U.S. stocks rallied for a fourth day after a weak jobs data added to bets the Federal Reserve will cut Interest Rates. Treasury yields and the US Dollar fell. The S&P 500 Index had its best week since November on speculation the Fed will move to shore up the economy as a report showed employers added the fewest workers in three months and wage gains cooled. Technology shares led the advance in equities, while banks sank. The 10-year bond yield extended its weekly slide. The Peso rose after President Donald Trump said there’s a “good chance” the U.S. will reach a deal to avert imposing trade tariffs on Mexico. After the US Markets closed on Friday President Trump announced that he would not impose a sliding scale of tariffs on goods from Mexico — from 5% to 25% over time — after that nation agreed to take a tougher stance on immigration, which was his goal all along. Mexico did commit to doing more — deploy National Guard troops to help curb illegal migration and agree to care for Central Americans seeking asylum in the U.S. indefinitely as their cases wind through the system. This has helped markets to open higher this morning.
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The days of the ‘Fed Put’ are back, with investors treating bad economic data as good news for stocks, despite the very weak US Payroll data on Friday. In company news, Microsoft Corp. climbed back above the coveted $1 trillion level in market value amid a broader rally in technology shares. The S&P 500 Index climbed 1.1% to 2,873.34, the highest in more than three weeks. The Dow rose three hundred points to close at 26010. The Stoxx Europe 600 Index gained 0.9%, while The MSCI Asia Pacific Index added 0.4%.
Products exported to the U.S. won’t be subject to a tariff increase until June 15. The offshore yuan fell to its weakest since November before paring losses as China’s Central Bank Governor said there’s “tremendous” room to adjust monetary policy if the trade war deepens. The much weaker than expected NFP data saw the Bloomberg Dollar Spot Index fall 0.2%, while the Euro climbed 0.5% to $1.1334. The Japanese yen rose 0.2% to 108.16 per dollar.
Traders have aggressively increased bets the Fed will cut rates after a string of weak reports on Retail Sales, Factory Orders and Home purchases indicated the world’s largest economy is slowing. Earlier in the week, Chairman Jerome Powell signalled he is open to easier policy amid trade tension. Fed Funds Futures show a quarter-point cut almost fully priced in for July. The yield on 10-year Treasuries decreased four basis points to 2.08%. Meanwhile in Europe, Germany’s 10-year yield fell two basis points to -0.26% which is a new record low yield. Britain’s 10-year yield declined one basis point to 0.813%.
Commodity closed higher after a difficult week with the Bloomberg Commodity Index rising 0.1%, and West Texas Intermediate crude 2.7% to $53.99 a barrel.
This morning on the Economic Front we have UK GDP Industrial/Manufacturing Production, Index of Services and the Trade Balance at 9.30 am. At 10.00 am we have the Euro-Zone Sentix Investor Confidence. Finally at 3.00 pm we have the US JOLTS Job Openings.
June S&P 500
Thankfully we had no sell levels in the Equity Markets on Friday as yet again the buy the dip prevailed despite selling off initially on the much weaker than expected NFP data. To add fuel to the fire Trump cancelled any tariff increases with Mexico resulting in another higher Gap Opening for the Futures Markets when we re-opened last night. The S&P is now trading an incredible 160 Handles higher at 2893 from where I marked prices this time last week. As a result we are now trading at the top of the Daily Bollinger Band with the S&P now overbought – what a difference to last week when we were trading outside the bottom of the Daily Bollinger Bank with a DSI reading of just 9% bulls. The S&P has strong resistance from 2898/2910 and I will be a seller in this area with a 2918 stop. I mentioned on Friday that a break and close over 2860 is s buy signal. If you did buy the market on Friday then you had a nice gain when we re-opened last night. Today I will move my buy level higher to 2852/2865 with a 2845 stop.
Late Friday I emailed my Platinum Members to raise their sell level in the Euro to 1.1350/1.1390 with a 1.1430 higher stop. I will leave my sell level unchanged at this new area with a 1.1320 T/P level if executed.
June Dollar Index
The US Dollar Index declined 1.2% last week, its largest weekly decline since February 2018. The decline back then led to a low for the Dollar, will last week’s decline be a low too? I am now sure. Today I will lower my sell level to 97.20/97.60 with a 97.95 stop.
Although the DAX has closed over the key 11800/11850 pivot area for the last three sessions, the market needs to break and close over its next key resistance area which comes in at 12210/12280. Today I will be a small seller on any rally to this area with a 12335 tight stop. I will also raise my buy level to 11910/11970 with a 11855 stop.
I am still flat the FTSE which has also rallied hard all week. The FTSE has strong resistance from 7400/7450 and I will be a seller on any further rally to this area with a 7485 stop. Given how overbought the FTSE is trading I do not want to be long the market at this time.
Dow Rolling Contract
Unfortunately the Dow just missed my buy level on Friday before rallying over 350 points off its early afternoon low as yet again anyone shorting this market gets slammed. Just like the S&P above the Dow is now trading at the top of its Bollinger Band following the higher open last night after Trump cancelled any new tariffs on Mexico. However it is still difficult to be short despite the market rallying nearly 1600 points in a week. The Dow has resistance from 26240/26390 and today I will be a small seller in this area with a 26470 tight stop. I will also raise my buy level to 25770/25930 with a 25680 stop. If we go back to December 3 last year when the market gapped higher on a ‘’Trade Tweet’’ from Trump the market reversed these gains very quickly so we have to be flexible and watch the VIX which closed over 2% higher on Friday despite the large gains recorded in the main US Indices.
This morning the NASDAQ is testing the key 7425/7475 resistance area that I have mentioned all of last week. It makes last Monday’s 6965 stop on my long position at the time even more infuriating. Today I will raise my buy level to 7300/7360 with a 7245 stop.
Late on Friday the Bund traded higher to my 171.73 sell level. As I did not want to have a position over the weekend I emailed my Platinum Members to exit any short position at 171.65 and I am now flat. How much more negative can the Bund go with Bund yields now at -27 basis points. Today I will again look to sell the Bund from 171.90/172.30 with a 172.65 stop.
Gold Rolling Contract
I am still flat Gold and as I am now long Silver I will leave my 1310/1319 buy range unchanged with the same 1302 stop.
Silver Rolling Contract
Overnight Silver traded lower to my 14.78 buy level. I am still long and I will now raise my stop on this position to 14.39 with a now lower 14.93 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.