U.S. Equities halted a two-day slide while Treasuries rose as investors assessed the likelihood for interest-rate cuts. Oil rallied on escalating Middle East tensions. The S&P 500 Index reached a five-week high as a surprise increase in U.S. jobless claims supported the idea the Federal Reserve may take a dovish turn. The Stoxx Europe 600 Index had opened in the red following declines across Asia, but reversed course to post a small advance. Plenty of caution remained, however, buoying Government Bonds and Gold. Oil jumped as much as 4.5%, the most since January, after two tankers were damaged in suspected attacks near the Persian Gulf. The U.S. blamed Iran. Investors are doing their best to stay upbeat amid the daily drumbeat of headlines pointing at political tensions around the globe. The tanker incident follows other attacks in the region last month, and comes as tensions simmer in Hong Kong following Wednesday’s clashes between police and protesters. Meanwhile, the trade dispute between the U.S. and China remains unresolved. The hope for many traders is a newly dovish Fed can help blunt some of these threats.
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Equities
The Equity Market right now is hyper-focused on what the Fed is going to do. Equity markets are pricing in a rate cut next week. If we don’t get that, you could see us pull back. The S&P 500 Index rose 0.4% at 2891, less than 2% from all-time highs. Despite opening lower, the Stoxx Europe 600 Index reversed these losses to close 0.2% higher. The MSCI Emerging Market Index decreased 0.4%, while the MSCI Asia Pacific Index sank 0.4%.
Currencies
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index was little changed.
The Euro weakened 0.1% to $1.1274.
The British pound slipped 0.1% to $1.2677.
The Japanese yen gained 0.1% to 108.36 per dollar.
Elsewhere, the Australian Dollar declined and the three-year yield dropped below 1% for the first time after the unemployment rate rose more than expected.
Bonds
The yield on 10-year Treasuries fell three basis points to 2.09% as we head into next week’s FOMC Meeting. In Europe, Germany’s 10-year yield was little changed at -0.24%. and Britain’s 10-year yield fell three basis points to 0.83%.
Commodities
West Texas Intermediate crude gained 2.2% to $52.25 a barrel. Gold increased 0.6% to $1,341.04 an ounce as the market looks to take out its $1347 year-to-date high, which it is doing this morning trading at $1352 as I go to press.
This morning on the Economic Front we already had the release of German Wholesale Prices which came in weaker than expected with a fall of 0.3% Euro-Area Finance Ministers meet in Luxembourg this morning. On the agenda: financial penalties for Italy over its debt load, and the Euro-Area Budget. At 1.30 pm we have US Retail Sales and this is followed at 2.15 pm by Industrial Production and Capacity Utilisation. Finally at 3.00 pm we have the University Of Michigan Consumer Sentiment Index.
June S&P 500
Shortly after I posted early yesterday morning we had the attack on the two oil tankers in Oman which saw the S&P trade to a low of 2867. This move lower hit my 2872 buy level before the market rallied to my 2880 T/P level and I am now flat. When the US Markets opened the S&P traded in a narrow range before having a small rally into the close. We have the G 20 Meeting this weekend ahead of the FOMC Rate decision next Wednesday and of course the unknown Trump Tweets to come over the weekend. I am still bullish the S&P believing that the market will eventually hit my target level of 3050/3100 before finally rolling over. Today I will again look to buy the S&P on any dip lower to 2873/2883 with a 2865 stop. I do not want to be short the S&P ahead of the weekend.
EUR/USD
I am still flat the Euro which again fell short of my lower 1.1330 sell level. I will now lower my sell range to 1.1315/1.1355 with a 1.1385 stop. Remember if the Euro can build value below 1.1220 I will then look to move my sell range lower.
September Dollar Index
As I am still flat the June Contract I will now roll to the September Contract which trades at a 50 point Discount to the June Contract. The September Contract has resistance from 96.90/97.30 and today I will be a seller on any rally to this area with a 97.65 stop.
June DAX
I am still flat the DAX and today I will again raise my buy level to 12010/12070 with a 11965 stop.
June FTSE
No Change as I am still a small seller on any rally higher to 7430/7470 with the same 7510 stop. Even though Sterling is weak I still do not want to be long the FTSE at this time.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 25880 buy level shortly after I posted yesterday morning before rallying to my 25950 T/P level and I am now flat. Just like the S&P above the Dow traded in a narrow range after the US Markets opened. The Dow has good support from 25810/25960 and today I will be a buyer in this area with a 25720 stop.
June NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 7450 buy level before rallying to my 7480 T/P level and I am now flat. Today I will again look to buy the NASDAQ from 7405/7455 with a 7365 stop.
September BUND
Despite the insanely low yield in the Bund, buyers keep buying the dip with the market again making new all-time highs this morning as I go to press. I am still flat and I will now raise my sell level slightly to 171.98/172.38 with a 172.75 stop.
Gold Rolling Contract
Gold rallied again yesterday after testing $1320 last Tuesday and I am still flat. This morning Gold is trading at 1352 which is a new high for the year. I have to respect this price action and I will now raise my buy level to 1335/1343 with a 1327 stop.
Silver Rolling Contract
Finally Silver rallied to my revised 14.88 T/P level on my latest 14.78 long position and I am now flat. Although Silver continues to underperform the move higher in Gold I still believe it is only a matter of time before we see Silver catch a decent bid. With this I mind I will now look to buy the market from 14.55/14.95 with a 14.15 stop. If I am taken long I will have a T/P level at 15.25.
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