U.S. Equity Markets slipped after President Donald Trump fanned trade-war flames anew. Treasuries edged lower while the US Dollar held steady. The S&P 500 Index sank as much as 1.3% after Trump warned that talks scheduled for next month could be cancelled, but pared about half that drop after a White House aide reportedly walked back comments that suggested the U.S. wouldn’t do business with key Chinese telecommunications firm Huawei. The 10-year Treasury yield inched up to 1.74%. Chipmakers were among the worst performers as the benchmark stock gauge halted a three-day rally and closed the week down 0.5%. It got off to a rough start Monday, when China’s currency devaluation sparked the biggest rout of the year.
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As the protectionist showdown between the U.S. and China drags on, investors are struggling to gauge the likely outcome and potential impact on asset prices. That’s driving up market volatility as traders try to predict the road ahead for corporate profits, interest rates and economic growth. The market is very sensitive of the comings and goings and narratives around trade. There is a lot of volatility, as we have seen over the past week, it is scary, and headline-driven. The S&P 500 Index fell 0.7% on Friday to close at 2919. In Europe, the Stoxx Europe 600 Index declined 0.8% and Italy’s FTSE MIB Index closed 2.5% lower.
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index was little changed.
The onshore yuan declined 0.2% to 7.0623 per dollar.
The Euro advanced 0.2% to $1.1203.
The Japanese yen climbed 0.4% to 105.61 per dollar.
Britain’s pound fell 0.9% to $1.2028 which is a new near three year low.
While the yield on 10-year Treasuries was quiet closing two basis points higher at 1.74%, all the action was concentrated in Italy where their 10-year yield surged 27 basis points to 1.8%. Italian bonds tumbled as the government coalition teetered, raising the prospect of snap elections. Meanwhile, Germany’s 10-year yield declined two basis points to -0.58%-near record lows.
Gold slipped 0.2% to $1,498.07 an ounce.
West Texas crude gained 3.5% to $54.39 a barrel.
Cooper fell 0.5% to $2.594 a pound.
This morning on the Economic Front we have no data of note on either side of the Atlantic. I cannot remember the last time that this has happened.
September S&P 500
My S&P plan worked well on Friday Aug 2 as the market traded lower to my 2935 buy level before rallying to my 2944 T/P level ahead of the NFP release. Subsequently the S&P made a rebound high of 2960 before selling off to my second buy level at 2918 as emailed earlier to my Platinum Members before we saw a further rally to my 2929 T/P level and I am now flat. As we all know last Monday saw the biggest drop in the S&P since December when the market closed over 3% lower. Subsequently the S&P dropped to an overnight low of 2775 before spending the rest of the week rallying, finally closing at 2920 last Friday. On Monday the McClellan Oscillator closed at -230 while the S&P was trading well below its Daily Bollinger Band and Williams Index, thus setting up a decent buying opportunity for those so inclined. This strategy worked perfectly provided you had a small position with a wider stop as yet again anyone shorting the market had to take their profits quickly before they evaporated. With Bond Yields at near record lows across the globe there is no where else to put your money. The S&P has strong support from 2892/2907 and today I will be a buyer on any dip to this area with a 2880 stop. If I am taken long I will have a T/P level at 2915.
The Euro traded in a narrow range all week. However the Euro did traded the whole of my sell range for a now average short position at 1.1190 with the same 1.1255 stop. I will now raise my T/P level on this trade to 1.1170 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
September Dollar Index
I am still flat the Dollar and today I will lower my sell level to 98.25/98.65 with a 99.05 stop.
It was a good decision to stay flat the DAX for the last 10 days. The DAX was hit hard last Monday and Tuesday before rallying from oversold levels. The market has support from 11460/11560 and I will be a buyer on any dip to this area with a 11390 stop.
Despite the Pound making new lows for the year, the FTSE was hit hard all week before finally seeing a small relief rally on Friday. The market has good support from 7110/7160 and I will be a buyer on any dip to this area with a 7075 stop.
Dow Rolling Contract
Shortly after the NFP was released on Aug 2 the Dow traded lower to my 26350 buy level before rallying to my revised 26405 T/P level and I am now flat. As we all know at this stage the Dow got hit hard on Monday/Tuesday falling to an overnight low of 25075 before spending the rest of the week rallying and I am still flat. The Dow has good support from 25950/26100 and today I will be a buyer on any dip to this area with a 25880 stop.
It was frustrating to get stopped out of my short NASDAQ position on Aug 1 at 8005 especially with the market trading below 7400 on Monday night. On August 2 the NASDAQ did trade lower to my 7750 buy level before rallying above 7800 on the NFP release and this move higher enabled me to cover this position at my revised 7760 T/P level. Subsequently I emailed my Platinum Members to buy the market again at 7660 with a 7690 T/P level and I am now flat after both levels were hit. The Nasdaq has strong support from 7540/7580 and I will be a buyer on any dip to this area with a 7495 stop.
The BUND closed the week at -59 basis points which is a new record low yield for the Bund. This move higher in price saw the market gap higher to my 176.50 sell level before stopping me out of this position two days later at 176.85 and I am now flat. The Bund has resistance from 177.80/178.20 and I will be a seller in this area with a 178.55 stop. If I am taken short I will have a T/P level at 177.45.
Gold Rolling Contract
Gold rallied to a new six-year high at 1510 on Aug 7. This move higher saw the Managed Futures Accounts move to a net-long 285,000 Contracts, within approximately 2000 Contracts of their record bullish position. Bullish sentiment remains extreme, as shown by the readings on both August 5+6 at 98%. This is a dangerous market to be holding a long position at this time and today I will be a very small seller from 1512/1524 with a 1531 stop.
Silver Rolling Contract
Silver made a new high for the year at 17.28 on August 7, attended by a DSI reading of 91% bulls. I am still flat the market and today I will be a small buyer from 16.30/16.70 with a 15.95 stop. If I am taken long I will have a T/P level at 17.00.
It took a while but finally my Cable traded higher to my 1.2190 T/P level on my latest 1.2150 long position and I am now flat. The Pound got hit hard on Friday closing at a three year low of 1.2030. Today I will again look to buy the market on any further sell-off to 1.1910/1.1960 with a 1.1865 stop. If I am taken long I will have a T/P level at 1.2020.