U.S. Equity Markets had a turbulent Thursday, fluctuating between gains and losses on mixed news about the Coronavirus outbreak, only to fade after the Federal Reserve Bank of New York said it will further shrink Repurchase Agreement Operations. The Fed news late in the trading day erased what had been a small gain for S&P 500 Index, which closed lower for the first time this week. The benchmark had bounced back from session lows after the World Health Organization said a surge in Coronavirus diagnoses did not necessarily indicate a spike in infections. China recently deployed a revised methodology to diagnose the virus, sending the number of confirmed cases soaring, but many of those cases could be days or weeks old, according to the WHO. Traders are still trying to gauge the outbreak’s effect on the economy. The New York Fed said it would shrink repo operations starting with Friday’s overnight offering. The Fed has been conducting repo offerings and Treasury-bill purchases in a bid to keep control of short-term interest rates and bolster bank reserves. The efforts had calmed markets since a September spike. Treasuries trimmed their gains for the day. The Euro traded near the lowest since 2017, while the U.K. Pound gained and Gilts retreated after Sajid Javid quit as Chancellor of the Exchequer. The FTSE 100 Index also declined. Earlier, stock gauges in Japan, Shanghai, Hong Kong and South Korea all declined, though shares in Australia edged higher. Oil climbed even as the International Energy Agency said the Coronavirus means global demand will drop this Quarter for the first time in over a decade.
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For anyone following my Platinum Service it made 140 points yesterday and is now ahead by 656 points for February, having made 2142 points in January, 818 points in December, 780 points in November, 1649 points in October, 1620 points in September and 2387 points in August. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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China and the U.S. are scheduled to lower tariffs on billions of dollars of respective imports as part of the trade deal signed last month, later today.
The S&P 500 Index decreased 0.2% to close at a price of 3374.
The Dow Jones Industrial Average fell 128 points to close at 29,423.
The Nasdaq 100 closed 0.15% Lower at 9596.
The Stoxx Europe 600 Index was little changed at 431.
The FTSE 100 declined 1.2% to 7452, the largest drop in almost two weeks.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index was little changed at 1207.
The British Pound advanced 0.7% to $1.3050, the highest level in two weeks.
The Euro decreased 0.3% to $1.0840, the weakest in almost three years.
The Japanese Yen rose 0.3% to 109.79 per dollar, the largest rise in two weeks.
The yield on 10-year Treasuries declined two basis points to 1.61%.
Britain’s 10-year yield increased four basis points to 0.65%, the highest level in four weeks.
Germany’s 10-year yield declined one basis point to -0.39%.
West Texas Intermediate crude closed unchanged at $51.54 a barrel.
Gold advanced 0.6% to $1,576.10 an ounce.
Copper rose 0.3%.
This morning on the Economic Front we already had the release of German GDP which came in flat at 0.0% versus +0.1% expected. At 10.00 am we have Euro-Zone GDP, Trade Balance and the Employment Change. This is followed at 1.30 pm by U.S. Retail Sales and Import/Export Price Index, Next, we have Industrial Production and Capacity Utilisation at 2.15 pm. Finally, we have The University of Michigan Consumer Sentiment and Business Inventories at 3.00 pm.
March S&P 500
Mu S&P plan worked very well with the market trading lower to my 3350 buy level before rallying to my 3357 T/P level. It is so difficult to be short this market as no matter what news is released, traders are prepared to buy any dip despite sentiment levels at extreme reading as mentioned in yesterday’s commentary. The S&P continued to rally throughout the U.S trading session before rallying to my 3386 sell level overnight. Subsequently I emailed my Platinum Members to exit this short position for a small gain at 3383 and I am now flat. Even though the S&P is in my target range for going short I cut this initial position as I want to tighten my sell level ahead of the key US Data being released this afternoon. Today my sell level will be from 3392/3407 with a lower 3419 stop. The S&P has initial support from 3355/3365 and I will be a buyer on any dip to this area with a 3347 stop which is just below yesterday’s low print.
The Euro closed lower for the eight session in the last nine days and is extremely oversold as shown by the market trading at the bottom of ts Daily Bollinger Band and Williams Index. Yesterday’s move lower saw the Euro hit my second buy level at 1.0835 for a now 1.0860 average long position. I will leave my stop unchanged at 1.0795 while lowering my T/P level on this position to 1.0875. The Euro has resistance from 1.0975/1.1010 and I will be a seller in this area with a 1.1055 stop. If I am taken short I will have a T/P level at 1.0935.
March Dollar Index
As I have increased my long Euro position I will now raise my Dollar sell level to 99.25/99.65 with a 100.05 stop.
The DAX just missed my initial 13790 sell level with a 13785 high print before falling 60 points into the New York close and I am still flat. Today I will raise my sell level slightly to 13820/13880 with a higher 13935 stop. Given how overbought the DAX is trading I still do not want to be long the market at this time.
The FTSE really struggled yesterday due to a combination of politics and a surging Pound. Yesterday’s sell-off saw the market trade lower to my 7370 buy level before rallying to my 7390 revised T/P level with a high overnight at 7410 and I am now flat. Today my buy level will be from 7280/7320 with a 7245 tight stop.
Dow Rolling Contract
If there is one thing I learned about Fed Chair Jay Powell in his appearance in front of Congress this week is that he has learned little about the monetary experiences of both the Fed over the past 10 years and that of the ECB and Bank of Japan. He said in front of the Senate on Wednesday that the Fed will ‘’likely need QE and forward guidance in a downturn’’. QE has proven to not be an economic stimulant, especially with Interest Rates already so low. They think that by telling the world that rates will stay low for a long time that it will engineer animal spirits. It in fact does the exact opposite as when households and businesses know that rates will stay low forever, there is no incentive to act now instead of later. They just act later and thus ‘’forward guidance’’ slows growth instead. This is especially through in Germany over the past six months where we are seeing no growth at all as shown by a flat GDP release earlier this morning. I am still flat the Dow and today I will leave my 29620/29780 sell level unchanged with the same 29885 stop. My only interest in buying the Dow is still on a dip lower to 29040/29190 with a 28930 stop.
The NASDAQ just missed my 9490 buy level with a 9510 low print before surging to an overnight high so far at 9655 and I am still flat. Today I will leave my 9690/9750 sell level unchanged with a 9805 stop. I will now raise my buy level to 9460/9520 with a 9410 higher stop.
My short 174.45 Bund plan worked well with the market trading to an intra-day low at 174.04 and this move lower enabled me to cover this position at my 174.25 T/P level and I am now flat. Today I will be a seller from 174.75/175.15 with a 175.45 stop.
Gold Rolling Contract
The boring sideways action in Gold continues and I am still flat. I am still a small buyer from 1542/1552 with a 1533 stop.
Silver Rolling Contract
No Change as I am still a buyer from 16.95/17.35 with the same 16.60 stop. If I am taken long I will have a T/P level at 17.55.