U.S. Equity Markets rose to the highest in a week as investors sifted through the latest company earnings and poor labour data. Yields on Treasuries tumbled. The S&P 500 rallied 1.15% with speculation mounting that the worst of the economic damage has passed as more of the country reopens. Filings for Unemployment continued at historically high levels, but fell from the prior week. News that top U.S. and Chinese negotiators spoke overnight helped boost sentiment. The tech-heavy Nasdaq Composite turned positive for the year, wiping out losses that reached as much as 24% at the depths of the pandemic-fuelled sell-off. The Bond market delivered a different take on the economy’s future. Two-year yields plunged to a record low and 10-year rates fell toward 0.6%. Banks stocks defied the move, with financial firms in the S&P 500 rising more than 2% to halt a five-day slide. The Stoxx Europe 600 Index gained as most National Gauges and industry sectors climbed. Crude oil declined after reaching $26 a barrel in New York. The Pound swung between losses and gains after the Bank of England kept its policy settings unchanged and signalled it may expand monetary stimulus as soon as next month. Risk assets rebounded swiftly in April following a dramatic sell-off in the first quarter, but stocks have struggled for direction this month as bulls and bears duel over the outlook. Optimists point to efforts to reopen economies, a slowing rate of new infections and unprecedented stimulus. Pessimists fret over the mounting economic toll, with Payrolls data from the largest economy this afternoon expected to be dire. Asian equities rose Friday along with U.S. and European Futures as investors continue to weigh moves to reopen economies and moves on trade negotiations between the U.S. and China against data illustrating the enormous damage wreaked by the Coronavirus. S&P 500 Futures hit their session highs after reports that China and the U.S. had a constructive phone call on trade.
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The S&P 500 Index rose 1.1% to close at 2881.
The Dow Jones Industrial Average increased 0.9% to 23,875.
The Nasdaq Composite Index rose 1.3% to close at 8,97, the highest in two months.
The MSCI All-Country World Index gained 0.9%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index decreased 0.4%, to 1250.
The Euro gained 0.3% to $1.0831.
The British Pound gained 0.1% to $1.2357.
The Japanese Yen weakened 0.2% to 106.28 per dollar.
The yield on 10-year Treasuries fell seven basis points to 0.63%.
Germany’s 10-Year Yield declined five basis points to -0.55%.
Britain’s 10-year yield closed unchanged at 0.23%.
West Texas Intermediate crude fell 3.0% to $23.25 a barrel.
Gold strengthened 2% to $1,718.10 an ounce.
This morning on the Economic Front the UK is closed for the May Bank Holiday. At 1.30 pm we have the latest U.S. jobs report for April, expected to show a severe impact from the pandemic. The median forecast in a Bloomberg survey of economists calls for a 21 million plunge in Payrolls At the same time both the Unemployment Rate and Average Earnings will be released. The Unemployment Rate is expected to be north of 11%. Finally, at 3.00 pm we have Wholesale Inventories.
June S&P 500
Stocks rallied nearly 13% in April, making it the best month for the Index since 1987. While most investors cheered, I am still not buying it. While unprecedented action from the Federal Reserve and US Government stopped the panic selling, the economic reality has not changed. Markets are on fire again this morning after a positive telephone call between the US and China on Trade talks. After the bubble burst in March 2000, the NASDAQ dropped 35% over the next two months. Subsequently the Index staged a 43% rally and recouped half of the initial loss. It was encouraging for investors, but it turned out to be a classic ‘’Bull Trap’’. When the rally fizzled, the NASDAQ ended up grinding 66% lower before bottoming nine months later. It seems the world has entered a new era, in which the principal function of Central Banks is to try and prevent markets from going down. So after the Gold Standard, under which the CB attempted to manage the Currency and the Dollar Standard, which saw the CB seek to manage the economy, we now have the S&P 500 Standard, in which a desperate CB tries to manage the financial markets. Central Banks will meet with as much success in this as their previous two endeavors. Once upon a time in the distant past, the value of the stock market, or of any asset, was deemed equal to a stream of future earnings discounted by the appropriate interest rate. In February, the market was overvalued by a chunky 40%, or two standard deviations. In March, it fell like a stone to a level where it was valued at around 7% above the long-term mean. Then last month, the market rebounded strongly, leaving it now overvalued in my opinion by roughly 30%. Overnight the S&P rallied to a high of 2922 and within touching distance of last Thursday’s 2964 rebound high so far. I am now short at a price of 2913. I will add to this trade on any further move higher to 2933 with a now higher 2941 tight stop. I will also raise my T/P level to 2901 on this trade as we wait for NFP at 1.30 pm. As this is a Friday I will where possible try to be flat all equity markets by the end of the day. If any of the above levels are hit I will be back with a new update for my Platinum Members.
I am still flat the Euro and today I will raise my sell level slightly to 1.0890/1.0940 with a higher 1.0985 stop.
June Dollar Index
Overnight the Dollar traded lower to my 99.70 buy level. I will now lower my T/P level on this position to 99.95 while raising my stop to 99.40.
Thankfully we had no sell level in the DAX yesterday with the market trading over 300 points higher from where I marked prices 24 hours ago. Today I will raise my buy level to 10550/10650 with a higher 10485 stop.
After the FTSE hit my initial 5910 sell level we had a small retracement and I used this move lower to cover this position at my revised 5895 T/P level as emailed to my Platinum Members. With the UK Markets closed today I will stay flat the FTSE until the market re-opens on Monday.
Dow Rolling Contract
I am still flat the Dow as the market fell shy of my buy level with a late low of 23835 before surging above 24280 this morning. As I am now short both the S&P and NASDAQ, I will now raise my Dow sell level to 24500/24700 with a higher 24845 stop. I no longer want to be long the Dow at this time.
The NASDAQ has surged, closing at a price of 9100 last night. This is a fractured market led by five stocks which sees the NASDAQ now trading almost 1000 points above both its 50 and 200 Day Moving Averages, by hitting a high of 9235 overnight. I have gone short in small size at 9200 and I will add to this position at 9300 with a tight 9360 stop. I will now raise my T/P level on this position to 9125 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Just like the Stock Markets, the Central Banks will do whatever they can to keep interest rates low. This is now surprise given the amount of QE they have implemented over the past two months. I am still flat the Bund and today I will raise my buy level to 172.60/173.20 with a higher 172.25 stop.
Gold Rolling Contract
Gold surged yesterday, closing 2% higher to sit at 1716 this morning. Despite this rally Gold has traded sideways in a narrow range for most of the past six weeks. I will now raise my buy level to 1682/1692 with a higher 1669 stop.
Silver Rolling Contract
My latest 14.80 long Silver position worked well with the market hitting my 15.05 T/P level and I am now flat. This morning Silver is following Gold higher and is trading at 15.45. Today I will be a buyer from 14.75/15.15 with a 14.35 stop.