Technology giants newly in the crosshairs of regulators led U.S. stocks lower, while speculation the Federal Reserve will warm up to rate cuts spurred a Treasury rally. The Nasdaq-100 Index extended losses from a record in May to more than 10% as the FAANG cohort of tech companies was said to potentially face federal probes on antitrust activity. Treasury two-year yields dropped to their lowest since 2017 and the US Dollar fell after James Bullard became the first Fed board member to publicly call for a rate cut amid the trade war. Selling was heaviest in Facebook Inc., Amazon.com Inc., Alphabet Inc. and Apple Inc. as the companies appeared set to undergo antitrust probes after the U.S. Justice Department and the Federal Trade Commission agreed to split up oversight of technology giants. For investors, any such investigation would represent broadsides at companies that sit at the heart of the bull market. After a brutal month for most asset classes except bonds, June began with no let-up in market risks. Besides concern over sweeping investigations into tech behemoths, the latest signs of factory weakness in major economies weighed on investor sentiment. A measure of American manufacturing activity fell in May to the lowest since October 2016.
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For anyone following my Platinum Service it made 95 points yesterday which was the first trading session for June, having made 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
Bank of America and Citigroup have lowered their U.S. corporate profit forecasts while pointing out the risk of a recession amid a trade war. They are among the first Wall Street strategists to lower their estimates since President Trump last month escalated a dispute with China and threatened tariffs on all Mexican goods unless the country steps up its fight against illegal immigration. The S&P 500 Index declined 0.3% to 2,744.45, which is the lowest in more than 12 weeks.. The Dow Jones Industrial Average was little changed. In Europe, he Stoxx Europe 600 Index climbed 0.4%.
Currencies
Following comments from Fed Member Bullard that Interest Rates may have to be cut the US Dollar fell with the Bloomberg Dollar Spot Index closing 0.3% lower, the big move was in the Euro which jumped 0.7% to $1.1244. Meanwhile the Japanese yen increased 0.2% to 108.07 per dollar. The Australian dollar was little changed at 69.78 U.S. cents despite the RBA cutting their Cash Rate by 0.25%, from 1.50% to 1.25% earlier this morning.
Bonds
The incredible rally in Bond markets continued with the yield on 10-year Treasuries falling five basis points to 2.08%. In Europe Germany’s 10-year yield increased less than one basis point to -0.20%, while Britain’s 10-year yield declined two basis points to 0.862%.
Commodities
The flight to safety saw Gold rise 1.3% to $1,327.90.20 an ounce while Oil closed unchanged after Friday’s 5% fall. Oil is now down 20% since the end of April.
This morning on the Economic Front we have Euro-Zone Unemployment and CPI at 10.00 am. This is followed by the ISM New York Business Conditions Index at 2.45 pm. Finally at 3.00 pm we have Factory Orders.
June S&P 500
Frustratingly the S&P just missed my 2728 buy level with a 2728.50 low print before rallying to an overnight high of 2756 and I am still flat. Despite the S&P closing 0.3% lower yesterday the McClellan Oscillator improved from Friday’s -176 print to close last night with a reading of -109. The VIX also held steady closing again below the key 20 resistance level at 18.86. I still believe that despite the huge sell-off over the past five weeks that the S&P is close to a short-term buy before the real sell-off starts later in the Summer or in Q4. With the RBA cutting rates overnight its is only a matter of time before the Fed follows with their own rate cut. Today I will raise my buy level to 2728/2740 with a 2721 stop. My only interest in selling the S&P is still from 2782/2794 with the same 2801 stop.
EUR/USD
Thankfully we had no sell levels in the Euro yesterday with the market rallying 100 points from where I marked prices 24 hours ago and I am still flat. The rate cut comments from Bullard did not help the US Dollar as in my opinion no Central Bank wants a strong currency at this time. Today I will raise my buy level to 1.1180/1.1220 with a 1.1145 stop.
June Dollar Index
I am still flat the Dollar and today I will again lower my sell level to 97.55/97.95 with a 98.30 stop.
June DAX
I am still flat the DAX with the market outperforming the US Indices for most of yesterday. Today I will raise my buy level to 11540/11600 with a 11475 stop. Given how oversold the DAX is trading I still do not want to be short the market at this time.
June FTSE
The FTSE just missed my 7055 buy level with a 7069 low print before rallying 100 points and I am still flat. Today I will raise my buy level to 7070/7105 with a 7035 stop.
Dow Rolling Contract
My long 24625 Dow position certainly worked well yesterday with the market rallying over 300 points after I posted. This move higher enabled me to cover this position at my 24750 T/P level and I am now flat. The Dow is severely oversold as shown by the CBOE Put/Call Ratio which has closed over 1.00 for 16 straight days, indicating more Puts are being purchased than Calls. On top of this the Daily Sentiment Index closed at just 12% bulls last Friday, its lowest level since the December 24 low of 4%. Today I will again look to buy the Dow on any dip lower to 24550/24700 with a 24460 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 24210/24370 with a 24080 stop. The Dow has strong resistance from 25130/25280 and I will be a small seller on any rally to this area with a 25385 stop.
June NASDAQ
After the antitrust probe was announced yesterday afternoon the NASDAQ got hit hard. I bought the market at a price of 7015 before unfortunately getting stopped out of this position near the low of the day at 6965. Staying below 7125 is negative, and shows a move lower to 6875 and possibly even 6160. The NASDAQ needs to break back above 7125 for the bulls to re-gain control and ideally 7450 otherwise we run the risk of a major move lower from here. Today I will be a small buyer from 6875/6925 with a 6835 tight stop.
September BUND
I have now rolled to the September Contract which trades at a hefty 244 points premium to the June Contract. Looking at the US Bond Market, the T-BOND is trading three Standard Deviations below its one year average while the CFTC reported last Friday that traders are currently net-long 65,032 Bond Futures Contracts which is the largest position ever. Meanwhile the DSI is at 92% bulls. In my opinion the current sentiment is compatible with a price decline and rise in yields. With this in mind I will now look to sell the September Bund from 171.15/171.55 with a 171.85 stop.
Gold Rolling Contract
Gold has now retraced 78.6% of the decline from $1347, the February, 20 high in just over a week. The weakness in the US Dollar over the past two trading sessions has helped to propel Gold higher. I am still flat and today I will now raise my buy level to 1301/1310 with a 1294 stop.
Silver Rolling Contract
Silver is joining Gold’s rally and has now closed higher for four consecutive days. The potential remains strong for a higher bounce especially if we can hold the May 28, low of 14.27. Today I will raise my buy level to 14.33/14.73 with a 13.98 stop.
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