The VIX rose 10.30% yesterday to close at 18.02 as 10 Year US Treasury Rates hit 3% for the first time in four years. For equity investors the timing could not have been worse. The Interest Rate milestone was never going to spark celebration in the stock market as rising bond yields signal higher borrowing costs for consumers and companies which sent stock market investors scurrying to the bond market in search of returns. Not helping the Dow was Caterpillar, 3M and United Technologies – all stalwarts of American Industry that serve as bellwethers for key pieces of the Global economy – with the Dow closing 425 points lower (-1.75%) and this was after a 200 point rally off its earlier lows.
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For anyone following my Platinum Service it lost 112 points yesterday and is now ahead by 1384 points for April, having made 1760 points in March, 2256 points in February, 879 points in January, 946 points in December, and 823 points in November Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Caterpillar had its biggest decline since 2016 while 3M plunged the most in twelve years as both companies warned that rising costs and tepid demand might hurt profits as the year goes on. Wall Street took the news as a warning that the worldwide expansion might be at its peak. Coupled with the Trump/ Macron press conference calling for the de-nuclearisation of North Korea, the Dow plunged over 500 points from its high in a few minutes.
The S&P 500 Index fell 1.3% to 2634.52 which was its biggest decline in three weeks, as companies with revenues that are more reliant on economic growth led the decline. Industrial, Materials and Tech stocks dropped more than 2%, offsetting gains from high-dividend shares such as telecom and utilities. Reappearing geopolitical concerns also weighed on equities after President Trump threatened Iran with the Dow falling over 800 pints from its earlier highs in just a couple of hours.
Earlier it was reported that German Business Confidence had plunged the most in almost a year while sentiment also deteriorated in both Italy and France, keeping the Euro region on an uncertain footing after a weak first Quarter. Meanwhile in Asia, China leaders are giving their strongest signal since 2015 that growth in the world’s second-largest economy could slow.
In FX, the US Dollar remained strong in narrow trading while Sterling continued to weaken with Cable closing at 1.3970 well off last week’s high at 1.44.
In Commodities, Gold strengthened on the back of the rising geopolitical tensions to close at $1332, while oil prices softened.
This morning on the Economic Front we have no data of note due from either the Euro-Zone or the UK while the only significant US data is MBA Mortgage Applications at 12.00 pm. Tomorrow we have the ECB Meeting and on Friday US GDP.
June S&P 500
My S&P plan worked well with the market trading lower to my initial 2666 buy level before rallying to a rebound high at 2674 and this move higher enabled me to cover this long position at my revised 2670 T/P level. Having got caught badly in the Dow I emailed my Platinum Members to buy the S&P again at 2623 before being able to cover this position at a revised T/P level at 2630 and I am now flat. The fact that the S&P fell over 70 Handles from its lunchtime high is a worry especially as we broke and closed below the key 2656 support level. There is no doubt that the first sell signal in two years for the VIX last Thursday has certainly proved to be correct. The S&P has strong support from 2598/2610 which is where the 200 Day Moving Average comes in and today I will be a buyer on any drop to this area with a 2589 stop. I have to respect the price action and I will be a small seller on any rally higher to 2655/2665 with a 2673 stop.
EUR/USD
The Euro just missed my 1.2255 sell level and I am still flat. Today I will raise my sell level slightly to 1.2265/1.2305 with the same 1.2335 tight stop. As mentioned yesterday the Euro has strong support at 1.2150 and today I will be a small buyer on any dip lower to 1.2110/1.2150 with a 1.2075 stop. Remember a break and close below 1.2150 is a sell signal.
June Dollar Index
No change as I am still a buyer on any dip lower to 90.00/90.40 with the same 89.70 stop
June DAX
It was incredible the way both the FTSE and DAX held in yesterday despite the near 2% fall in US Indices. Earlier the DAX just missed my 12690 sell level with a 12660 high print and after the Dow got crushed I emailed my Platinum Members to cancel any buy level in either the DAX or FTSE. However if you did buy these markets at my buy level yesterday then both markets are trading at these price levels as I go to print. If the Dow continues to sell-off this afternoon then it is hard to see both the DAX and FTSE hold on to these prices. The DAX has strong support from 12270/12340 and today I will be a buyer on any dip to this area with a 12215 tight stop. I do not want to be short the market at this time.
June FTSE
I am still flat the FTSE and I have to respect the price action given its huge run higher over the past 10 days. Despite the positive trading I am not going to chase this market higher. The FTSE has strong support at 7250 and today I will be a buyer on any dip lower to 7220/7260 with a 7185 stop. I still do not want to be short the market at this time despite how severely overbought the FTSE is trading.
Dow Rolling Contract
Sometimes you can be lucky with a surprise announcement and other times like yesterday there is nowhere to hide with the Dow falling over 400 points once the Trump/Macro press conference started. This move lower saw me attempt to buy the Dow as it fell out of bed at a price of 24260 before literally stopping me out of this position a few minutes later at my 24140 stop level and I am still flat. Thankfully I had a tight stop as the market continued to fall to a low at 23810 before rallying 200 points into the close. As I have mentioned countless times it is many years since we have witnessed this kind of volatility with the high price of the Dow not helping as the points movements are huge. Given how easily we broke support at the 24170/24340 support level this area should now act as resistance on any subsequent test and today I will be a small seller in this area with a wider 24480 stop. The Dow has huge support at the 23650 area which is the 200 Day Moving Average and today I will be a buyer on any dip lower to 23540/23680 with a 23460 stop. This area caught the dip three weeks ago and I would expect this to be replicated on any test. However a break and close below 23600 is an important long-term sell signal.
June NASDAQ
My NASDAQ plan did not work well with the market trading lower to my average buy level at 6607 before stopping me out of this position at 6545 and I am still flat. Today I will be a small seller on any rally higher to 6595/6655 with a 6705 stop. My only interest in buying the NASDAQ is on a dip lower to 6390/6440 with a 6345 tight stop.
June BUND
Shortly after I posted yesterday morning the Bund traded higher to my 158.05 exit level on my latest 158.10 long position. Late in the afternoon when the Equity markets tanked I bought the Bund again at a price of 157.90 before unfortunately getting stopped out of this position in the last few minutes at 157.55 and I am now flat. With the ECB Meeting tomorrow I would expect that Dragi is not happy with the recent rise in Bond yields and today I will again look to buy the Bund on any dip lower to 156.95/157.35 with a 156.60 stop. Despite the negative price action I still do not want to be short the market at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1303/1311 with the same 1296 stop.
Silver rolling Contract
I am still long at 16.85 and not happy with the price action especially as Silver is under pressure again this morning. Today I will now lower my exit level to 16.75 with the same 16.35 stop. If either of these scenarios happen I will be back with a new update for my Platinum Members.
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