Stocks halted four days of declines as trade optimism reigned ahead of U.S.-China talks at the Group of 20 conference this weekend in Japan. Treasuries advanced. The S&P 500 headed for its best month since January, rebounding from a rout in May to leave it higher by more than 3% for the Quarter. Banks led gains on the day as Chinese and American officials jockeyed before the highly anticipated meeting between Presidents Donald Trump and Xi Jinping on Saturday. Energy producers fell as oil hovered just under $60 a barrel. The 10-year Treasury yield slipped below 2.02%, with Goldman Sachs Group Inc. cutting its year-end forecast for the rate to 1.75%, matching JPMorgan Chase & Co.’s call from May 31. The yield has plunged from 2.4% at the end of the First Quarter. The two-year rate hit 1.74%. The US Dollar was little changed, on track for its first monthly decline since January. Gold Futures slipped a second day after reaching a six-year high, paring its best monthly rally since 2016 to 8.0%.
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Equities
The Saturday sit-down between President Donald Trump and Xi in Japan looms as a key event for markets, with reports about a tariff pause contrasting with Trump’s repeated threats of more duties. Even with all of the noise surrounding trade, investors are keeping a close eye on monetary policy and expectations central banks will cut rates to counter signs of a slowing global economy. Investors need to be sensitive to this rally, that it’s not driven by corporate fundamentals or better economic data. It is purely driven by two things: one is the Fed and ECB, the global concerted effort to go on an easing cycle. And second, with this near-term resolution on trade, which they might be up for disappointment because I do not expect the G-20 summit to bring anything materially different than a handshake and a continuation of talks. After a volatile trading session the S&P 500 Index closed 0.4% higher at 2925. The Nasdaq composite rose 0.7%, while the Dow Jones Industrial Average was little changed. In Europe, the Stoxx Europe 600 Index was also little changed while the MSCI Emerging Market Index climbed 0.7%.
Currencies
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index was steady.
The Euro was little changed at $1.1369.
The British Pound fell 0.2% at $1.2669.
The Japanese yen was little changed at 107.76 per dollar.
Bonds
Bond Yields reversed Wednesday’s move higher with the yield on 10-year Treasuries falling four basis points to 2.01%. Meanwhile in Europe, Germany’s 10-year yield dropped two basis points to -0.32% and Britain’s 10-year yield fell one basis point at 0.822%.
Commodities
West Texas Intermediate crude fell 0.2% at $59.24 a barrel, and Gold dipped 0.3% to $1,411.30 an ounce having tested the 1400 key support earlier in the session. All the action was in Bitcoin which fell 25% to close at $10500 before rallying 7% overnight to sit at $11200 this morning.
This morning on the Economic Front we already had the release of German May Import Index which fell 0.1% as expected. At 9.30 am we have UK GDP, Current Account and Total Business Investment. Next, we have Euro-Zone CPI at 10.00 am. This is followed at 1.30 pm by US Personal Consumption/Spending and Canadian GDP. Finally, we have the Chicago Purchasing Mangers’ Index at 2.45 pm and the University of Michigan Consumer Sentiment at 3.00 pm.
September S&P 500
The continued idea of buying dips in the S&P as long as we hold the key 2900/2920 support area paid dividends again yesterday. Four of my Indices hit near the same time including the S&P which traded lower to my 2919 buy level before rallying to a rebound high of 2939.50 overnight. This move higher enabled me to cover this position at my revised 2923 T/P level as I had too many ‘’Open’’ positions at the time and I am now flat. If the S&P can continue to hold the key 2900/2920 support area and get through this weekend unscathed then in my opinion it is only a matter of time before we test the next resistance from 3000/3050. Today I will again look to buy the S&P on any dip lower to 2915/2925 with a 2906 stop.
EUR/USD
The Currency Markets are on hold ahead of the G-20 Meeting which starts today. I am still flat and I will continue to be a buyer on any dip lower to 1.1280/1.1320 with the same 1.1245 stop. Ahead of a potentially volatile weekend I no longer want to be a seller of the Euro.
September Dollar Index
I am still flat the Dollar and today I will now lower my buy level to 94.90/95.30 with a 94.55 stop.
September DAX
My DAX plan worked well with the market trading lower to my 12200 buy level before rallying to my revised 12230 T/P level and I am now flat. Today I will again look to buy the DAX on any dip lower to 12130/12190 with a 12080 tight stop.
September FTSE
My FTSE plan also worked well with the market trading lower to my 7315 buy level before rallying to an overnight high of 7365. As I wanted to be flat I covered this position at my revised 7328 T/P level. Today I will again look to buy the FTSE on any dip lower to 7250/7290 with a 7215 stop.
Dow Rolling Contract
As I was long the other Indices I waited to buy the Dow which I did at a price of 26480 before covering this position at 26540 and I am now flat. Overnight the Dow traded to a high of 26632. The big question facing Equity Markets over the weekend is CAN THE MARKET GET A FED RATE CUT AND GOOD TRADE NEWS? No doubt the Fed will be paying close attention to this weekend’s Presidential Meeting between Trump and Xi. Slowing economic growth resulting from trade tensions is one of the reasons the Fed is expected to lower Interest Rates. Lack of progress this weekend could strengthen the case for a rate cut. But what if the meeting goes well and hopes for a trade deal improve? That could make a rate cut less likely. In other words, good news on one front (trade) could be bad news on the other (no rate cut). Market pundits tell us that stocks are rising on hopes for a rate cut and better trade relations. The market may get one of these, but it seems unlikely that it will get both at the same time. Today I will again look to buy the Dow on any dip lower to 26320/26470 with a 26225 stop.
September NASDAQ
Unfortunately the NASDAQ just missed my 7650 buy level with a 7651 low print before rallying over 60 points and I am still flat. The NASDAQ has strong support from 7590/7640 and today I will be a buyer on any dip to this area with a 7545 stop.
September BUND
Shortly after the US Markets opened the Bund traded higher to my 172.63 sell level. As I wanted to be flat overnight I covered this position at my revised 172.57 T/P level and I am now flat. Given the 90%+ readings in the DSI for the US Bond market I am surprised that all bond market have held onto this month’s huge gains with any meaningful set back so far. I do not think that this can last and today I will again look to sell the Bund from 172.85/173.15 with a 173.55 wider stop.
Gold Rolling Contract
I am still flat Gold and today I will raise my buy level to 1385/1395 with a 1377 stop.
Silver Rolling Contract
I am still long Silver at a price of 15.37 with the same 15.05 stop. I am disappointed how weak Silver is in relation to Gold and today I will look to exit this position for a small loss at 15.30 and go flat over the weekend.
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