U.S. Equity Markets rallied again as investors speculated that the $2 trillion rescue package poised to pass Congress will blunt the Coronavirus pandemic’s toll on the economy. Treasuries held gains and the US Dollar fell. The S&P 500 closed near session highs, posting its first three-day rally since February. The Dow Jones Industrial Average saw its biggest three-day gain since 1931 — and is now 21% above its March 23 trough — buoyed by another big advance in Boeing Co. Jobless claims surged to a record 3.28 million Americans last week as businesses shut down to help prevent the spread of the virus. While the reading exceeded estimates, aid from the U.S. government my help offset the damage to workers and businesses. Federal Reserve Chairman Jerome Powell also sought to assure the public that the central bank wouldn’t run out of crisis-fighting ammunition. The Jobless number is one of the first major data points to show the extent of the impact on the American economy since states around the country began widespread business shutdowns aimed at preventing the Coronavirus from spreading. European stocks moved higher, and sovereign debt rose after the region’s central bank announced it will scrap limits on bond purchases for its emergency programme, a landmark decision that gives it almost unlimited power to fight the economic fallout from the virus. The Euro strengthened while a gauge of the dollar headed for a third down day. While rescue measures across major economies are unprecedented, traders remain cognizant of the virus’s escalating toll. The world’s cases now top 451,000, with more than 20,000 deaths. The U.S. death toll has topped 1,000. Elsewhere, Crude declined after three days of gains. The head of the International Energy Agency said global oil demand is in free fall because of the pandemic, made worse by the price war between Saudi Arabia and Russia. Emerging-Market shares and Currencies climbed.
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The Jobless Claims were horrific coming in at 3,283,000, an increase of 3,001,000 from the previous week’s revised level. This marks the highest level of seasonally adjusted Initial Claims in the history of the seasonally adjusted series. The previous high was 695,000 in October 1982.
The S&P 500 Index rose 6.1%, closing at a price of 2630 after a gain of 154 Handles.
The Dow Jones Industrial Average rose 1351 points for a 6.36% gain, closing at 22,595.
The Stoxx Europe 600 Index rose 2.6%.
The MSCI Asia Pacific Index advanced 0.9%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index decreased 1.9%.
The Euro advanced 1.6% to $1.1055.
The British Pound increased 2.9% to $1.2224.
The Japanese Yen advanced 1.6% to 109.42 per dollar.
The yield on 10-year Treasuries dipped five basis points to 0.82%.
Germany’s 10-year yield decreased 10 basis points to -0.36%.
Britain’s 10-year yield fell five basis points to 0.4%.
Gold rose 1% to $1,632.66 an ounce.
WTI crude decreased 5.1% to $23.23 a barrel.
This morning on the Economic Front we have the Bank of England Quarterly Bulletin at 11.00 am. This is followed at 12.30 pm by U.S. Personal Income/Spending. Finally, at 2.00 pm we have the Michigan Consumer Sentiment Index.
June S&P 500
We are witnessing one of the biggest Bear Market rallies in history as Phase 2 of my analysis really kicks in. I was so unlucky yesterday with the S&P missing my 2400 buy level with a low print of 2402.50 after the Jobless Claims were released before rallying, closing on the high at 2619. Hopefully you might have bought in front of my buy range before we saw this massive rally. The only consolation was that we have no sell levels across any of my Indices yesterday as yet again short positions were slammed. The price action over the last month has caused a lot of technical damage to the Broad Stock Market. It has been the most severe decline from an all-time high ever. And, most important, the odds are quite high the S&P will finish below its 20-Month Exponential Moving Average (EMA). This is most important because the 20-Month EMA is the dividing line between the Bull and Bear Market. The EMA comes in at a price of 2873. When we broke this EMA in late 2000 and early 2008 it led to significantly lower prices in the months that followed. In my opinion if the S&P closes below here next Tuesday then the Bull is dead, with stocks heading lower in the months ahead. This why I said earlier in the week if the S&P rallies back to the 2700/3000 then if you are caught long and wrong in your pension that you should move some funds back to Cash. Remember Phase 3 as outlined on Tuesday will see a nasty decline from whatever rebound high that we see in this Phase 2. Short-term the market is bullish as long as we can hold the 2550 support area. We are seeing a large Gap lower from last night’s Chicago close. Today I will be a small buyer from 2522/2552 with a tight 2498 stop. If I am taken long I will have a T/P level at 2590. Where possible I want to be flat all Indices over the weekend.
After the Euro traded higher to my 1.0980 sell level I emailed my Platinum Members to exit any short position at my revised 1.0950 T/P level and I am now flat. The Euro has now rallied 450 points from last Monday’s 1.0635 low which was no surprise given how severely oversold the Euro had gotten, having fallen 860 points from its March 9 high. The Euro has strong resistance from 1.1060/1.1120 where I will be a seller with a 1.1165 stop.
June Dollar Index
My long 100.80 Dollar position was wrong as I was stopped out of this trade yesterday at 100.05 and I am now flat. This morning the Dollar is trading 4% lower from Monday’s high at 99.40. The Dollar has strong support from 98.60/99.10 where I will be a buyer with a 98.15 stop.
My DAX plan worked well with the market trading lower to my 9550 buy level before rallying to my 9602 revised T/P level and I am now flat. The DAX continued to rally after my exit trading to a high above 10000 late yesterday. This morning we are off 250 points at 9750. The DAX has support from 9470/9630 where I will be a buyer with a 9395 tight stop.
The FTSE just missed my 5440 buy level and I am still flat. The strong rebound in Sterling gas slowed the progress of the FTSE. I am not going to chase the market higher and I will only raise my buy level slightly to 5390/5470 with a higher 5315 stop.
Dow Rolling Contract
Just like the S&P above the Dow missed my 20620 buy level with a low of 20645 after the Jobless Claims were released before rallying over 2000 points. Hopefully you managed to buy in front of my buy level before we saw the third consecutive trading rally in the Dow, which is the biggest three-day gain since 1931. This is only a Bear Market rally. The Bear market that started in 2000 lasted about 18 months. The Bear market during the 2008 Financial Crisis lasted 15 months. In both cases the Dow lost half of its value. If the current Bear market follows the same pattern, then it will likely end in the summer of 2021. And, the Index will be trading somewhere around the 15,000 level. Of course, no one knows for sure how things play out but based on history, 1700 looks a pretty good target for the S&P and 14,000/15,000 for the Dow. We are well into Phase two of this rally which should see the Dow hit my 24000 target level over the coming days. It is possible that we could overrun to the 25000/25500 area where I will again look to set short positions. Today I will move my buy level higher to 21550/21900 with a 21375 stop. If I am taken long I will have a T/P level at 22295.
The NASDAQ’s low was 7320 yesterday, just missing my 7310 initial buy level before rallying 500 points and I am still flat. As long as the NASDAQ can hold the 7590/7670 area then this Bear Market rally will continue. I will be a buyer in this area with a 7495 stop.
The BUND is trading 200 points higher from where I marked prices 24 hours ago and I am still flat. Today I will raise my buy level to 170.20/170.80 with a 169.75 stop.
Gold Rolling Contract
A lot of the spread betting firms have stopped quoting Gold prices. The main reason for this is that Futures Prices in New York are surging to a huge premium over Spot prices because of the worry over the deliverability of the product due to a production shut down over the virus, and a curtailment in shipping venues such as cargo trains and planes. We are right to stand aside in Gold and I will wait until normal markets resume before trading the market again.
Silver Rolling Contract
No Change as I am still a buyer from 13.50/13.90 with the same 13.15 stop.