U.S. Equity Markets, while Treasuries surged as bleak Retail, Manufacturing and Homebuilding data from the world’s largest economy added to concern over a severe global recession. The S&P 500 Index sank from a one-month high, with all of its major groups dropping. Financial shares slid as Goldman Sachs Group Inc.’s investment portfolio took a hit from the Coronavirus pandemic, while Bank of America Corp. and Citigroup Inc. followed rivals in setting aside billions for loan losses. Oil plunged to the lowest in two decades amid a record collapse in U.S. fuel demand. Treasuries surged with the US Dollar. Both earnings and economic data highlight the brutal impact of the economic stoppage designed to combat the virus outbreak. U.S. Retail Sales and Factory Output posted historic declines in March, and surveys in April looked even worse. Manufacturing in New York state and sentiment among American homebuilders plunged by previously unthinkable amounts. U.S. stocks have gone through their biggest bout of weakness relative to Treasury securities in decades, according to a barometer cited by Talley Leger, a senior investment strategist at Invesco US. The indicator is the ratio between the S&P 500 and the reciprocal of the 10-year Treasury’s yield, which he presented in an April report on market gauges. The ratio started this month by closing at its lowest level since 1983 after tumbling 85% from a high in October 2018. A rebound is needed for stocks to recover, Leger wrote.
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Equities
The S&P 500 sank 2.2%, closing at a price of 2783.
The Dow Jones Industrial Average fell 1.86% to 23,504.
The NASDAQ 100 closed 1.15% lower at 8591.
The Stoxx Europe 600 Index slid 3.2%.
The MSCI Asia Pacific Index dipped 0.4%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index jumped 1%.
The Euro dipped 0.6% to $1.0912.
The Japanese Yen weakened 0.3% to 107.56 per dollar.
Bonds
The yield on 10-year Treasuries decreased 12 basis points to 0.63%.
Germany’s 10-year yield decreased nine basis points to -0.47%.
Britain’s 10-year yield fell four basis points to 0.302%.
Commodities
The Bloomberg Commodity Index sank 1.7%.
West Texas Intermediate crude fell to $19.87 a barrel.
Gold was fell 1% to $1712.20.
This morning on the Economic Front we already had the release of German Wholesale Price Index for March which came in at -0.4% versus -0.9% expected. At 9.30 am we have the UK Bank of England Credit Conditions Survey and this is followed at 10.00 am by Euro-Zone Industrial Production. Next, at 1.30 pm we have the US Weekly Jobless Claims where the expectation is for another 5+ million will have lost their jobs. Also at 1.30 pm we have Building Permits, Housing Starts and the Philly Fed Manufacturing Survey. Finally, the Bank of England’s Tenreyro and the Fed’s Williams are speaking at 2.30 pm and 8.00 pm respectively.
June S&P 500
The S&P had a wild session yesterday with the market trading the whole of my buy range for a 2763 average long position. Subsequently we rallied back above 2790 before getting hit in the last hour of trading. This initial move higher enabled me to cover this position at my revised 2771 T/P level and I am now flat. Overnight we hit a low of 2751 before again rallying to trade at 2800 this morning. For the last three Thursdays’ after the release of the Jobless Claims we had a brief sell-off before spending the rest of the session trading higher. It is very difficult to have a short-position at this time given the level of intervention from the Central Banks. This morning it was announced that several European Countries extended short-selling bans until the middle of next month. On Tuesday the Bullish Percent Index gave only its third sell signal in as many years. The Bullish Percent Index is another indicator of overbought or oversold conditions. It measures the percentage of stocks in a sector that are trading with bullish technical patterns. And, since it is a percentage, it can range from zero – meaning no stocks have bullish patterns – to 100 – meaning all stocks in the sector have bullish patterns. For the S&P 500, any reading above 80 on the BPSPX is considered overbought. When the Index turns down from overbought conditions, it generates a sell signal. The BPSPX closed at 88 on Tuesday before falling 12.90% yesterday to close at 77. The BPSPX was at 91 on Monday which was the highest reading of the past decade. The S&P fell 10% in one week following the sell signal in February 2018 while In January the Index dropped 4% in a few days after generating a sell signal. It seems to me that the S&P will have a tough time pressing higher from here and ties in with my view that once Phase 2 finished we will have a dramatic Phase 3 sell-off. As I mentioned above it is not easy to be short and we have to wait until some key levels are broken like the 2550/2600 support area before we can safely say the sell-off has started. It is possible that we can trade back to the March 6, ‘’Open Gap’’ at 2963 first. Today I will be a buyer from 2755/2780 with a 2738 stop. The S&P has initial resistance from 2870/2892 where I will be a seller with a 2905 stop. Either way I will be an aggressive seller from 2940/2975 with a 3005 stop.
EUR/USD
My Euro plan worked well with the market trading lower to my 1.0870 buy level before rallying to my 1.0905 T/P level and I am now flat. Today I will again be a buyer from 1.0810/1.0860 with a 1.0765 stop.
June Dollar Index
The Dollar spiked to a high of 100.10 yesterday enabling me to cover my latest 98.90 long position at 99.25 and I am now flat. Today, I will be a buyer from 98.90/99.40 with a 98.45 stop.
June DAX
The DAX traded the whole of my buy range yesterday. I bought the market at an average rate of 10300 before exiting this position for a breakeven as I had so many open positions at the time. This morning the DAX is trading higher at 10400 and if you are still long I would take your gain here. So far, the DAX is holding the key 10100/10220 support area. Today I will be buyer on any dip to this range with a 9995 wider stop.
June FTSE
As suspected the FTSE was weak again yesterday as thankfully we had no buy level. The FTSE never came close to my sell range and I will now lower my sell level to 5690/5750 with a 5835 stop.
Dow Rolling Contract
My Dow plan worked well with the market trading lower to my 23380 buy level before rallying to a rebound high this morning at 23780. Yesterday I covered my long position at my revised 23480 T/P level and I am still flat. Today I will again look to buy the Dow on any dip to 23125/23350 with a 22985 stop. My only interest in selling the Dow is from 24350/24600 with the same 24765 stop.
June NASDAQ
This Contract I traded badly yesterday. Just after I posted the market hit my 8595 exit level on my 8540 short position. Subsequently the NASDAQ got hit hard to my 8500 buy level before rallying back above 8690 this morning. I broke my own rule of not respecting both the 50 and 200 Day Moving Averages by cutting this long position at 8520 and I am still flat. The fact that the NASDAQ is back above these key levels is preventing me from being more bearish at this time and is why there is the possibility that the S&P can rally back to near 3000 before we see Phase 3. Today I will be a buyer of the NASDAQ from 8520/8590 with a 8445 stop. The NASDAQ has resistance from 8780/8850 where I will be a small seller with a 8925 stop.
June BUND
Late yesterday the Bund traded higher to my 172.55 sell level before in the last few minutes hitting my 172.10 T/P level and I am now flat. Today I will again look to sell the Bund from 172.50/172.90 with a tight 173.25 stop.
Gold Rolling Contract
I am still flat Gold and today I will raise my sell level slightly to 1752/1765 with a higher 1778 stop.
Silver Rolling Contract
No Change as I am still a seller from 15.90/16.30 with the same 16.75 stop.
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