U.S. Equity Markets dropped on concern the blistering rally in risk assets overshot economic prospects. Treasuries climbed. The S&P 500 halted a surge that drove the gauge higher for 2020, led by energy and industrial companies. Small-cap shares underperformed after a 10% advance in six June sessions. The Nasdaq 100 briefly topped 10,000 as Apple Inc. jumped on a news report it’s preparing to announce a shift to its own main processors in Mac computers. Treasury yields sank to as low as 0.8%. The US Dollar fell for a ninth straight day — its longest slide since 2006. After a record-breaking rally that added $21 trillion to global stock markets, technical indicators suggest a pullback is overdue. Sentiment toward U.S. Equities swung to extreme confidence from equally extreme fear in less than three months. Nearly 300 stocks in the S&P 500 are trading at prices that exceed their consensus 12-month targets set by individual company analysts, data compiled by Bloomberg show. That is ’s a swift change from late March, when only two stocks boasted prices higher than analysts forecast. While the easing lockdowns around the globe fuelled a stock rally from the lows, the World Bank warned the economy will contract the most since World War II this year. U.S. Job Openings plummeted in April to the lowest since 2014 and separations remained elevated as the pandemic ripped through the labour market with devastating speed. Elsewhere, oil rose in a late rally ahead of inventory data this afternoon and after Libya once again closed its top oil field shortly after reopening.
To mark my 2075th issue of TraderNoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 20 points yesterday and is now ahead by 750 points for June, having made 2456 points in May, 4773 points in April, an incredible 9264 points in March, 2223 points in February, 2142 points in January and 818 points in December. 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
The S&P 500 dipped 0.8%, closing at a price of 3207.
The Dow Jones Industrial Average fell 300 points for a 1.09% loss, closing at 27,272.
The NASDAQ 100 rose 0.67%, closing at a new all-time high at 9967.
The Stoxx Europe 600 Index fell 1.2%.
The MSCI Asia Pacific Index rose 0.7%.
This morning the Nikkei closed 0.15% higher at 23,125.
Currencies
Here is a summary of the main Changes in F.X Markets:
The Bloomberg Dollar Spot Index decreased 0.1%.
The Euro climbed 0.4% to $1.1334.
The Japanese Yen appreciated 0.6% to 107.76 per dollar.
Bonds
The yield on 10-year Treasuries decreased five basis points to 0.82%.
Germany’s 10-year yield climbed one basis point to -0.31%.
Britain’s 10-year yield rose less than one basis point to 0.336%.
Commodities
The Bloomberg Commodity Index climbed 0.1%.
West Texas Intermediate crude increased 1.6% to $38.80 a barrel.
Gold climbed 0.9% to $1,720 an ounce.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 12.00 pm we have the latest U.S MBA Mortgage Applications and this is followed at 1.30 pm by CPI. Finally, we have the Fed’s Policy Decision at 7.00 pm, where Officials are expected to leave rates above zero, and the Powell press conference at 7.30 pm. The Fed will probably use its meeting to shed light on various lending plans without easing further. Officials will also publish their employment and growth targets for the first time since the outbreak.
June S&P 500
Internally the market was extremely weak yesterday with the McClellan Oscillator falling from Monday’s +333 close to last night’s +184 closing print. Despite this aggressive sell-off in the MO and the fact that the VIX rose nearly 9%, closing at 27.57, the S&P only closed 0.8% lower. Already a lot this sell-off has been reversed this morning as we wait for the FOMC Statement and Powell press conference this evening. As I mentioned yesterday it is the Small-Cap stocks, led by Retail (small accounts) that are driving the US Indices to almost new highs across the board. Today, I look at the curious cases of Chesapeake Energy and Hertz Rent-a-car. Chesapeake is on the verge of a potential bankruptcy filing and its bonds trade for less than 10 cents on the Dollar. Hertz has already declared bankruptcy. It goes without saying, but shares of bankrupt companies should not be worth very much. They are almost always cancelled and end up being worth zero. They keep trading though, sometimes for years. Usually they bounce around $1 and eventually bleed to zero. I am not a Corporate Finance Person and I have no opinion on the breakup value or recovery value of either of these companies. All I am saying that in a normal market these two assets would be bouncing along between $0 and $1, not producing 1000% returns. Sure, there are squeezes in the stocks of bankrupt companies, but not like this. Hertz has rallied from 41 cents to over $6 in the last two weeks while Chesapeake has rallied from $7.77 to $77.50. The S&P is trading so far above its 9 Day EMA which is at 3111 this morning that a correction is due and is the main reason why I will not chase this market higher. I will leave my 3110/3130 buy level unchanged with the same 3095 stop. The S&P has short-term resistance from 3245/3260 where I will be a seller with a 3271 stop.
EUR/USD
The Euro continues to build value above 1.12 as we test the key 1.14 resistance area. A break and close above 1.14 for a few days is a confirmed buy signal for much higher prices. I am still flat the Euro and today I will raise my buy level to 1.1220/1.1270 with a 1.1175 stop. Short-term the Euro is overbought and today I will again raise my sell level to 1.1425/1.1475 with a tight 1.1515 stop.
June Dollar Index
For the second consecutive session the Dollar rallied to a high of 97.06, just below my 97.10 T/P level before stopping me out of my 97.00 long position at 96.55 and I am still flat. The Dollar has now closed lower for six consecutive trading session which is the longest loosing streak since 2006. The next support level for the Dollar is from 95.30/95.80 where I will be a more aggressive buyer with a 94.75 stop.
June DAX
My DAX plan worked well yesterday with the market trading the whole of my buy range for a 12550 average long position before the market rallied to my revised 12615 T/P level and I am now flat. This morning the DAX opened higher at 12750 before selling off to sit at 12690 as I go to press. Today, I will be a small buyer from 12450/12550 with a 12375 stop. My only interest in selling the DAX is still on a rally higher to 12980/13100 with the same 13155 stop.
June FTSE
The FTSE is weak as expected with the market falling 150 points from where I marked prices 24 hours ago. Cable is making new recovery highs for the year and this is having a material affect on the FTSE. Today I will lower my sell level to 6440.6490 with a lower 6535 stop. The FTSE has short-term support from 6210/6270 where I will be a buyer with a 6175 stop.
Dow Rolling Contract
I am still flat the Dow as I expect the market to trade in a narrow range ahead of the FOMC this evening. Given how severely overbought the Dow is trading I will only raise my buy level to 26500/26750 with a higher 26325 stop. Meanwhile I will now lower my sell level to 27700/27950 with a 28055 lower stop.
June NASDAQ
Frustratingly the NASDAQ fell shy of my 9775 T/P level before rallying to my second sell level at 9995. I am now short at an average rate of 9945 and I will now raise my T/P level on this position to 9920. For now, I will leave my 10055 stop unchanged and if any of the above levels are hit I will be back with a new update for my Platinum Members.
September BUND
I am still flat the Bund. I will now lower my buy level slightly to 172.60/173.00 with a lower 172.25 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold continues to trade sideways and I am still flat. I will now raise my buy level to 1680/1690 with a higher 1669 stop.
Silver Rolling Contract
No Change as I am still a buyer from 16.90/17.30 with the same 16.55 stop. If I am taken long I will have a T/P level at 17.55.
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