U.S. Equity Markets surged yesterday, led by the 3.13% rise in the NASDAQ 100. As a result of yesterday’s across the board rally, the Dow, S&P 500 and NDX all closed above their respective 50-Day Moving Averages. Yesterday morning, brokerage firm Bank of America released its monthly Global Fund Manager Survey. The findings disclosed that institutional investors have not been this pessimistic about stocks or the economy since the lows made during the COVID-19 crash in March 2020, the onset of the financial crisis in October 2008, or just after the World Trade Centre attacks in September 2001. Investors’ cash levels are elevated compared to historical norms. The last six times they have reached this level or higher, the S&P 500 returned an average of 19.7% on a total return basis (dividends included) over the next 12 months. Within the S&P 500, all 11 sectors finished higher. European Markets rallied as investors were optimistic that a solution would be worked out with Russia to resolve disrupted natural gas flows. According to a report by Reuters, energy giant Gazprom is expected to restart the pipeline after it completes scheduled maintenance. The European Central Bank was also said to consider raising interest rates by a larger-than-anticipated 0.5% at Thursday’s policy meeting. This could send the Euro higher, helping the fight against inflation. In Asia, markets closed higher for the day as COVID-19 worries festered. Health officials in the Chinese city of Shanghai introduced mass testing in nine districts in an attempt to stem a recent rise in infections. This stoked fears that authorities could introduce widespread lockdowns once more. That would result in renewed global supply-chain snarls, which could drive inflation even higher. Elsewhere, Oil closed 1.18% higher while Gold again closed flat.
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Equities
The S&P 500 closed 2.76% higher at a price of 3936.
The Dow Jones Industrial Average closed 754 points higher for a 2.43% gain at a price of 31,827.
The NASDAQ 100 closed 3.13% higher at a price of 12,249.
The Stoxx Europe 600 Index closed 1.9% higher.
This morning, the MSCI Asia Pacific Index rose 1.4%.
This morning, the Nikkei closed 2.64% higher at a price of 27,672.
Currencies
The Bloomberg Dollar Spot Index closed 0.8% lower.
The Euro closed 0.7% higher at $1.0222.
The British Pound closed 0.4% higher at 1.2030.
The Japanese Yen fell 0.1% closing at $13817.
Bonds
Germany’s 10-year yield closed 6 basis points higher at 1.27%.
Britain’s 10-year yield closed 5 basis points higher at 2.20%.
US 10 Year Treasury closed 5 basis points higher at 3.03%.
Commodities
West Texas Intermediate crude closed 1.18% higher at $103.43 a barrel.
Gold closed 0.1% higher at $1708.10 an ounce.
This morning on the Economic Front we already had the release of UK CPI yoy which rose 9.4% versus 9.3% expected and June German PPI which rose 0.6% versus +1.3% expected. The only other data of note is U.S. Existing Home Sales and Euro-Zone Consumer Confidence which will released at 3.00 pm.
Cash S&P 500
The breakout that I have been looking for in the S&P finally happened yesterday with the S&P reversing Monday’s Bear Trap, by closing over 100 Handles higher. Equity allocation versus Cash is at the lowest level since October 2008, helped propel global markets yesterday while the potential for a massive short-squeeze remains. There is plenty of resistance above and we have to be respectful of these but any move lower to the 50-Day MA (3922) should be bought. The McClellan Oscillator will tell us when the S&P is overbought (+250) closing last night with a +161 print. So many traders have been betting on new lows, which never arrived, which in turn will force these traders to cover their positions, forcing the market higher. In my opinion, the S&P could rally as high as 4365 which is the 61.8 retracement over the coming months. The S&P was never able to make a new low over the past few weeks despite sentiment at record low levels. I am still flat the S&P. We have support from 3908/3928 where I will be a buyer with a 3889 ‘’Closing Stop’’. If I am taken long I will have a T/P level at 3953. I still do not want to be short the S&P at this time.
EUR/USD
The Euro also surged after I posted yesterday morning, never coming close to my buy level and I am still flat. I will now raise my buy level to 1.0110/1.0170 with a higher 1.0055 ‘’Closing Stop’’.
March Dollar Index
The Dollar has now fallen 3% since making a high at 109.50 last Thursday. I am still flat and today, I will now lower my sell level to 107.00/107.60 with a tight 108.05 stop.
Cash DAX
Incredible move in the DAX with the market rallying over 1100 points in the past 10 days. Thankfully we were not short and are still flat. It is hard to buy the market here after such a move higher. However, I still would not be short as the DAX is still oversold. The DAX has support from 13150/13230 where I will be a buyer with a 13065 stop.
Cash FTSE
The FTSE surged yesterday and I am still flat. This morning, we are trading at 7330. We have resistance from 7400/7470 where I will be a small seller with a 7525 stop.
Dow Rolling Contract
The Dow rallied hard into the close, managing to break above its 50 Day MA (31613) to trade at 31940 this morning. This is the first time that we have closed over this key resistance since April 25 and is a big deal in my opinion. I am still flat the Dow. I will now raise my buy level to 31430/31680 with a tight 31295 ‘’Closing Stop’’. The ‘’Fear & Greed Index continues to improve, closing at 36 which is still a reading of ‘’Fear’’. A 50 print is neutral and when this happens it should propel the Dow higher given the level of bearishness amongst traders and Fund Managers.
Cash NASDAQ 100
Finally, the NDX closed above its 50 Day MA (12005) for the first time since early April. Today, I will add to my existing long position on any dip lower to 11930/12080 with a 11795 ‘’Closing Stop’’. If I am taken long I will have a T/P level at 12220. I am still long from April at 14327. I continue to hold my April long position at 14327. I will leave my exit level unchanged at 12900 on this position.
September BUND
The Bund traded the whole of my buy range yesterday for a 151.10 average long position before rallying to my 151.47 revised T/P level this morning and I am now flat. The Bund has strong support from 150.10/150.70 where I will again be a buyer with a 149.55 lower ‘’Closing Stop’’.
Gold Rolling Contract
No Change. My only interest in buying Gold is still on a dip lower 1673/1688 with the same 1659 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. Silver has support from 17.80/18.50 where I will again be a buyer with the same 16.95 ‘’Closing Stop’’.
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