A technology rally drove U.S Equities to fresh records at the start of a busy week for corporate earnings, economic data and Federal Reserve speakers. Treasuries climbed. Gains in tech outweighed losses in energy and financial companies in the S&P 500 Index. The Nasdaq-100 and the Dow Jones Industrial Average also closed at all-time highs. Citigroup Inc., the first giant U.S. bank to report results, was little changed. After last week’s surge, Treasury 10-year yields dropped as investors bought bonds at cheaper prices. Oil fell below $60 a barrel. Traders will sift through speeches by Fed officials after Chairman Jerome Powell left it all but certain that the Fed will reduce Interest Rates for the first time in a decade. As the July 30-31 meeting nears, the debate now is how deep they will cut and what will they do afterwards. Key data points such as U.S. Retail Sales may provide more clarity as the earnings season gets under way.
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For anyone following my Platinum Service it was flat yesterday and is still ahead by 683 points for July, having made 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. 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
It is very, very well advertised that earnings are expected to come out weaker when reported over the coming weeks. If we connect this with the Fed and say, if the Fed is doing these insurance cuts to really stave off any real significant slowdown, then maybe earnings in the Fourth Quarter might be pretty good. Profits are expected to drop from last year, making this season “the worst of times.” Eight of 11 sectors are forecast to post declines in per-share earnings growth, with analysts and companies cutting Second-Quarter views “to the bone.” Despite these concerns the S&P closed 0.1% higher at 3014, for yet another record closing high. The Dow Average also gained 0.1% while the NASDAQ-100 added 0.3%. Meanwhile in Europe, the Stoxx Europe 600 Index advanced 0.2%.
Currencies
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index increased 0.1%.
The Euro fell 0.1% to $1.1257, where it is opening in London this morning.
The Japanese Yen was unchanged at 107.91 per dollar.
Bonds
Bond Yields reversed some of Friday’s gains with the yield on 10-year Treasuries declining four basis points to 2.09%. In Europe, Germany’s 10-year yield also decreased by four basis points to -0.25% and the UK Gilt fell three basis points to 0.801%.
Commodities
Commodity prices were generally soft yesterday with the Bloomberg Commodity Index closing 0.6% lower. As Tropical Storm Barry passed without incident, West Texas Intermediate crude dipped 1.1% to $59.58 a barrel. Elsewhere, Bitcoin trimmed losses, following another weekend sell-off that saw some digital tokens plunge by more than 20%. Treasury Secretary Steven Mnuchin said Monday that the Trump administration has “very serious concerns” about Facebook Inc.’s proposed cryptocurrency Libra.
This morning on the Economic Front we have UK Average Earnings and Unemployment at 9.30 am. This is followed at 10.00 am by the German ZEW Survey and Euro-Zone Trade Balance. Next we have Central Bank speakers Carney (BoE) and Fed Members Bostic and Bowman all speaking at 12.00 pm, 1.15 pm and 1.30 pm respectively. US Retail Sales are also due a 1.30 pm and are expected to be stronger than last month. This is followed at 2.15 pm by Industrial Production. Next at 3.00 pm we have Business Inventories and the NAHB Housing Market Index. Finally at 5.15 pm we have a speech from Fed Chair Powell and this is followed at 8.30 pm by a speech from Fed Member Evans.
September S&P 500
In contrast to the last two trading sessions which saw little or no movement, today promises to see some fireworks given the amount of Economic releases, Fed speakers and Earnings. I am still flat the S&P as I watch the VIX closely for any spike higher. Last night we closed 2.68% higher at 12.68, despite the stronger equity markets. My own view is that after a 300 Handle rally in the S&P since the 2728 low on June 3 that we are due a decent correction. Worryingly for the bulls is that fact that last Friday the Daily Sentiment Index closed with a reading of 90% bulls. Today I will leave my 3028/3038 sell level unchanged with the same 3046 stop. I will still be a small buyer on any dip lower to 2993/3003 with the same 2985 stop.
EUR/USD
The boring sideways action in the Euro continues and I am still flat as I look to buy the market from 1.1180/1.1220 with the same 1.1155 tight stop. Despite the Euro trading below its 50,100 and 200 Day Moving Averages I still do not want to be short the market at this time.
September Dollar Index
I am still flat the Dollar and ahead of today’s crucial data and Fed speakers I will now lower my buy level to 95.70/96.10 with a 95.35 stop.
September DAX
I am still flat the DAX and today I will now raise my buy level to 12250/12310 with a higher 12195 stop. As long as the DAX can hold the key 12250 support level I will not be a seller of the market despite its weak price action over the past two weeks.
September FTSE
I am still flat the FTSE and today I will raise my buy level slightly to 7385/7425 with a 7350 stop.
Dow Rolling Contract
Yesterday was the 29th day of the Dow rally, which started on June 3, from a low of 24,680. Even though we have had a massive rally, the NYSE Advance/Decline ratio has been extremely tame since the July 4 Holiday despite a succession of new all-time highs in the blue chips. Big Board volume has been contracting while junk-to-Treasury Credit Spreads appear to have bottomed and have started to expand. The 10-Day Daily Average of NYSE volume closed last night at its lowest level since August 2018. As a result of all of the above I am on the lookout for a reversal in the market. Today I will leave my 27430/27580 sell level unchanged with the same 27655 tight stop.
September NASDAQ
The NASDAQ had a strong finish yesterday to yet again register a new all-time high. I am still flat and concerned especially with the Daily Sentiment Index closing at 93% bulls. This matches the 93% reached on April 23, before the market topped three days later. Subsequently the NASDAQ fell 11% to its June 3 low. Today I will leave my 8025/8075 sell level unchanged with the same 8115 stop.
September BUND
Just like the Equity markets any sell-off in the Bund is met by traders buying the dip. Yesterday the Bund rallied to my 172.40 sell level. I am still short and I will add to this position on any further move higher to 172.80 with a 173.15 stop. For now I will also raise my T/P level on this position to 172.15.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1392/1402 with the same 1384 stop.
Silver Rolling Contract
I am still flat the market and today I will now raise my buy level slightly to 14.90/15.20 with a lower 14.55 stop. If I am taken long I will have a T/P level at 15.40.
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