U.S. Equity Markets rebounded as a rally in beaten-down industries outweighed pessimism over bleak economic data and trade tensions. In a very volatile session, banks led gains in the S&P 500 as Wells Fargo, JPMorgan and Bank of America jumped at least 4%. Energy shares joined a surge in crude. Both industries are still the worst performers this year — tumbling more than 30%. The Dow Jones Industrial Average outperformed major benchmarks as American Express and Cisco Systems jumped. Treasuries rose. Earlier losses in stocks were driven by weak U.S. jobless claims and as President Donald Trump said he doesn’t want to talk to his Chinese counterpart Xi Jinping right now. While caution still prevails, some traders may be buying the dip after a sell-off that put the S&P 500 on pace for its worst week since March 20 — or just before the start of a furious stock rally. The number of Americans seeking Unemployment benefits remained in the millions for an eighth straight week as the economy continued to reel from the Coronavirus pandemic. Initial Jobless Claims in state programs totaled 2.98 million in the week ended May 9, Labor Department figures showed Thursday, following 3.18 million the prior week. Later in the day, however, Connecticut corrected its figure to show 29,846 claims, rather than the 298,680 shown in the federal report, indicating an error inflated the national figures. With the latest numbers, a total of about 36.5 million applications for unemployment insurance have been filed since the virus began shutting down businesses in mid-March. That is close to the level of all claims filed during the last recession, which ran for 18 months. Elsewhere, Oil rose as Saudi Aramco slashed its sales to key buyers and the IEA said that the market is showing signs of improving.
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Shares of U.S. banks have become so weak by comparison with technology stocks that a turning point is coming soon, Jonathan Krinsky, chief market technician at Bay Crest Partners LLC, wrote in a report Wednesday. He cited the ratio between the KBW Bank Index and the Nasdaq 100, which closed at record lows the past two days. Wednesday’s ratio was 39% below the average for the past 200 trading days, according to data compiled by Bloomberg. The historically large gap shows “we are in the ballpark” for a swing toward banks, Krinsky wrote.
The S&P 500 rose 1.2%, closing on the high of the day at 2852, well off its intraday low of 2766.
The Dow Jones Industrial Average closed 1.62% higher at 23,626.
The NASDAQ 100 closed 1.05% higher at 9094.
The Stoxx Europe 600 Index decreased 2.2%.
The MSCI Asia Pacific Index decreased 1.5%.
Here is a summary of the main Changes in F.X. Markets
The Bloomberg Dollar Spot Index fell 0.1%.
The Euro decreased 0.2% to $1.0801.
The Japanese Yen weakened 0.3% to 107.31 per dollar.
The yield on 10-year Treasuries declined three basis points to 0.63%.
Germany’s 10-year yield decreased one basis point to -0.54%.
Britain’s 10-year yield fell less than one basis point to 0.204%.
The Bloomberg Commodity Index rose 1.1%.
West Texas Intermediate crude gained 9.3% to $27.64 a barrel.
Gold rose 1.3% to $1,739.30 an ounce.
This morning on the Economic Front we already had the release of German April PPI which fell 0.7% versus -0.6% expected. At 10.00 am we have Euro-Zone GDP, Employment Change and the Trade Balance. This is followed by U.S Retail Sales and the New York Empire State Manufacturing Index. Next, we have Industrial Production and Capacity Utilisation at 2.15 pm. Finally, at 3.00 pm we have the JOLTS Job Openings, University of Michigan Consumer Sentiment and Business Inventories.
June S&P 500
Despite more awful Weekly Jobless Claims the S&P surged for the eighth consecutive Thursday. The bad economic news came on top of bearish forecasts for the S&P from some heavyweight Wall Street traders and market economists. Most traders are confused about the price action post-crisis. The U.S economy is basically in a depression, yet stocks keep climbing higher. It is not hard to figure out as the Federal Reserve is buying everything in sight. The Fed just started buying credit ETFs this week. With the Fed buying Municipal Bonds, Investment Grade Corporate Bonds. High- Yield Bonds, Treasuries and Mortgages, it is difficult for the stock market to go down. And if stocks do try to test their March lows, I would fully expect the Fed to buy stocks, too. I hate using stops in the market preferring to exit on my own terms. This strategy works when you trade in small size and if a market closes below my initial ‘’Stop’’ I am happier to exit on that basis. Frustratingly the S&P just missed my 2755 buy level with a 2759.75 low print before surging almost 100 Handles into the close as thankfully we had no sell levels in any of the US Indices yesterday. Building value above 2832 and settling above 2850 tells me to reset long positions, while building value and closing over 2862 tells me to add long positions for a move back to 2900. I still believe we will test the 200-Day MA at 2999 before we see a more meaningful correction. A break and close below the late April low of 2727 tells me I am wrong on this view. Today I will move my buy level higher to 2818/2838 with a 2799 closing stop. Ahead of the weekend I still do not want to be short the S&P.
I am still flat the Euro and today I will move my buy level higher to 1.0720/1.0770 with a higher 1.0675 stop. Meanwhile I will leave my 1.0880/1.0930 sell level unchanged with the same 1.0965 tight stop.
June Dollar Index
No Change as I am still a buyer from 99.40/99.80 with the same 98.95 stop.
Shorty after I posted I was stopped out of my 10430 long position at 10360 and I am still flat. The DAX had a wild session yesterday, trading to a low of 10160 before surging to trade at 10500 this morning. The DAX has strong support from 10150/10300 where I will be a buyer with a 10045 stop.
My FTSE plan worked well with the market trading the whole of my buy range for a 5740 average long position before rallying to my 5780 T/P level and I am still flat. Today I will be a buyer from 5670/5740 with a 5595 wider stop. Meanwhile I will leave my 5920/5990 sell level unchanged with the same 6045 stop.
Dow Rolling Contract
As expected, the Dow held its 50 Day Moving Average with a low of 22789 before surging 1000 points off this low print. From now on I am going to use a closing price for my US Indices as there is nothing worse in having the correct view before getting stopped out and then subsequently the market rallies hard. For the record I was stopped out of my 23210 long position at 22949 and I am still flat. The Dow has strong resistance from 23900/24100 where I will be a small seller with a 24225 tight stop. If I am taken short I will have a T/P level at 23750. The Dow has strong support from 23150/23400 where I will be a buyer with a 22995 closing stop. If I am taken long I will have a T/P level at 23550.
The NASDAQ traded heavy for most of yesterday before staging a late surge. The market traded the whole of my buy range for a 8900 average long position before rallying to my revised 8935 T/P level and I am still flat. Today I will be a buyer from 8920/9000 with a 8845 stop. I still do not want to be short the NASDAQ at this time.
No Change as I am still a buyer on any dip lower to 172.80/173.30 with the same 172.35 stop. I will now lower my sell level to 174.20/174.65 with a lower 174.95 stop.
Gold Rolling Contract
Gold surged yesterday and I am still flat. I will now raise my buy level to 1705/1715 with a higher 1694 stop.
Silver Rolling Contract
Silver just missed my 15.20 buy level before surging 8% to sit at 16.37 this morning. This is a breakout. Today I will raise my buy level to 15.80/16.20 with a 15.35 stop. If I am taken long I will have a T/P level at 16.75.