Global Equity Markets plunged to four-month lows, Government debt yields sunk to unprecedented levels and crude oil extended declines as anxiety over the spread of the Coronavirus deepened. The S&P 500 tumbled 4.4% to close at the lowest levels of the day. It whipsawed investors earlier, turning lower late after California’s governor said the State was monitoring 8,400 people for signs of the virus after they travelled to Asia. The decline of more than 10% since last Friday has the benchmark on pace for its worse week since the 2008 Global Financial Crisis and helped push the Index into what is known as a correction. The MSCI All-Country World Index fell to the lowest since October, while the Stoxx Europe 600 also entered a correction. The outbreak has the potential to become a pandemic and is at a decisive stage, the head of the World Health Organization said Thursday. The global economy is on course for its weakest year since the Financial Crisis as the virus damages demand in China and beyond, Bank of America predicted. Earlier, Goldman Sachs slashed its outlook for U.S. companies’ profit growth to zero. Germany is examining potential stimulus measures to stem the economic impact. Saudi Arabia halted religious visits that draw millions. Haven assets continued to be in demand, and the Japanese Yen strengthened as yields on 10-year U.S. and Australian government bonds hit fresh record lows. Oil sank further. The Pound reversed a gain after the U.K. told the European Union it could walk away from the negotiating table in June if progress is not being made toward a trade deal.
Investors are pricing in a Federal Reserve easing in April followed by another rate cut in July, swaps data show, while bets for easing from Japan to Australia have also increased after the International Monetary Fund cut global growth forecasts.
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For anyone following my Platinum Service it lost 125 points yesterday and is now ahead by 1458 points for February, having made 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
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Equities
Losses continue to mount as investors weigh each gloomy headline on the virus. U.S. health authorities on Wednesday said they found the first case of the illness that does not have ties to a known outbreak. Microsoft Corp. joined an expanding list of companies warning over the impact of the virus on operations. Overnight, Fear tightened its grip on global markets, with European stocks poised to join the sell-off in Asia and U.S. Index Futures signalling yet more pain after the biggest one-day rout on Wall Street since 2011. In Asia, benchmarks from Tokyo and Seoul to Shanghai and Sydney saw declines of more than 3%
The S&P 500 Index sank 4.4% to 2978, with its sixth consecutive decline, and the largest tumble in more than eight years.
The Dow Jones Industrial Average sank 4.4%, closing at 25,764.
The Nasdaq 100 fell 5% to close at 8436.
The Stoxx Europe 600 Index closed 3% lower.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index dipped 0.3%.
The Euro climbed 1% to $1.0989.
The British Pound dipped 0.2% to $1.2880.
The Japanese Yen appreciated 0.5% to 109.85 per dollar.
Bonds
The yield on 10-year Treasuries declined five basis points to 1.28%, which is the lowest level on record.
The yield on 30-year Treasuries fell five basis points to close at 1.78%.
Germany’s 10-year yield dipped four basis points to 0.55%.
Britain’s 10-year yield fell three basis points to 0.47%.
Commodities
West Texas Intermediate crude sank 3.8% to $46.68 a barrel, the lowest level in fourteen months.
Gold weakened 0.1% to $1,636 an ounce.
This morning on the Economic Front we have had the release of German Import Prices which fell 0.4% for January versus +0.1% expected. This is followed by German Unemployment at 8.55 am and CPI at 1.00 pm. At 1.30 pm we have U.S. Personal Income/Spending and Wholesale Inventories. Finally, we have the Chicago Purchasing Managers’ Index at 2.45 pm and the University of Michigan Consumer Sentiment at 3.00 pm.
March S&P 500
Yesterday surpassed Wednesday’s incredible volatility with the VIX closing 42% higher at 39.16. In my 35 years of trading I have never seen a week like this with the S&P now moving in clips of 20/30 Handles at a time. On top of this the McClellan Oscillator closed at a new record low with a – 380 print last night. It is but a given that the Fed will lower Interest Rates and I would not be surprised if they do it between meetings as they did back in 2008. Yesterday after the S&P hit my 3065 average buy level I was stopped out of this position at 3042. The sell-off continued with the S&P dropping to my aggressive buy level at 3015 with a 3005 low print before incredibly rallying to a rebound high at 3093. This move higher enabled me to cover this position at my 3065 T/P level and I am now flat. The S&P got slammed into the close on the news out of California of the 8400 possible Coronavirus cases and this sell-off continued overnight stopping for now at 2900 before rallying in the last hour. The Fear & Greed Index had a print of 97 Extreme Greed in late December. Last night this reading closed at 13 which is now Extreme Fear. The S&P has strong support from 2880/2940 but needs to break and close above 3020 for a few days before we can see some stability. Building value below 2880 opens up a move lower to 2630/2700 over the coming days. I have been wrong all week expecting that the negative MO would help stabilise the markets but with last night’s extreme close the odds are increasing of a more lasting rally. Technically this awful and we will end February with Downside Key Month Reversals for the S&P, Dow and NASDAQ. Unless something dramatic happens today this will be the first Key Month Reversals since the GFC in 2008. Today I will be a buyer from 2870/2910 with a 2835 stop. If I am taken long I will have a T/P level at 2978 which is the last night’s Chicago close.
EUR/USD
The Euro closed 1% higher, to register its largest move higher in 21 months. I am still flat and I will again raise my buy level to 1.0910/1.0950 with a higher 1.0865 stop.
March Dollar Index
The Dollar continues to sell-off as expected but unfortunately I have not been able to get a short position on board. I will stay flat over the weekend as there is so much action going on in the other markets.
March DAX
As I was long all three US Indices at the same time yesterday I did not buy the DAX or the FTSE. If you did buy and used mental instead of physical stops then this strategy would have worked well given the size of the afternoon rally before of course collapsing overnight. I have no edge in the DAX at this time and I am going to stay flat for now.
March FTSE
The FTSE has now fallen over 15% since its January 21 high and was the first Index to make a top. The market is severely oversold. Despite a weaker Pound the political situation with Europe is getting worse and this is not helping. Looking at the Weekly Chart the FTSE is now testing its 2018 low here at 6500. This level needs to hold this evening or else we have now support below here until 6200. Today I will be a small buyer from 6450/6510 with a 6380 stop. If I am taken long I will have a T/P level at 6620.
Dow Rolling Contract
The Dow is nearly impossible to trade unless you were short from earlier in the week. I never expected the sell-off that we are witnessing as up to this week the buy the dip paid handsome dividends. Yesterday after I bought the Dow at 26500 I was stopped out of this trade at 26265. Frustratingly the Dow recovered to a rebound high at 26756 before getting absolutely slammed into the close and again this morning. Looking at the Weekly Chart we have support at 25000 but a break and close below here could well see a move lower to its Monthly support at 22400. These are scary numbers for the economy as a move to these levels will guarantee a world- wide recession. As I go to press the Dow is trading 650 points lower that last night’s 25764 close. Remember at 8.45 pm we were trading over 26100 before we saw a 400 point sell-off in the last 15 minutes of trading. Today I will be a small buyer from 24900/25100 with a wider 24650 stop. If I am taken long I will have a T/P level at 25490.
March NASDAQ
While the sell-off in the NASDAQ has been dramatic it is the only Index to still trade above its 200 Day Moving Average which comes in at 8135 this morning. For the markets to have any chance of recovering we need this level to hold. Today I will be a buyer from 8010/8160 with a 7905 stop. If I am taken long I will have a T/P level at 8340.
March BUND
After the Bund traded higher to my 176.65 sell level the market just missed my 176.20 T/P level with a 176.25 low print before stopping me out of this position at 177.25 this morning and I am now flat. The DSI for the US Bond Markets closed over 91% bulls last night. This indicates that we are at or near the end of this particular move. The Bund has resistance from 177.70/178.20 and I will be a seller in this area with a 178.55 stop.
Gold Rolling Contract
Despite the Equity Market crashing Gold is trading $60 below last Monday’s high. Again, this sell-off was flagged by a DSI reading at 96% bulls. Gold has support from 1595/1605 and I will be a buyer in this area with a 1587 stop.
Silver Rolling Contract
Silver got hit hard since I posted yesterday morning wit the market now trading at 17.20. I am still flat and I am going to stay flat as we head into the weekend.
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