Equity Markets finished the week with strong gains as investors embraced risk in spite of the biggest monthly loss in jobs in more than 70 years. Yields on Treasuries rose and the US Dollar weakened. Shares of energy, industrial and consumer staples companies helped the S&P 500 register its first weekly gain in three. The tech-heavy Nasdaq climbed for a fifth day, bringing this week’s gain to 6%. The latest jobs report showed a cut of 20.5 million workers in April, propelling the Jobless Rate to 14.7%. While that was the highest since the Great Depression, investors were anticipating the damage and speculating it will mark a low point during the pandemic-fuelled economic slump. Meanwhile, Oil posted its first back-to-back weekly gain since February as output cuts from the biggest producers and a nascent recovery in demand began to rebalance a market awash with crude. Stocks remained higher even after President Donald Trump cast doubt on the future of his “phase one” trade deal with China, saying Friday that he is struggling with Beijing in the wake of the Coronavirus pandemic. Building and travel stocks pulled the Euro Stoxx Index higher while U.K. markets were closed for a holiday. Japanese Equities led a surge across Asia. Italian bonds climbed before a sovereign ratings decision. Equities have so far managed to weather miserable economic data as well as a string of poor earnings reports as investors bet on a swift recovery, but the strong rebound in risk assets has left others questioning whether further gains are warranted. Elsewhere, Gold declined. Bitcoin briefly rose above $10,000 for the first time since late February, before getting hammered over the weekend to trade at $8700 this morning.
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The S&P 500 Index rose 1.6% to close at 2930.
The Dow Jones Industrial Average increased 1.8% to 24,331.
The Nasdaq Composite Index rose 1.5% to close at 9,121, the highest in ten weeks.
The MSCI All-Country World Index gained 1.6%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index decreased 0.2%, to 1248.
The Euro was little changed at $1.0835.
The British Pound gained 0.3% to $1.2404.
The Japanese Yen weakened 0.4% to 106.74 per dollar.
The yield on 10-year Treasuries climbed three basis points to 0.66%.
Germany’s 10-Year Yield gained one basis point to -0.54%.
Britain’s 10-year yield closed unchanged at 0.23%.
West Texas Intermediate crude gained 4.4% to $24.59 a barrel.
Gold weakened 0.6% to $1,706.10 an ounce.
This morning on the Economic Front we have no data of note on either side of the Atlantic.
June S&P 500
On Friday, the Bureau of Labour Statistics of the Labour Department reported that the Unemployment Rate rose to 14.7% in April, the highest level since 1948, seventy- two years ago. If those people who were counted as employed but absent from work were included, the Unemployment Rate rose to 19.7%. At the height of the Great Depression of the 1930’s, the Unemployment Rate was 25%. 20.5 millions jobs were lost last month, wiping out all the job gains since 2010. The difference is, this time the U.S Government ordered the loss of jobs, whereas during the Great Depression, they did not. The S&P initially sold off on the news before rallying into the close, and again overnight to trade as high as 2946, just below the April 30 high of 2964. The S&P hit a low of 2898, after the NFP was released, just below the 2901 T/P level outlined in Friday’s Commentary. Personally, I covered my 2913 short position at 2907 ahead of 1.30 pm and I am still flat. I mentioned on Friday that optimism is hitting extreme levels again. This is enhanced further with the CBOE equity put/call ration closing at 69 on Friday. This is the lowest extreme since February 20 (.67) one day after the S&P made its peak. The S&P has strong resistance from 2958/2972 where I will be a seller with a 2983 stop. I will also be an aggressive seller on any further rally to 3001/3021 with a 3035 wider stop. The S&P has initial support from 2900/2916 where I will ne a buyer with a 2889 stop.
The Euro just missed my 1.0890 sell level with a high print of 1.0876 before selling off into the New York close and I am still flat. Today I will lower my sell level slightly to 1.0880/1.0930 with a lower 1.0972 stop. I still do not want to be long the Euro at this time.
June Dollar Index
The Dollar had a small rally after the NFP was released trading to a high of 99.97. I covered my 99.70 long position at my revised 99.85 T/P level and I am still flat. Today I will be a small buyer from 99.10/99.55 with a 98.75 stop. I still do not want to be short the Dollar at this time.
I am still flat the DAX as the market closed higher on Friday. That trend is continuing this morning with the DAX trading just below 11000. The DAX has strong resistance from 11080/11200 where I will be a seller with a 10995 stop. I will also raise my buy level to 10650/10780 with a higher 10575 tight stop.
The FTSE has re-opened higher this morning having been closed on Friday. The FTSE has strong resistance from 6060/6140 where I will be a seller with a 6205 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow never came close to my 23700 buy level on Friday before surging to my 24500 sell level overnight with a high of 24555. Subsequently I emailed my Platinum Members this morning to exit any short position at my revised 24425 T/P level and I am still flat. The Dow has string resistance at 24900 which was its out of hours extreme high on April 30. The intra-day high on that day was 24764 before the market subsequently fell 1600 points over the next few days. This sell-off was met with strong buying. Today I will be an aggressive seller from 24700/24950 with a 25105 stop. Given how overextended the Dow is trading I do not want to be a buyer of the market at this time.
I was lucky on Friday as shortly after the NFP was released the NASDAQ traded lower to my 9125 T/P level on my 9200 short position and I am still flat. Overnight the NASDAQ hit a high so far at 9283, which is only 600 points below its all-time high. The NASDAQ is now in positive territory for 2020, an incredible turnaround. The market has strong resistance from 9350/9500 where I will be an aggressive seller with a 9605 wider stop.
I am still flat the BUND and today I will lower my buy level to 172.20/172.75 with a lower 171.75 stop.
Gold Rolling Contract
I am still flat Gold and today I will lower my buy level to 1674/1684 with a 1665 tight stop. If I am taken long I will have a T/P level at 1690.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 14.80/15.20 with the same 14.35 stop.