Equity Markets had a wild start to the week, reversing earlier losses to close higher on the day led by the 1.68% surge in the NASDAQ 100. The White House is expected to roll back tariffs on the import of some Chinese goods soon, in an attempt to ease inflation growth. U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He held a video call on how the two sides can repair trade ties and improve the relationship moving forward. Investors await the Bureau of Labour Statistics’ release on Friday of monthly Non-Farm Payroll data for June, as a real-time update on the health of the domestic economy. Base Metals got hammered yesterday and are now down 32% from their March Highs, implying that we are already in recession. Money Managers look to commodity prices as a signal for economic demand. After all, it is hard to imagine anything being built without steel or copper used in one form or another. If something we consume is not made from steel, the machine that produces it is. And copper has all types of industrial uses because of its resistance to corrosion, ductility, malleability, and electrical conductivity. When economic activity is strong, there is high demand for both of these metals. So, prices rise. But, when activity is faltering, the need for new construction or machinery drops. Households and businesses make do with what they already have. So, prices for these two commodities drop. Right now, metals prices are in a freefall, signalling economic activity is cratering. The implication is analysts need to readjust their economic expectations and earnings estimates going forward. As those adjustments are made, it will make the price-to-earnings multiple on the S&P 500 Index appear more expensive. The change means there is additional near-term downside for the S&P 500 as we saw yesterday afternoon. Following Russia’s invasion of Ukraine in March, metal prices rose quickly as doubts were cast on supply reserves. The country is an important provider of things like aluminum, nickel, and steel. Money Managers worried sanctions would hurt the ability of companies to get the necessary products needed to build everything from cars to cellphones. The change was happening just as the global economy was opening up from the removal of COVID-19 restrictions. But now the dynamic has rapidly shifted… In addition to providing the world with metals, Russia is also an important producer of Oil and Natural Gas. Sanctions meant regions like Europe would have to compete for supplies from other parts of the world, driving prices up. The result has been rapidly rising inflation everywhere. And it has caused central banks to respond by raising interest rates to combat higher prices. The change in borrowing costs and declining disposable income for households and businesses have led to a global slowdown in demand for goods. All of this points to one thing… A recession in the U.S. and across the globe is looming. We have already seen the U.S. Bureau of Economic Analysis’ first-quarter gross domestic product (“GDP”) figures contract by 1.6%. Considering that America is the world’s largest economy, if a slowdown is happening here, it’s happening everywhere. As growth drops, so will the need for raw materials, like metals, to build goods. The change will lead to a reset lower in prices. That will be disinflationary. And as expectations are reset to realistic levels, it should create more steady growth going forward. European Markets got slammed yesterday. The Euro-Zone’s Produce Price Index (PPI) was released yesterday morning showing inflation remained near all-time highs, driven by elevated energy costs. ECB Vice President Luis de Guindos said inflation will remain elevated for “some time,” implying interest rates need to go higher, while Governing Council member Jaochim Nagel said policymakers should only use yield-control crisis tools in exceptional circumstances. In Asia, China’s Purchasing Managers’ Index (“PMI”) figures for June rebounded back into expansion territory as COVID restrictions eased. Finally, the Peoples Bank of China Deputy Governor Pan Gongsheng said the government will further open up its bond markets to foreign investors in an attempt to boost financial stability. Elsewhere, Oil fell 8% due to falling demand while Gold closed 2.1% lower on a super strong Dollar.
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For anyone following my Platinum Service it lost 285 points yesterday and is now ahead by 137 points for July after closing June with a gain of 3371 points June, while making 3651 points in May, having made 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 0.16% higher at a price of 3831.
The Dow Jones Industrial Average closed 129 points lower for a 0.42% loss at a price of 30,967.
The NASDAQ 100 closed 1.68% higher at a price of 11,779.
The Stoxx Europe 600 Index closed 2.1% lower.
This morning, the MSCI Asia Pacific Index fell 08%.
This morning, the Nikkei closed 1.2% higher at a price of 26,107.
Currencies
The Bloomberg Dollar Spot Index closed 1.3% higher.
The Euro closed 1.5% lower at $1.0249.
The British Pound closed 1.1% lower at 1.960.
The Japanese Yen rose 0.1% closing at $135.52.
Bonds
Germany’s 10-year yield closed 13 basis points lower at 1.21%.
Britain’s 10-year yield closed 14 basis points lower at 2.06%.
US 10 Year Treasury closed 9 basis points lower at 2.80%.
Commodities
West Texas Intermediate crude closed 8% lower at $99.72 a barrel.
Gold closed 2.1% lower at $1770.10 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders for May which rose 0.1% versus -0.5% expected. Next, we have U.K. Construction PMI at 9.30 am and Euro-Zone Retail Sales at 10.00 am. This is followed by U.S. Global PMI at 2.45 pm. ISM Services and the JOLTS Job Openings at 3.00 pm. Finally, at 7.00 pm we have the FOMC Minutes from last Month’s FOMC Meeting when the Fed raised rates by 0.75%.
Cash S&P 500
An interesting session after the S&P revered morning gains leading to a horrible open prompted by a Dollar rallying to 20-year highs where it looked like the bears were going to drive the S&P to new lows for the year. Instead, the S&P again bottomed at its Weekly 150 Moving Average by rallying over 100 Handles off its 3742 low print. This is the third time the S&P has had an aggressive rally off this support level and the big question is are the Bears getting weaker. The late rally saw the S&P close over the May lows (3810) which is bullish helped no doubt by falling Treasury Yields and the 8% fall in Crude while Natural Gas closed 6% lower. As I alluded in my extensive Daily Commentary above deflation rather than inflation may be the next problem. As everyone knows I hate using fixed stops in markets, preferring instead to trade smaller size with no stops and exiting on my own terms. Unfortunately, I did not mention a ‘’Closing Stop’’ for most of my positions yesterday and paid the price. Hopefully you faired better than me in that regard. I bought the S&P at 3800 before my 3779 stop was triggered and I am still flat. With inflation risks rolling over, recession risks getting higher which will limit the amount of Fed rate hikes as things look closer to breaking on the economic front. Today, I will again be a buyer of the S&P from 3790/3810 with a 3769’’Closing Stop’’. I still do not want to be short the S&P at this time.
EUR/USD
My Euro plan was wrong yesterday as after the Euro traded lower to my 1,0370 buy level I was stopped out of this trade at 1.0285 and I am now flat. The Euro is now trading at its lowest level since 2003 not helped by the insane monetary policy by the ECB and incredibly weak economic data. The Euro is severely oversold and is probably to close to parity for the market not to test ‘’1’’. Today, I will again be a buyer from 1.0180/1.0240 with a 1.0135 stop. I no longer want to be short the Euro at this time.
March Dollar Index
Wrong! I sold the Dollar at an average rate of 105.55 before being stopped at 106.25 and I am still flat. This morning, the Dollar is trading higher at 106.40. We have resistance from 106.70/107.30 where I will be an aggressive seller with a 108.05 wider stop.
Cash DAX
Wrong! I bought the DAX at an average rate of 12720 before getting stopped at 12595 and I am still flat. The DAX hit a low at 12360 before rebounding to sit at 12630 as I go to press. The fact that we are back above 12500 is positive as this is the post-invasion low print. Today, I will be a small buyer from 13380/12480 with a 12295 stop. If I am taken long I will have a T/P level at 12590.
Cash FTSE
News that two Senior Cabinet Ministers Rishi Sunak and Sajid Javid from Boris Johnson’s Government saw Gilt Yields, Sterling and the FTSE get hit hard. It is hard to see Boris staying in power for much longer. Both resignation letters were very extremely critical of Johnson and how he is running the country. I bought the FTSE at 7165 before getting stopped at 7075 and I am now flat. Today, the FTSE is higher, trading at 7132 again emphasizing my point of trading with no stops. The FTSE has support from 7000/7080 where I will again be a buyer with a 6935 stop.
Dow Rolling Contract
My Dow plan eventually worked well with the market hitting my 30800 average buy level (low of 30355) before rallying nearly 600 points into the close. This move higher saw my 30920 revised T/P level filled and I am now flat. The Dow had every chance to make new lows yesterday and you have to be impressed by the late come-back. Today, I will again be a buyer from 30500/30800 with a 30295 wider ‘’Closing Stop’’.
Cash NASDAQ 100
The NDX was the strongest of the American Indexes yesterday, helped by falling Bond Yields and lower Crude. I bought the market at 11420 before exiting this position too early at my 11645 revised T/P level. Today, I will again be a buyer on any dip lower to 11530/11680 with a 11395 stop. If I am taken long I will have a T/P level at 11840. Lower Treasury Yields should support the NDX in Q3 and is the main reason why 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 rallied hard yesterday, hitting my sell range. I am now short at 151.20 with a higher 150.50 T/P level. I will add to this position at 151.90. My stop is unchanged at a ‘’Closing Price’’ of 152.15 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold traded the whole of my buy range and I am now long at 1787 with the same 1769 ‘’Closing Stop’’. I will now lower my T/P level on this position to 1793.
Silver Rolling Contract
This morning, Silver traded lower to my second buy level at 19.00 for a now 19.40 average long position. I will leave my stop unchanged at 18.35 while lowering my T/P level to 20.10.
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