U.S. Equities jumped the most since 2008 to cap a wild week of trading as President Donald Trump joined world leaders in pledging to do whatever it takes to protect the economy from the Coronavirus fallout. The S&P 500 surged more than 9%, providing some respite a day after stocks’ worst session since 1987. Equities went on a tear in the last half-hour of trading as Trump declared a national emergency to help combat the virus, moved to prop up energy prices, declared a moratorium of federal student-loan interest and said the private sector will help with efforts to expand testing. That added to optimism about a robust public policy response after the Federal Reserve said it was buying $37 billion of bonds across maturities. Oil climbed as Trump said the U.S. will step up purchases for strategic reserves. The US Dollar posted its best week since 2008. Treasury yields rose and stress in the credit markets showed signs of easing. Precious metals tumbled, with silver down almost 9% and palladium posting its worst week on record. After days of no or inadequate action, policy prescriptions came fast Friday. As Trump announced his plans, Congress was also working on a relief bill. The European Union prepared to suspend government spending rules, and regulators in Italy and Spain banned short-selling on some stocks. China’s central bank said it would pump in $79 billion to bolster the economy.
In a desperate move the Federal Reserve held an Emergency Meeting and cut Interest Rates by 1% to Zero at 9.00 pm last night. Treasuries surged and U.S. Equity Futures tumbled at the start of another volatile week as investors responded to a rapidly escalating economic hit from the Coronavirus and a massive emergency move by the Federal Reserve to ease policy. Benchmark Treasury yields declined more than 30 basis points at one point, while Futures on the S&P 500 Index hit trading limits and fell about 5%, following Friday’s rebound on Wall Street. European contracts slumped. While the Fed and other central banks strengthened efforts to stabilize capital markets, investors are also reacting to a rapid deterioration in the global economy. Nike Inc. and Apple Inc. announced mass store closings, and Fed Chairman Jerome Powell said growth next quarter will be weak. The Japanese Yen jumped after the Fed and five counterparts also said they would deploy Foreign-Exchange Swap Lines. Australian equities fell almost 10%, the most since 1992 even after the Reserve Bank of Australia said it stood ready to buy bonds for the first time — an announcement that sent yields tumbling. New Zealand’s currency slumped after an emergency rate cut there. Meantime, China reported Monday that Output and Retail Sales plunged the past two months. Oil resumed its trenchant decline.
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Equities
The S&P 500 Index climbed 9.2%. closing at a price of 2711. However, this morning the Futures Market is locked limit down at 2555.
The Dow Jones rose 1985 points on Friday to close at 23,185. However, most of this increase will be reversed when the U.S Markets open this afternoon.
The Stoxx Europe 600 Index added 1.4%, but is trading 5% lower this morning.
The MSCI Asia Pacific Index dipped 2.3%.
The MSCI All-Country World Index rose 5.9%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index increased 1.1%.
The Euro decreased 0.8% to $1.1097.
The Japanese Yen weakened 3.1% to 108.03 per dollar.
Bonds
The yield on 10-year Treasuries rose 17 basis points to 0.97%. This morning the Yield is 28 basis points lower at 0.69%
Germany’s 10-year yield jumped 20 basis points to -0.55%.
Commodities
West Texas Intermediate crude rose 4.3% to $32.88 a barrel.
Gold fell 3% to $1,529.71 an ounce.
We have no Economic data due from either the Euro-Zone or UK this morning. At 12.30 pm we have the New York Empire State Manufacturing Index. Finally, at 8.00 pm we have the Net Long-Term TIC Flows.
March S&P 500
A strong late-day rally saw the S&P close 9.3% higher at 2711 for a 230 Handle rally as most of Thursday’s near 10% decline was reversed. These are incredible times with most of the U.S following Europe’s lead in closing schools restaurants and bars from today. The Federal Reserve brought forward this Wednesday’s scheduled meeting to yesterday and at 9.00 pm announced they were dropping the overnight interest rate that banks borrow funds from to zero. The S&P Futures Market tanked on the news, hitting the 5% down limit. The Fed announced QE5 where they will buy an incredible $700 bn worth of bonds. Late on Friday the S&P traded higher to my 2690 sell level. As I was short the NASDAQ, I did not want to hold two short positions over the weekend and I covered this position at my revised 2665 T/P level and I am now flat. Today the S&P has short-term support from 2390/2440 where I will be a buyer with a 2365 stop. As I mentioned on Friday the S&P has support at the December 2018 low at 2346 which must hold or else we will see an acceleration lower to my 2100/2200 target level where I will be a strong buyer with a 2045 stop. My only interest in selling the S&P is from 2695/2735 with a 2772 stop.
EUR/USD
Following the second surprise Fed rate cut the Euro spiked to a high at 1.1200 before selling off to 1.1150 and I still flat. Today I will raise my sell level to 1.1285/1.1335 with a higher 1.1375 stop.
June Dollar Index
I have now rolled to the June Contract. The Dollar has support from 9680/9730 where I will be a buyer with a 9635 stop.
March DAX
Incredible volatility in the DAX. The market just missed my initial 9050 buy level on Friday by a few points before rallying 500 points into the New York close. As the DAX does not open until 7.00 am, we gaped lower by an incredible 700 points with the market trading below Friday buy level and stop and I am still flat. The DAX has now fallen 5300 points in a month to a low so far this morning at 8515 before bouncing as I send this commentary. The DAX is severely oversold on a Daily, Weekly and Monthly basis. We have support from 8280/8430 where I will be a buyer with a 8190 stop. If I am taken long I will have a T/P level at 8600.
March FTSE
The FTSE is trading over 600 points lower from where we were trading at 9.00 pm last Friday. The FTSE is now down close to 40% from its November 2019 high. Given how oversold all equity markets are it is very difficult to be short. However, so far all Central Bank action to stabilise the situation has failed. My own view is that eventually the weight of the Central Bank action will have a positive affect but the key question is how much further we need to fall before this CB buying works. The FTSE has support from 4800/4900 where I will be a buyer with a 4720 stop.
Dow Rolling Contract
A strong late-day rally carried the Dow to a positive close, up 1985 points, or a rise of 9.36%. Despite Friday’s advance the Index was down 10.36% for the week and is on course to open at least 7% lower this afternoon. Today, I will leave my 20500/20700 buy level unchanged with the same 20250 stop. There is every chance that the Dow will trade as low as 17550/19332 over the coming days where I will be an aggressive buyer with a 17180 stop. I will now lower my sell level to 24000/24600 with a 24850 stop.
March NASDAQ
My NASDAQ plan worked well with the market trading higher to my 7700 sell level before selling off to my 7550 T/P level. Subsequently I emailed my Platinum Members to go short again at 7825. I held this position over the weekend but unfortunately I had a tight T/P level at 7740 and I am now flat. The NASDAQ is expected to open below 7400 this afternoon. Today I will be a seller from 7800/7950 with a 8045 stop. My only interest in buying the NASDAQ is from 6920/7070 with a 6815 stop.
June BUND
The U.S Treasury Bond declined nearly 20 Points in four-half-days, a stunning move. The yield went from below 1% to 1.87% before getting hit hard overnight on the Fed Rate Cut. The Bund fell 300 points on Friday and despite the Fed Rate cut is trading lower this morning. I have no edge in the Bund at this time and I am going to stay flat for now.
Gold Rolling Contract
After Silver traded the whole of my buy range on Friday I emailed my Platinum Members to cancel any buy level in Gold and I am still flat. Friday’s 4% fall in Gold was the largest daily sell-off in nearly seven years. Gold has now fallen over $200 from its $1705 high made last month. Gold rallied to a high at 1574 overnight after the Fed Rate cut but is already giving back a lot of these gains, trading at 1534 as I go to press. I have no strong view in Gold at this time and I am going to stay flat for now.
Silver Rolling Contract
My Silver plan did not work well as after I bought the market at 15.15 I was stopped out of this trade near the low of the day at 14.65 and I am now flat. Silver declined 7.54% on Friday which was its steepest one-day decline since June 20, 2013. Overnight Silver rallied to 15.20 on the Fed Rate cut before getting hit hard and is now trading at 13.80. The December 2015 low is just below here at 13.62 which should offer some support. Today I will be a small buyer from 13.00/13.40 with a 12.60 stop. If I am taken long I will have a T/P level at 13.85.
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