The stomach-turning ride on global financial markets took a dramatic turn yesterday, with U.S. Equity Markets plunging the most since 1987 after President Donald Trump warned the economic disruption from the virus could last into summer. The S&P 500 sank 12%, extending losses as Trump said the economy could fall into a recession. Equities opened sharply lower after central bank stimulus around the world failed to mollify investors worried about the damage the coronavirus is inflicting on economies. The negative superlatives for American stocks are piling up. The S&P wiped out its gain in 2019 and is now down almost 30% from its all-time high. The Dow Jones Industrial Average lost almost 13%, falling 3,000 points to close at a two-year low. The Russell 2000 had its worst day on record, losing more than 14%. While the Fed cut rates toward zero and stepped up bond buying, investors continued to clamor for a massive spending package to offset the pain from closures of schools, restaurants, cinemas and sporting events. Companies around the world have scaled back activity to accommodate government demands to limit social interaction.
Here are some of Monday’s key moves across major assets:
- All 11 groups in the S&P 500 fell, with eight of them down at least 10%.
- The Dow Jones Industrial Average’s tumble from its record reached 30%.
- Brent crude dipped below $30 a barrel for the first time since 2016.
- Treasury yields retreated across the curve with moves most pronounced on the short end.
- Shares tumbled in Asia and Europe, where the continent is now reportingmore new virus cases each day than China did at its peak as more countries lock down.
- The Yen surged, the Swiss franc rallied and the Dollar fluctuated.
- Gold failed again to capitalize on the rush to havens and reversed an earlier gain to tumble.
- Bonds declined across most of Europe, where a measure of market stress hit levels not seen since the 2011-2012 Euro crisis.
However, this morning U.S. equity futures rallied by the most allowed and European stocks jumped as investors caught their breath after the biggest plunge on Wall Street since 1987. Treasuries fell alongside the yen and gold. S&P 500 futures reached their limit-up after the index plunged 12% Monday, erasing its gain for all of 2019. The Stoxx Europe 600 Index jumped after its lowest close in seven years. Asia saw a volatile session, with Japan’s equity benchmark closing up more than 2% after swinging sharply between gains and losses. A day after a record slump, Australia had its biggest rise since 1997 while Hong Kong and China saw more muted moves.Treasury yields rose after plummeting almost a quarter percentage point Monday.
To mark my 2025th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 1355 points yesterday and is now ahead by 4257 points for March, having made 2223 points in February, 2142 points in January, 818 points in December, 780 points in November, 1649 points in October, 1620 points in September and 2387 points in August 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 Fed and other central banks have dramatically stepped up efforts to stabilize capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating global economic outlook. An International Monetary Fund pledge to mobilize its $1 trillion lending capacity also had little impact in markets.
The problem is, bad news keeps stacking up. The New York Fed’s regional gauge of factory activity plunged. Ryanair Holdings Plc said Monday it will ground most of its European aircraft while a consultant said the pandemic will bankrupt most airlines worldwide before June unless governments and the industry step in. Nike Inc. and Apple Inc. announced mass store closings.
The S&P 500 fell 11.98%, closing an incredible 325 Handles lower at 2386.
The Dow Jones Industrial Average plunged 12.93%, with an 2997 points drop at 20,188.
The Stoxx Europe 600 Index lost 4.9%, paring a drop that reached 10%.
The MSCI Emerging Market Index declined 6.3%.
The MSCI Asia Pacific Index decreased 3.7%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.2%.
The Euro gained 0.5% to $1.1162.
The Japanese Yen strengthened 1.8% to 105.94 per dollar.
Bonds
The yield on two-year Treasuries sank 14 basis points to 0.35%.
The yield on 10-year Treasuries declined 22 basis points to 0.73%.
The yield on 30-year Treasuries declined 22 basis points to 1.31%.
Germany’s 10-year yield climbed seven basis points to -0.47%.
Commodities
West Texas Intermediate crude fell 9.2% to $29.05 a barrel.
Gold weakened 4.3% to $1,463.30 an ounce.
Iron ore sank 2.5% to $86.10 per metric ton.
This morning on the Economic Front we have UK Average Earnings and Unemployment at 9.30 am. This is followed at 10.00 am by the latest German and Euro-Zone ZEW Survey. At the same time we have Euro-Zone Construction Output. This is followed at 12.30 pm by U.S. Retail Sales. Next, we have Industrial Production and Capacity Utilization at 1.15 pm, Finally, at 2.00 pm we have the JOLTS Job Openings and the NAHB Housing Market Index.
March S&P 500
Contrary to initial expectations, the spread of the Coronavirus around the world is not following what now turns out to have been the relatively benign trajectories experienced in China outside of Hubei, and in Korea, Singapore and the rest of Asia. Instead, across Europe- and very likely in the U.S. too-the spread of the disease increasingly resembles the path it took in Hubei. This threatens both medical and economic disasters. But while it may be too late for the policymakers to avert a public health crisis, it is still possible to implement the combined fiscal and monetary measures needed to prevent an economic catastrophe-but they will need to go much further that the monetary steps announced by the Fed on Sunday evening. In my opinion, Governments in every major economy must guarantee unlimited fiscal compensation for lost revenues and wages to all businesses affected by the quarantines and lockdowns. If not the full 100% then at least 75%. It is clear that the current monetary policy won’t do anything to stimulate economic activity. But Zero Rates and huge liquidity injections are still necessary as a pullative to prevent financial systems from collapsing. Yesterday the S&P closed an incredible 325 Handles lower for a near 12% plunge. The CBOE Volatility Index (VIX) continues to surge, closing 43% higher last night at 82.69 which is the highest close on record. My S&P plan worked well with the market trading the whole of my buy range for a 2415 average long position before rallying to my revised 2480 T/P level with a rebound high at 2561. The 150 Handle Gap left from Friday’s 2711 Chicago close is the largest on record and will eventually be closed. Today I will be a small seller from 2670/2715 with a 2742 stop. So far the S&P is holding its December 26, 2018 low at 2346 while the Dow has plunged below its equivalent low on that day. I will be a small buyer from 2310/2350 with a 2295 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 2100/2180 with a 2055 stop.
EUR/USD
I am still flat the Euro as the market just fell short of yesterday’s range before selling off. Today I will lower my sell level to 1.1220/1.1270 with a 1.1315 lower stop.
June Dollar Index
I am still flat the Dollar and I will now raise my buy level to 97.30/97.70 with a higher 96.85 stop.
March DAX
Incredible volatility in the DAX with the market at one stage trading 11% lower at 8225 before rallying to a high so far this morning at 9160. My DAX plan worked well with the market hitting my 8355 average buy level before rallying to my 8580 revised T/P level and I am now flat. The DAX has now fallen over 5600 points in five weeks. Today I will be a buyer from 8250/8380 with a 8165 stop.
March FTSE
At yesterday’s low the FTSE was almost 40% lower than its 7850 high made last November. This move lower enabled me to buy the market at 4900 before we rallied to my 5000 T/P level with a high so far this morning at 5370. Just as I post this commentary the FTSE is getting hit hard and now trading 300 points lower. The FTSE is severely oversold and today I will again look to buy the market from 4830/4930 with a 4745 stop. If I am taken long I will have a T/P level at 5040.
Dow Rolling Contract
The Dow closed 3000 points lower at 20,188 for a 12.93% plunge. The Dow has now taken back over three years of advance, from February 2017. Yesterday my Dow plan worked well with the market hitting my 20600 average buy level before rallying to my 20995 T/P level and I am now flat. The Dow has strong resistance from 22300/22500 where I will be a seller with a tight 22650 stop. If I am taken short I will have a T/P level at 22050. The Dow has strong support from 19850/20050 where I will be a buyer with a 19725 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 19350/18000 with a 17400 wider stop. From this second buy level I will look for a retracement to at least the 24000 area.
March NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 7070 buy level before rallying to my 7205 T/P level and I am now flat. The NASDAQ is holding in better than both the Dow and S&P at this time. We have resistance from 7400/7500 where I will be a seller with a 7625 stop. The NASDAQ has strong support from 6780/6880 and I will be a buyer in this area with a 6690 stop.
June BUND
In contrast to the US Treasuries where the yield is declining the Bund Yields are rising. The Bund has now fallen over 600 points since last week, trading at 171.60 this morning. The Bund has support from 170.10/170.60 and I will be a buyer in this area with a 169.75 stop.
Gold Rolling Contract
Gold has now fallen 15% from its high in just five trading days. Optimism is still extreme. Silver broke its December 2015 low of 13.62 by $2 yesterday while Gold is still trading over $400 from its equivalent $1046 low on that day. This is huge divergence and although I am tempted to go short I am going to stay flat for now.
Silver Rolling Contract
Silver plunged yesterday, declining 11.2%, the largest one-day decline since April 15, 2013. Yesterday’s intra-day low was 11.83 before the market rallied into the close at 12.50. Yesterday after Silver hit my 13.20 buy level I was quickly stopped out of this position at 12.60 and I am now flat. Silver has support from 11.10/11.50 where I will be a buyer with a 10.75 tight stop.
Recent Comments