U.S. Equity Markets rallied into the close of trading after whipsawing investors during a volatile week that featured optimism over the reopening of the economy and a renewal of trade tensions. The US Dollar strengthened and Oil snapped a six-day winning streak. The S&P 500 index swung between gains and losses before finishing up 0.2%. Technology shares helped the Nasdaq Composite outperform, while Caterpillar and Johnson & Johnson weighed on the Dow Jones Industrial Average. Friday’s volatility came as traders braced for tension between Washington and Beijing to escalate after China announced plans to impose a national security law on Hong Kong. Investors took some comfort after U.S. National Institute of Allergy and Infectious Diseases chief Anthony Fauci said he does not support a prolonged lockdown. The Stoxx Europe 600 Index edged lower as the risk-off tone took hold earlier in Asia, where Hong Kong’s benchmark stock index plunged more than 5% amid a broad selloff. The Yuan dipped as China’s National People’ Congress abandoned its decades-long practice of setting an annual target for economic growth amid uncertainty unleashed by the Coronavirus pandemic. The prospect of fresh turmoil in Hong Kong following sweeping national security legislation introduced by China comes as the relationship between the world’s two biggest economies appears to be souring. The S&P 500 closed lower on Thursday, with signs mounting that President Donald Trump will make his tough stance on China a key element of his re-election bid. Beijing responded to accusations from Trump, warning that it will safeguard its sovereignty, security and interests, and threatened countermeasures. It all risks choking the rally that took global equities up about 30% from the March lows, spurred by stimulus measures and optimism for a swift economic recovery from the virus. Meanwhile, the Pound weakened for a third day as data showed Retail Sales in the U.K. dropped by almost a fifth in April. Elsewhere, Gold rose. The Australian Dollar dipped as Fitch Ratings Ltd. cut the country’s rating outlook to negative. Indian bonds rallied after an unscheduled rate cut.
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The S&P 500 Index climbed 0.2%, closing at a price of 2955.
The Dow Jones Industrial Average fell 0.1% to 24,465.
The NASDAQ 100 closed 0.4% higher at 9413.
The Stoxx Europe 600 Index fell 0.6%.
The German DAX rose 0.2%, closing at 11,095.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index increased 0.3% to 1245.
The Euro decreased 0.5% to $1.0905.
The Japanese Yen was little changed at 107.60 per dollar.
The British Pound closed 0.3% lower at $1.2190.
The yield on 10-year Treasuries fell one basis point to 0.66%.
Germany’s 10-year yield increased one basis point to -0.49%.
Britain’s 10-year yield was flat at 0.21%.
West Texas Intermediate crude decreased 1.3% to $33.41 a barrel.
Gold increased 0.4% to $1,735.20 an ounce.
This morning on the Economic Front we already had the release of German Final GDP which fell 2.2% as expected. With the UK and U.S Markets closed today, the only other data of note is the German IFO Survey at 9.00 am.
June S&P 500
Another week and another Fed save as Fed Chairman Jay Powell’s 60 Minute interview aborted the market weakness from the week before resuming in a weekly market Gap up which was further fuelled by yet another conveniently timed false hope vaccine headline. Markets remain a Fed- chase- operations as the Fed’s balance sheet has now exceeded $7 trillion, an 87% increase since the summer interim lows of 2019. Apart from the NASDAQ the April highs have held for the Dow while the S&P is breaking its 2964 high this morning. Reality is markets have played a range ping pong for the better part of the last month making little progress but seeing valuations again reach the higher end of the range at 140% market cap to GDP as now close to 40 million people have lost their jobs in the last two months while American Billionaires have gained $430 billion in wealth in the same time frame. So the battle for control continues and investors have to weigh the risk/reward between chasing a high valued market in the face of a still disastrous global economic backdrop. In my opinion there is no chance of a V-Shaped recovery. High unemployment will remain in the US economy for a long time no matter how much the Fed prints. On Friday my 2915 average long position worked well with the market closing Thursday’s ‘’Open Gap’’ as expected. The S&P hit my 2928 T/P level and I am still flat. We spent most of Friday trading sideways before a late spike into the close. Thankfully we had no sell levels in any of my Index calls as yet again anyone shorting this market got slammed. The Futures market closes this afternoon at 4.30 pm before re-opening at 11.00 pm. Today I will be a buyer on any dip lower to 2935/2945 with a 2923 stop. Despite the elevated market I still do not want to be short the S&P at this time.
This morning the Euro is opening weak and I have bought the market in small size at 1.0875. I will add to this position at 1.0835 with a 1.0795 stop. I will now lower my T/P level on this position to 1.0900 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
June Dollar Index
I am still flat and today I will raise my buy level to 99.25/99.65 with a higher 98.85 stop.
Shortly after I posted the DAX traded higher to my 10930 T/P level from Friday’s 10870 long position and I am still flat. This morning the DAX has surged trading to a high of 11218 before selling off 100 points. The DAX has strong resistance from 10220/10370 where I will be a seller with a 10455 stop.
With the UK Markets closed today I will stay flat until tomorrow’s commentary.
Dow Rolling Contract
Friday was a quiet pre-holiday trading session. Total stock market volume was the slowest in three months, since February 24, and the NYSE advance/decline ratio was essentially flat, ending at 1.26:1. For the week the three major U.S Indexes were up just over 3%. The Dow has still not exceeded the April 29 high at 24,764 intra-day and the out-of-hours high of 24900. My Dow plan worked well on Friday the market hit my 24270 T/P level on my latest 24180 long position and I am still flat. This morning the Dow has gaped higher to hit a high so far at 24,627. I will be a small buyer from 24300/24450 with a 24165 stop. I still do not want to be short the Dow at this time.
The NASDAQ never came close to my 9190 buy level on Friday as the market spent most of the session trading higher. This morning we are trading at 9460. The NASDAQ has strong resistance from 9550/9700 where I will be a seller with a 9805 stop.
I am still flat the Bund. I will continue to be a buyer on any dip lower to 172.30/172.80 with the same 171.95 stop. With the Fed and ECB effectively nationalising the Bond markets there is no point in being short.
Gold Rolling Contract
I am still flat Gold. Today I will lower my buy level to 1695/1705 with a 1687 stop.
Silver Rolling Contract
No Change as my only interest in buying Silver is from 15.70/16.30 with the same 15.35 stop.