U.S and European Indices closed higher yesterday, helped by a combination of vaccine optimism and the fact that the EU Leaders agreed on Euro 750 billion Recovery Fund, with 390 billion given by way of grants and the balance by a low Interest loan. Earlier, ECB President Lagarde said she would rather see an ‘’ambitious’’ financial aid package versus a rushed deal. The EU Leaders finally reached agreement at 5.30 am this morning after a marathon 90 hours of talks that began last Friday. This agreement required the unanimous approval of all 27-Member States and is seen as victory for Chancellor Merkel and French President Macron after four days of acrimonious negotiations. ‘’I am very relieved’’ Merkel said after as ‘’we have come up with the biggest crisis the EU has faced’’. The U.K. reached a deal to secure 90 million doses of a Coronavirus vaccine from companies in Germany and France, while British Pharmaceutical Company Synairgen announced positive data on its COVID-19 treatment, saying it reduced risk of ‘’severe infection’’ by 79%. On the vaccine front, Oxford University and AstraZenca published early data on their Coronavirus candidate saying that the vaccine showed an ‘’acceptable safety profile’’ only causing minor side effects. It produced a strong neutralising antibody response. Congress returned from recess yesterday and will now formally begin negotiations on a fifth Coronavirus Support Bill. These positive developments helped the NASDAQ to post a 3% gain. The S&P turned positive for the year as its rally took it to levels last seen just as the pandemic was starting. Elsewhere, Gold closed 0.8% higher at $1818 which is its highest level in nine years. Meanwhile the US Dollar and Treasuries closed unchanged.
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Equities
The S&P 500 Index closed 0.8% higher at a price of 3252.
The Dow Jones closed little changed at 26,680.
The NASDAQ 100 closed 2.9% higher at 10952.
The Stoxx Europe 600 Index closed 0.8% higher at 375 which is its highest level in 19 weeks.
This morning the Nikkei closed 0.75% higher at 22,884.
Currencies
Here is a Summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index dipped 0.2% to 1203.
The Euro increased 0.1% to $1.1445.
The British Pound closed 1.1% higher at $1.2687.
The Japanese Yen decreased 0.3% to 107.32 per dollar.
Bonds
The yield on 10-year Treasuries fell one basis point to 0.61%.
Germany’s 10-year yield dipped one basis point to -0.46%.
Britain’s 10-year yield fell rose two basis points to 0.15%.
Commodities
West Texas Intermediate crude increased 0.2% to $40.68 a barrel.
Gold rose 0.4% to $1,818.20 an ounce.
This morning on the Economic Front we already had the release of UK Public Sector Net Borrowing which came in as expected with a £34.8 billion print. The only other data of note on either side of the Atlantic is the Chicago Fed National Activity Index which will be released at 1.30 pm.
September S&P 500
The S&P has rallied over 75 Handles from where I posted yesterday to hit a new rebound high at 3267 earlier this morning. We are now well into the ‘’Open Gap’’ for the Cash S&P from February 21/24 at 3259/3330 as yet again anyone trying to short the S&P gets slammed including me. The S&P is now trading less than 4% from its all-time February high of 3391, despite the fact that we are in the greatest recession since 1945. The Central Banks are the largest hedge funds in the market today and with the EU joining the party with their own Euro 750 billion Recovery Fund this morning it is extremely difficult to have a short position for any length of time. Yes valuations are stretched. It is a rally led by only a few key stocks but with the NASDAQ trading at yet another new all-time high this morning after rallying 5% in the past 24 hours, it is a brave trader who bets against the trend. On Friday the market again closed above 151% Market Cap to GDP which is close to all-time highs and is unsustainable especially in a recession. Yesterday’s 0.84% rally in the S&P featured only 35.5% of the Index’s shares advance while 64.5% declined. My S&P plan did not work well with the S&P hitting my average sell level at 3244 before stopping me out of this position at 7.00 am at 3261 and I am still flat. I have called the S&P to trade into this mega Gap from February and in my opinion we will put in a more sustained top between here and 3330. Today I will be an aggressive seller from 3280/3310 with a 3325 stop. The S&P has initial support from 3210/3225 where I will be a buyer with a 3199 stop.
EUR/USD
My short 1.1455 Euro plan worked well with the market trading lower to my 1.1425 T/P level and I am still flat. The Euro is overbought and due a correction which will not happen until we see the US Indices trade lower. The Euro has resistance from 1.1490/1.1540 where I will be a seller with a 1.1575 stop. The Euro has short-term support from 1.1330/1.1370 where I will be a buyer with a 1.1285 stop.
September Dollar Index
I am still flat and today I will lower my buy level slightly to 94.80/95.30 with a lower 94.45 stop. Given how oversold the Dollar is trading, I still do not want to be short the market at this time.
September DAX
As you know at this stage the DAX trades from 7.00 am until 9.00 pm. This morning on the back of the EU Recovery Fund been agreed the DAX gaped into the middle of yesterday’s sell range at a price of 13220 where I went short. Subsequently I emailed my Platinum Members to exit any short- position at my revised 13195 T/P level and I am now flat. Despite the Euro-Zone in recession the DAX is now trading close to all-time highs having rallied over 60% off it March 8100 low print. The DAX is severely overbought and due a correction. It has resistance from 13320/13450 where I will be a seller with a 13525 tight stop. I will now raise my buy level to 12800/12950 with a 12715 stop.
September FTSE
My FTSE plan worked well with the market trading lower to my 6190 buy level shortly after I posted yesterday morning before rallying to my 6235 T/P level and I am still flat. The FTSE continues to underperform the other main Indices and is only trading slightly higher this morning at 6258 in comparison to the surge in the DAX and U.S Indices. The renewed strength in Sterling is another factor for the underperformance. The FTSE has resistance from 6305/6345 where I will be a small seller with a 6375 tight stop.
Dow Rolling Contract
The idea of buying the dip in the Dow worked well yesterday. After the Dow hit my revised 26660 revised T/P level on yesterday’s 26550 long position, I emailed my Platinum Members to buy the Dow again at a price of 26540 before we rallied a second time to my 26620 T/P level and I am now flat. This morning the Dow is trading higher at 26870. I will continue to be an aggressive seller from 27300/27550 with the same 27725 stop. The Dow has initial support from 26450/26650 where I will be a buyer with a higher 26295 stop.
September NASDAQ
My NASDAQ plan did not work well yesterday as I did not see this market rallying over 5% from where I marked prices 24 hours ago. After the NASDAQ traded the whole of my sell range for a 10795 average short position I was stopped out of this trade near the close at 10955. This morning the NASDAQ is trading close to all-time highs at 11050. This move higher has completely negated last Monday’s Downside Key Day Reversal. The NASDAQ has short-term resistance from 11150/11250 where I will again look to sell the market with a 11355 stop. The NASDAQ has support from 10900/10800 where I will be a buyer with a 10675 stop.
September BUND
Late yesterday the Bund traded higher to my 176.45 sell level before selling off to my revised 176.30 T/P level and I am still flat. I will continue to sell the Bund on rallies and today my sell level will be from 176.60/177.00 with a higher 177.45 stop.
Gold Rolling Contract
Gold closed at a 9-year high last night and I am still flat. I will now raise my sell level to 1835/1848 with a higher 1856 stop.
Silver Rolling Contract
The incredible rally in Silver shows no sign of ending and I am still flat. I will now raise my buy level to 19.45/19.85 with a 18.95 stop.
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