U.S. Equity Markets edged away from records as investors weighed expectations for easier monetary policy against concerns about a slowing global economy. Treasuries gained, while the US Dollar dropped. The S&P 500 fell for a second session, stalling below last week’s all-time high that was fuelled by the prospect of rate cuts. Health-care paced losses as Bristol-Meyers Squibb Co. tumbled after the company said it will strip out a top drug from its merger with Celgene Corp. to get regulator approval. Energy producers dropped in the wake of new U.S. sanctions on Iran. The Russell 2000 Index slumped. Investors in risk assets have continued to shrug off signs of an economic slowdown and focus on the increasingly dovish tone at central banks around the world. That attention will intensify this afternoon when Fed Chair Jerome Powell discusses monetary policy. But sentiment could be at a crossroads as the conflict between the America and Iran has ramped up, and the meeting between China’s President Xi Jinping and Donald Trump this week at the Group of 20 conference in Japan presents a pivot point for trade relations between the two countries. The 10-year Treasury yield dropped to 2.02%, while West Texas crude rose toward $58 a barrel. The Euro touched a three-month high against the Dollar even as data showed that a slump in German Business Confidence deepened in June.
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Equities
Markets were extremely quiet yesterday as it is a pretty good guess that we won’t see a whole lot of movement in front of the big upcoming meetings (G20 and OPEC). Given the meeting between President Trump & President Xi at the one and the impact the situation with Iran could/should have on the other, the results of those meetings should be quite important to the stock market’s next move. The S&P 500 closed 0.2% lower at 2945.The Nasdaq 100 Index dropped 0.3%, while the Russell 2000 Index slid 1.3%. Meanwhile the Stoxx Europe 600 Index decreased 0.3% to the lowest in a week.
Currencies
Here is a summary of he main changes in F.X. Markets:
The Bloomberg Dollar Spot Index dropped 0.1%.
The Euro rose 0.2% to $1.1395, the strongest in almost 14 weeks.
The British pound was little changed at $1.2736.
The Japanese yen was little changed at 107.31 per dollar.
Bonds
Bond Markets were extremely quiet yesterday with the yield on 10-year Treasuries dipping four basis points to 2.02%. Germany’s 10-year yield declined two basis points to -0.31%, while Japan’s 10-year yield advanced less than one basis point to -0.154%.
Commodities
West Texas Intermediate crude rose 0.6% to $57.78 a barrel.
Gold climbed 1.5% to $1,421.60 an ounce, reaching the highest in almost six years, while Bitcoin surged toward 11,000.
This morning on the Economic Front we have UK CBI Distributive Trends Survey at 11.00 am. This is followed at 2.00 pm by the Housing Price Index and at 3.00 pm by New Home Sales, Consumer Confidence and the Richmond Fed Manufacturing Index. Finally at 5.00 pm Fed Chairman Jerome Powell speaks at the Council on Foreign Relations in New York where he will discuss the challenges facing the U.S. economy.
September S&P 500
After a quiet trading session yesterday, the S&P overnight had a small sell-off with the market trading lower to my 2943 buy level. With a number of my calls being hit overnight I emailed my Platinum Members to exit any long S&P position at 2946 and I am now flat. With Powell speaking at 5.00 pm we may see some increased volatility surrounding this speech but by and large we are on hold to the G20 taking place this Friday and Saturday in Japan. Today I will again look to buy the S&P on any further dip to 2925/2935 with a 2917 stop. I still do not want to be short the market at this time.
EUR/USD
Overnight I was stopped out of my 1.1370 short position at 1.1410 and I am now flat. I will now look to buy the Euro from 1.1310/1.1350 with a 1.1285 stop. I will also be a seller on any further rally to 1.1460/1.1500 with a 1.1535 stop.
September Dollar Index
I am still flat the Dollar and today I will now lower my buy level slightly to 94.70/95.10 with a 94.35 stop.
September DAX
The sell-off in Daimler Shares following another profit warning saw the DAX trade lower to my 12245 buy level before having a small 40 point rally which enabled me to cover this position at my revised 12261 T/P level and I am now flat. With the Euro trading above 1.14 also a negative influence on the DAX as the market again ran into serious resistance at last week’s 12400 high. However ahead of this weekend I am reluctant to go short the market and today I will be a buyer on any further dip lower to 12080/12140 with a 12025 stop.
September FTSE
No Change as I am still a buyer on any dip lower to 7240/7280 with the same 7215 stop.
Dow Rolling Contract
I am still flat the Dow. Despite the Dow closing higher yesterday the McClellan Oscillator weakened appreciably closing just in positive territory with a + 37 print. As a result I will now lower my buy level slightly to 26400/26550 with a 26395 stop.
September NASDAQ
Just like the S&P above the NASDAQ also traded lower overnight to my 7720 buy level before rallying to my revised 7731 T/P level and I am now flat. Ahead of the G20 later this week I will again look to buy the NASDAQ on any further dip to 7625/7665 with a 7580 tight stop.
September BUND
The Bund continues to trade close to all-time highs. We now have an incredible $12 trillion worth of bond markets trading with a negative interest rate. In my opinion the Fed studies and only acts on stale, old data. The Fed is reactive rather than proactive which is a recipe for failure in the long run. The Fed should never have hiked rates last December as it was clear to most people that the US Economy was already slowing. A small group of un-elected economists should not dictate the price of money. I am still flat the Bund and today I will continue to be a small seller from 172.80/173.20 with a 173.55 stop.
Gold Rolling Contract
Gold has now risen $90 since last Wednesday as Large Speculators in Gold Futures increased their position to 38% of the Open Interest, which is the largest in 19 months. The Gold Daily Sentiment Index has registered back-to-back days of 94% bulls, the first consecutive 90%+ readings since Gold’s peak in September 2011. Last Friday traders bought $1.5 billion of the SPDR Gold Shares (GLD) and iShares Gold Trust (IAU), which is the largest one-day purchase of these ETFs in history. This market is certainly severely overbought and due a correction. Any major correction that sees Gold trade back to last week’s 1375 breakout level will be met with strong buying. Gold has small resistance from 1458/1470 and I will be a seller in this area with a 1478 tight stop.
Silver Rolling Contract
Given the underperformance of Silver I emailed my Platinum Members earlier this morning to buy Silver at 15.37. I am still long and I will have a tight stop at 15.05 on this position. For now my T/P level on this trade will be 15.62.
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