U.S. Equity Markets rebounded from the biggest rout in 12 weeks as dip-buyers emerged for companies that bore the brunt of Thursday’s selling. Treasuries fell, while the US Dollar rose. Real-estate, financial and energy companies led gains in the S&P 500. Cruise operators and airlines that were among the hardest-hit during the rout soared. Earlier Friday, the gauge fell as the World Health Organization said the risk of a second wave of Coronavirus is present for any country exiting lockdowns. States and cities might have to resume shutdowns if cases surge dramatically, top officials at the U.S. Centres for Disease Control and Prevention said. While U.S. stocks recovered Friday, all three major equity gauges fell for the week on concern over the pace of recovery following months of lockdown. Arizona and Oklahoma were among U.S. states to report record one-day increases in new Coronavirus cases, a month after easing restrictions. Florida had the biggest daily jump since May 1. White House economic adviser Larry Kudlow said a new wave of cases has not appeared. Overnight all changed, U.S. and European futures tumbled and haven assets climbed on Monday, returning markets to last Thursday’s risk-off mode, spurred by worries over a second wave of infections that could dash hopes for a V-shaped recovery. Futures on the S&P 500 slid over 3% at one point, and European contracts were down more than 2%. Japanese, Australian and Hong Kong stocks also slumped, with South Korea sinking 4% plus. The US Dollar climbed along with the Japanese Yen, and Treasuries advanced. Crude oil crumbled. The moves suggested the stabilisation on Wall Street Friday in wake of a near 6% stock slide may be temporary. Chinese Economic data Monday showed the world’s second-largest economy had a smaller bounce back in May than economists had expected, with Retail Sales continuing to drop and Industrial Output rising less than forecast. On the virus front, more than 20 U.S. States are seeing a pick-up in cases, Tokyo reported a jump over the weekend and a fresh outbreak in Beijing prompted officials to close a market there.
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Equities
The S&P 500 advanced 1.3%, closing at a price of 3041.
The Dow Jones Industrial Average rose 477 points for a 1.9% gain to close at 25,605.
The NASDAQ 100 rose 0.8% to close at 9663.
Stoxx Europe 600 Index advanced 0.3%.
The MSCI Asia Pacific Index decreased 1.2%.
This morning the Nikkei closed a hefty 3.47% lower at 21,530.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index advanced 0.1%.
The Euro decreased 0.4% to $1.1256.
The Japanese Yen weakened 0.5% to 107.36 per dollar.
Bonds
The yield on 10-year Treasuries gained four basis points to 0.71%.
Germany’s 10-year yield decreased three basis points to -0.44%.
Britain’s 10-year yield advanced one basis point to 0.208%.
Commodities
The Bloomberg Commodity Index sank 0.6%.
West Texas Intermediate crude advanced 0.1% to $36.38 a barrel.
This morning on the Economic Front we have Euro-Zone Trade Balance at 10.00 am and this is followed at 1.30 pm by US New York Empire State Manufacturing Index. Finally, at 9.00 pm we have the Net Long TIC Flows.
June S&P 500
And then it happened. A vicious sell-off seemingly out of the blue putting a sudden end to the steepest rally ever with many Indices and Individual stocks getting hammered seeing sizeable declines as the NASDAQ was making new highs. Markets were clearly extended on many fronts and a correction was due. But nothing is normal about these liquidity- soaked markets. The rally was historic with a 47.5% near vertical ascent following the March lows and the disconnect of valuations behind the size of the real economy has taken on historic levels. Markets reached 152% Market Cap to GDP before the snapback as valuations suddenly dropped to 141.8% by Thursday’s market close. Friday’s late rally in the S&P has been reversed with the S&P trading over 100 Handles lower from Friday’s close to a morning low at 2935 so far. The S&P has fallen close to 300 Handles since the FOMC Statement was released on Wednesday evening. However I would caution in getting short down here as we have the expiration of the June Contract on Friday. My S&P plan worked well with the market trading higher to my 3070 sell level before selling off to my 3045 T/P level and I am still flat. Today I will tighten Friday’s buy range to 2910/2925 with the same 2895 stop. I cannot see the US traders leaving such a huge gap from Friday without at least some of this gap to 3040 been filled. The S&P has strong support at its 50 Day Moving Average which comes in at 2904 this morning. The 200 Day MA has been broken (3013) but I would like to see a close below here to confirm this break. The S&P has resistance from 3015/3030 where I will be a small seller with a 3045 stop.
EUR/USD
Late Friday the Euro traded lower to my 1.1220 buy level before rallying to my revised 1.1243 T/P level and I am still flat. The Euro has now fallen 200 points since last Wednesday’s high which is no surprise given the fact that we had risen for seven consecutive sessions, pushing the DSI to two- year highs at 79%. The Euro has support from 1.1140/1.1180 where I will be a buyer with a 1.1095 stop. I will now lower my sell level to 1.1330/1.1370 with a lower 1.1415 stop.
September Dollar Index
I am still flat the Dollar. Today I will raise sell level to 97.65/98.15 with the same 98.55 stop.
June DAX
The DAX re-opened at 7.00 am below Friday’s buy range and I am still flat. The DAX has support from 11420/11550 where I will be a buyer with a 11345 stop. The DAX has now fallen over 13% since last week’s rebound high and I do not want to be short the DAX at this time.
June FTSE
My FTSE plan worked well with the market trading higher to my 6130 sell level before selling off to my too tight revised T/P level at 6098 and I am still flat. This morning the FTSE is trading much lower at 5950. We have support from 5850/5910 where I will be a buyer with a 5795 stop.
Dow Rolling Contract
An incredible move in the Dow as the market rallied on Friday to my 25760 sell level before selling off to trade at 24600 in London this morning. This move lower saw the Dow hit my 25660 T/P level and I am still flat. As you know where possible I will stay flat over the weekend given the risk involved. The Dow is now trading 3000 points lower than last Monday’s high. An incredible sell-off in such a short space of time. There is no chance of a V-Shaped recovery in my opinion despite the trillions of Dollars spent by the Fed in supporting the markets. This support makes it so difficult to be short as the Fed will have to come in and buy the market as they cannot afford to let the Dow make now lows. The Dow has support from 24150/24400 where I will be a buyer with a 23975 stop. Given the fact that the June Contracts all expire on Friday I do not want to be short the Dow at this time. The 50 Day MA comes in at 24341 and we should see a decent bounce on any test of this key support level.
June NASDAQ
My NASDAQ plan worked well on Friday with the market trading higher to my 9770 sell level before selling off to my 9710 T/P level and I am still flat. This morning the NASDAQ is trading at 9400, a huge 755 points below last week’s 10155 all-time high. The NASDAQ has strong support from 9275/9125 where I will be a buyer with a 9045 stop.
September BUND
I am still flat the Bund as the market never came close to my 174.50 buy level on Friday. Today I will raise my buy level to 174.60/175.20 with a 174.15 tight stop.
Gold Rolling Contract
I am still flat Gold and I will now lower my buy level to 1686/1696 with a lower 1678 stop.
Silver Rolling Contract
I was lucky on Friday as Silver traded higher to my 17.70 T/P level on my 17.40 long position and I am now flat. This morning Silver is trading 4% lower at 17.00. We have support from 16.20/16.70 where I will be a buyer with a 15.85 stop.
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