move higher saw my revised 12835 T/P level triggered and I am now flat. Yesterday’s low saw the NDX start poking below its Daily Bollinger Band after falling over 400 points since last week’s high. Today, I will be an aggressive buyer from 12600/12750 with a lower 12495 ‘’Closing Stop’’. Ahead of month-end I do not want to be short the NASDAQ
June BUND
The Bund surged yesterday, trading 200 points higher from where I marked prices 24 hours ago. Lower Bond Yields are telling us that Central Banks are at or close to finishing rate hikes. I will now raise my buy level to 133.70/134.50 with a 133.05 ‘’Closing Stop’’ which is just below Monday’s low print.
Gold Rolling Contract
Gold hit a low at 1976 before rallying over $15 into the close. Even though I am still long Silver, I will now raise my Gold buy level to 1960/1975 with a higher 1949 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 1988.
Silver Rolling Contract
No Change. I am still long at a price of 24.90 with the same 25.60 T/P level. I will add to this position at 24.10 while leaving my 23.35 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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