U.S. stocks rebounded from a slump that took them to a 12-week low, while Treasuries resumed a rally that pinned yields at 20-month lows amid concern that the trade spat with China could derail global growth. Oil tumbled. The S&P 500 paired its May decline to 5%, with the 200-day moving average providing support during an afternoon swoon. Technology shares paced the gain, while banks contributed most to losses. A fresh batch of economic data suggested the expansion was on firm footing before the Trump administration escalated the trade war earlier in May, but an inversion in part of the yield curve has investors on edge about the threat of a recession. The 10-year Treasury yield continued its march lower, hitting 2.22% for the second straight day. Investors dumped high-grade bond funds at the fastest pace since 2015 in the week ended Wednesday, while utility stocks sought for their yield fell for a fourth straight day. The US Dollar traded at a five-month high. Crude slumped 3% to below $57 a barrel. Gold rose. However overnight S&P Futures got hit hard after President Trump vowed to impose a 5% tariff on Mexican goods ”until that country stops immigrants from entering the U.S. illegally” — brandishing a weapon used against a widening group of countries and jeopardizing a new North American trade agreement. The tariff would take effect on June 10, “until such time as illegal migrants coming through Mexico, and into our country, STOP,” Trump said in a Twitter post overnight. He warned that the levy “would gradually increase until the illegal immigration problem is remedied at which time the tariff will be removed.” The tariffs could rise as high as 25% on Oct. 1, Trump said in a statement released by the White House.
To mark my 1850th 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 13 9 points yesterday and is now ahead by 1822 points for May, having made 955 points in April, 1027 points in March, 1013 points in February, 1671 points in January, 2803 points in December, 1541 points in November and 2094 points in October. 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
Turbulence in stocks and the march lower in bond yields this week suggest investors are increasingly coming to terms with an uncertain outlook for markets. The possibility that Beijing may cut exports of rare-earth minerals, along with signs that U.S.-EU talks aren’t going anywhere meaningful, are adding to trade tensions. The S&P 500 closed 0.2% higher. However this morning the S&P Futures are down 0.8% at 2865. It is a sign that the more confrontational foreign policy could extend to beyond China and perhaps is the last thing the market needs during such a fragile backdrop. In Europe, The Stoxx Europe 600 climbed, led by media firms, a day after posting its biggest drop in nearly three weeks. Finally Asian markets were mixed, with Shanghai edging lower as China notched a fresh escalation of the tariff war by putting U.S. soybean purchases on hold.
Currencies
The Bloomberg Dollar Spot Index was flat after touching the highest level in more than five months. The Euro climbed 0.1% to $1.1140. Mexico’s currency slumped — by as much as 2.3% — its biggest one-day move since October following Trumps overnight tweet. That implosion in the Mexican peso, a major emerging-market currency, will ripple across other Emerging Markets FX names with every chance the peso could breech 20 per dollar.
Bonds
The surprise tariff moves extended the recent rally in U.S. Treasuries, with the 10-year yield dropping decisively below its 200-week moving average — a key technical level. It traded at 2.17%, the lowest since September 2017, as of 6 a.m. in London. The market response is likely to be negative as this doesn’t come at the best time, when month-end rebalancing and concerns over the softness in global economic activity have made investors cautious. In Europe this morning the German Bund is trading two basis points lower at -0.20%.
Commodities
Elsewhere, oil got hit hard yesterday with the market now off 5% since I marked prices 24 hours ago opening at $56 per barrel in London after the release of an industry report showing a much bigger-than-expected drop in U.S. crude stockpiles. Bitcoin has finally seen some profit taking with the market down 8% over the past 24 hours to sit at $8200.
This morning on the Economic Front we already had the release of German Retail Sales which came in very weak with a print of -2% versus +0.1% expected. At 9.30 am we have UK Mortgage Approvals, Money Supply and Consumer Credit. This is followed at 1.00 pm by German CPI and at 1.30 pm by US Personal Income/ Spending and the Employment Cost Index. Finally, we have the Chicago Purchasing Managers’ Survey and the Michigan Consumer Sentiment Index at 2.45 pm and 3.00 pm respectively.
June S&P 500
Yesterday was a quiet trading session with none of my parameters getting hit. However, on the back of Trump’s overnight tweet to impose tariffs on Mexico the S&P has fallen 23 Handles from its 2788 Chicago close as yet again the market wakes up to a large ‘’Open Gap’’ to the downside. As a result I am now long the S&P at an average rate of 2768. I will not risk too may points on this trade and I will lower my stop to 2755. I will also lower my T/P level to 2775. If any of the above levels are hit I will be back with a new update for my Platinum Members. Given the increasing amount of Trump tweets after the US Markets close it is getting more and more difficult to leave any overnight orders open. This is certainly through over a weekend and I will try and be flat this weekend especially as the S&P is already nearly 6% lower for the month and the fact that we are now trading below its 200 Day Moving Average which comes in at 2776 this morning. Remember building value below this key indicator for a few days is bearish for a move lower to 2720 and possibly 2650 over the coming weeks.
EUR/USD
I am still flat the Euro and today I will leave my 1.1055/1.1095 buy level unchanged with the same 1.1015 stop.
June Dollar Index
I am still flat the Dollar as the market so far has been unable to trade higher to my 98.30/98.70 sell range. I will still be a seller in this area with a now higher 99.05 stop.
June DAX
This morning the DAX has opened below the bottom of yesterday’s trading range. I am still flat as I have enough exposure with my long S&P trade above the market. If the DAX does not manage to close back above its now key 11800/11850 resistance level we could well see an acceleration to the downside. The DAX is severely oversold after this month’s aggressive sell-off and I am going to stay flat today and will reassess in Monday’s commentary.
June FTSE
I am still flat the FTSE which is selling off as I go to press. This sell-off is happening despite the fact that the Pound is trading at its lowest level for the year-to-date. Today my only interest in buying the FTSE is on a dip lower to 7065/7105 with a 7030 stop.
Dow Rolling Contract
Although the Dow is trading lower and in yesterday’s buy range I have done nothing as I have enough exposure with the S&P position. Given the volatility most members will only have one or two open positions in equity markets at the same time. With the Dow now trading 240 points lower from last night’s close most traders will not want to go home with a long position this evening. In bear markets surprises are always to the downside as we saw with last December’s aggressive sell-off. Worryingly the Dow is now trading over 500 points below its 200 Day Moving Average and as I mentioned this week, continuing to build value below here opens up the possibility of a further move lower to 24100 and possibly 23500 over the coming weeks. The Dow has support from 24570/24730 and I will be a small buyer on any dip to this area with a 24480 stop. Ahead of the weekend and given how oversold the US Indices are I do not want to be short the Dow at this time.
June NASDAQ
I am still flat the NASDAQ and today I will now lower my buy level to 7075/7135 with a 7030 stop.
June Bund
After the Bund traded higher to my 168.05 sell level I emailed my Platinum Members to exit any short position at 167.92 and I am now flat. This morning the Bund is trading at all-time highs with the Yield now at negative 21 basis points. This is insane but still we have to respect the bullish price action. Whenever the Bund reverses it will give a lot of pain to investors and pension funds who are long the market at these prices. The Bund’s next resistance level is from 164.70/165.10 and I will be a seller in this area with a 165.55 wider stop.
Gold Rolling Contract
I am still flat Gold and today I will now raise my buy level slightly to 1268/1276 with a higher 1261 stop.
Silver Rolling Contract
I am still flat and today I will now raise my buy level to 14.00/14.40 with a 13.65 stop.
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