U.S. Equity Markets rallied back from the worst rout since the Financial Crisis on expectations the Trump administration will implement stimulus measures to counter the economic impact from the Coronavirus. Treasuries fell and oil jumped. The S&P 500 rallied 4.9% as investors digested a trickle of news that President Donald Trump and his team are looking at measures including cutting payroll taxes and aiding ailing businesses like airlines and cruise operators. Stocks whipsawed throughout another wild day on Wall Street, wiping out a gain of 3.5% to turn negative before a furious rally in the final two hours of trading delivered the biggest gain since December 2018.
Among the major moves:
- Airlines rallied after Trump’s comments. He did not offer details on what he’d do for the group that’s among the hardest hit, as event cancellations mount.
- Energy companies jumped 5% with oil surging.
- Apple spiked higher by 7.2%.
- The CBOE Volatility Index fell below 50.
- The 10-year Treasury yield topped 0.75%. German 10-year rates stood at -0.79%
- West Texas Intermediate surged 11% to climb above $34 a barrel.
Volatility continued to grip global financial markets rattled by the virus and an all-out oil price war. U.S. stocks plunged the most since 2008 on Monday, and further selling took futures 20% from records before the rally sparked by Trump’s promise for action Tuesday. The S&P 500 is down 15% from its record. So far, the President has criticized the Federal Reserve and Democratic congressional leaders without providing details of his proposals. With markets on edge, signs had started to mount that governments around the world are awaking to need for stimulus measures to combat the virus that is threatening to plunge the global economy into recession. At the same time, measures to contain the Coronavirus continue to undermine prospects for corporate earnings, and raise the danger of a funding crisis, while the oil price crash threatens a swath of defaults among producers. Italy added nationwide travel restrictions to its effective lockdown of the northern region of the country.
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Equities
The S&P 500 Index rose 4.9% to close at a price of 2882.
The Dow Jones Industrial Average rose 4.9%, closing at 25018, for a 1167 point gain.
The Nasdaq 100 rose 5.35, closing at 8372.
The Stoxx Europe 600 Index fell 1.2, having been up 3.5% at one stage.
Germany’s DAX Index declined 1.2%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.5%
The British Pound sank 1.3% to $1.3890.
The Euro sank 1.2% to $1.1305.
The Japanese Yen weakened 3.5% to 105.51 per dollar.
Bonds
The yield on 10-year Treasuries rose 20 basis points to 0.75%.
Germany’s 10-year yield increased 7 basis points to -0.79%.
Commodities
West Texas Intermediate crude rose 11% to $34.05 a barrel.
Gold fell 2% to $1,648.40 an ounce.
S@P equity futures retreated with Treasury yields as investors awaited details from the Trump administration on planned stimulus measures to counter the Coronavirus impact. Asian equities were mixed and the oil price surged with no clear trigger. S&P 500 futures fell as much as 2.6%, following a strong rebound on Wall Street after Monday’s plunge. President Donald Trump didn’t appear at a briefing on the outbreak after promising a day earlier he would announce a “major” economic package, leaving investors waiting. The yen clawed back some of a steep overnight retreat. Shares in Japan and Hong Kong saw modest losses, with larger declines in South Korea and Australia. Oil extended its rally on the back of Monday’s crash.
March S&P 500
The March S&P Futures Contract closed up 135 points yesterday at 2882. We were trading at this level at 12.00 pm before the market fell 150 Handles to a low of 2732 before reversing this sell-off in the last two hours of trading for another insane trading session. At end of the day the S&P had recovered 75% of what was lost on Monday. The past two days have created enormously oversold conditions with the VIX looking like it will give a second buy signal in a week, by closing back within its Daily Bollinger Bands. As we saw in January, A VIX ‘’Double buy’’ signal often marks the bottom of a correction phase and leads to large gains in the weeks ahead. I think that will prove true this time around as well. If you put money to work last Friday then the pain of that trade should be lessened. There is a really good chance that the February high at 3397 will mark the high for several months. In my opinion there is plenty of room for a large oversold bounce. My first target is the 9-Day MA near 3000. Then comes the 20-Day MA at 3150. My final target is the 50 Day MA which will likely be around 3250 a week or so from now. I suggest that if we get anywhere near my target levels then to lighten up any equity exposure before we sell off to lower lows. Yesterday after the S&P traded lower to my 2750 buy level I covered this position too early at 2767 and I am now flat. The S&P has support from 2760/2790 and I will be a buyer in this area with a 2735 mental stop.
EUR/USD
The Euro fell 200 points from Monday’s 1.1495 high as expected given how overbought the Euro had gotten after rallying 750 points in a few weeks. The Euro has resistance from 1.1370/1.1410 and I will be a seller in this area with a 1.1465 stop.
March Dollar Index
My 94.80 long position worked well with the market trading higher to my 95.35 T/P level and I am now flat. Today I will be a buyer on any dip lower to 95.50/95.90 with a 94.95 stop.
March DAX
Frustratingly, the DAX missed my 10400 buy level with a 10427 low print before rallying 500 points into the New York close and I am still flat. Today I will raise my buy level to 10330/10480 with a 10265 stop. If I am taken long I will have a T/P level at 10600
March FTSE
I am still flat the FTSE and today I will raise my buy level to 5900/5960 with a 5915 stop.
Dow Rolling Contract
My Dow plan worked really well with the market trading lower to my 23750 buy level before rallying 1250 points into the close. This move higher enabled me to cover this position at my 24025 revised T/P level and I am now flat. The fact that the Dow closed over 24600 is encouraging. Today I will be a small buyer from 24100/24280 with a 23995 mental stop. If I am taken long I will have a T/P level at 24470.
March NASDAQ
Just like the DAX above the NASDAQ missed my buy level by a few points before rallying 400 points into the close and I am still flat. I will now raise my buy level to 7900/7980 with a 7915 stop. If I am taken long I will have a T/P level at 8105.
June BUND
The BUND never came close to my sell level before falling 70 points to close at 177.59. Today I will lower my sell level to 178.40/178.80 with a lower 179.15 tight stop.
Gold Rolling Contract
Gold fell over 2% yesterday as thankfully we had no buy level in this market. Today I will lower my sell level to 1678/1690 with a 1701 stop.
Silver Rolling Contract
My latest 16.75 long position worked well with the market rallying to my 17.10 T/P level and I am now flat. Today I will be a buyer from 16.10/16.50 with a 15.75 lower stop.
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