Following Tuesday’s report showing that Moderna’s COVID-19 vaccine produced antibodies in all parties involved in a Phase 1 trial, Oxford University announced yesterday that it had generated a positive antibody and T-cell response in patients, with results due to be released soon. This gave a boost to equity markets on both sides of the Atlantic with the DAX and FTSE closing higher by 2%. German Chancellor Angela Merkel said she is willing to compromise in order to find an agreement on the EU’s Euro 750 billion recovery fund to support the Euro-Zone Economy. In a significant development for Ireland, Apple won a victory in it’s legal fight against the EU over $15billion in taxes when the regions second largest Court said the European Commission’s claim did not meet legal standards. Meanwhile, in the U.S, Economic data was also strong, as Manufacturing and Industrial Production rebounded sharply in June and topped estimates. Earnings were also a tailwind with Goldman Sachs reporting a strong second quarter. In other news, President Trump said he does not want to further escalate tensions with China and has ruled out additional sanctions against top officials for now. The S&P briefly hit positive territory for the year before selling off and then rebounding to close 0.9% higher. Elsewhere, Oil rose 1.71% on news of a larger than expected decline in U.S Crude Inventories while the Dollar closed flat. Overnight Chinese Equities got hit hard and are down 3% as I go to press following record Outflows from overseas investors last Tuesday.
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Equities
The S&P 500 Index closed 0.9% higher to close at a price of 3226.
The Dow Jones rose 228 points for a 0.9% gain to close at 26,870.
The NASDAQ 100 closed basically flat at 10701.
The DAX closed 2% higher.
The MSCI World Index closed 0.5% higher at 543.
This morning the Nikkei closed 0.75% lower at 22740.
Currencies
Here is a Summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index dipped 0.4% to 1203.
The Euro rose 0.1% to $1.1408.
The British Pound closed flat at $1.2580.
The Japanese Yen rose 0.3% to 106.93 per dollar.
Bonds
The yield on 10-year Treasuries gained one basis point to 0.63%.
Germany’s 10-year yield rose one basis point to -0.44%.
Britain’s 10-year yield fell two basis points to 0.13%.
Commodities
West Texas Intermediate crude increased 1.8% to $41.03 a barrel.
Gold rose 0.2% to $1,812.20 an ounce.
This morning on the Economic Front we have already had the release of UK Unemployment. The Jobless Claims came in at -28.1K versus last month’s 528.9K while the May Unemployment Rate was 3.9% versus 4.2% expected. At 9.30 am we have the latest Credit Conditions’ Survey and this is followed at 10.00 am by Euro-Zone Trade Balance. At 12.45 pm we have the ECB Monetary Policy Decision followed by ECB President’s Lagarde Virtual Press Conference at 1.30 pm. At the same time the U.S Weekly Jobless Claims, Retail Sales and the Philly Fed Manufacturing Survey will be released. Finally, at 3.00 pm we have Business Inventories and the NAHB Housing Market Index.
September S&P 500
My S&P plan worked well with the market trading higher to my 3232 sell level before making an afternoon low at 3192. This move lower saw me cover this short position at my too tight 3225 T/P level and I am still flat. As I have said countless times we have a large ‘’Open Gap’’ since February from 3258/3330 and this will attract buyers until we close or partially close this Gap. The S&P is overbought and overvalued but with the Fed having done five stimulus packages already it is extremely difficult to have a short position for any length of time. The 10-Day CBOE equity put/call ratio closed at .441 last night. Not only is this a new extreme for the rally, exceeding the peak reading at the February 19, 2020 top, but it is the lowest 10-Day average in nearly 20 years. Subsequently the S&P 500 fell 51% from March 2000 to October 2002. My own view is that we will trade higher into this Gap before the Phase 3 down move starts with a bang. The S&P has support from 3170/3185 where I will be a buyer with a 3159 stop. I will also continue to sell the rallies and today my sell range will be from 3241/3255 with a 3267 stop.
EUR/USD
My Euro plan worked well with the market trading higher to my 1.1450 sell level with a high of 1.1453 before selling off to my 1.1415 T/P level and I am still flat. Today I will again look to sell the Euro from 1.1460/1.1510 with a 1.1545 tight stop. Meanwhile I will leave my 1.1300/1.1340 buy level unchanged with the same 1.1255 stop.
September Dollar Index
No Change as I am still a small seller from 96.50/96.90 with the same 97.35 stop.
September DAX
Although the DAX traded above 12900 yesterday, I am reluctant to chase the market higher. Therefore, I will leave my 12520/12650 buy level unchanged with the same 12455 stop.
September FTSE
I am still flat and today I will move my buy level higher to 6130/6175 with a higher 6085 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Frustratingly the Dow just missed my 26600 buy level with a 26687 low print before rallying back above 27000. This morning the Dow is under pressure following the 3% fall in Chinese Equities overnight and is trading at 26750 as I go to press. I will now raise my buy level slightly to 26420/26620 with a higher 26295 stop. I am not going to chase the Dow lower and I will continue to look to sell on any rally to 27300/27550 with the same 27725 stop.
September NASDAQ
I was lucky yesterday as the NASDAQ traded lower to my 10550 buy level with a 10449 low print before rallying to my 10625 T/P level and I am now flat. Before the NASDAQ topped on Monday we had rallied for 10 of the previous 11 sessions culminating in the 11070 high that afternoon. There is every chance that this high will be significant and as a result I will continue to be a seller on rallies. I will now lower my sell level to 10740/10840 with a 10955 stop. The NASDAQ has initial support from 10380/10480 where I will be an aggressive buyer with a 10295 stop.
September BUND
The BUND traded in a narrow range yesterday as we wait for the ECB Announcement and Lagarde press conference this afternoon. The Bund is trading at 176.25 as I go to press, and I will continue to be a small seller from 176.70/177.10 with a 177.45 stop.
Gold Rolling Contract
Gold close over 1800 again and I am still flat. With sentiment at such extreme levels I will continue to be a small seller on rallies. Gold has strong resistance from 1825/1837 where I will leave my sell level unchanged with the same 1849 stop.
Silver Rolling Contract
The move higher in Silver since the March 18 low at 11.64 to yesterday’s 19.84 high has been incredible. However, in May 2011, Silver reached a high above $50, so there is plenty of scope for Silver to move higher over the coming years. I am still flat and I will now raise my buy level to 18.50/18.90 with a higher 18.15 stop.
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