U.S. Equity Markets slumped after a stunning reversal on Friday afternoon and Treasuries rallied as the trade dispute between the world’s two largest economies deepened. The US Dollar fell as expected. After the close of regular trading, President Donald Trump confirmed he will boost tariffs on Chinese imports in response to Beijing’s retaliation. The SPDR S&P 500 ETF Trust fell over 1% following the announcement. Prospects for heightened tension rattled markets Friday, overshadowing speculation that the Federal Reserve will cut Interest Rates after Chairman Jerome Powell’s remarks. Energy and tech stocks led losses in the S&P 500 Index, and the Dow Jones Industrial Average tumbled 623 points as only Boeing Co. advanced among its 30 blue-chip companies. The Nasdaq-100 Index plunged more than 3% The bond market’s U.S. recession indicator — the spread between 2- and 10-year rates — flirted with inversion again. Elsewhere in the yield curve, three-month and 10-year Treasuries hit the most-inverted level since March 2007. The greenback dropped as Trump said that “we have a very strong dollar and a very weak Fed,” fuelling chatter about a possible move to weaken the currency. Oil sank, while gold surged.
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For anyone following my Platinum Service it made 170 points on Friday and is now ahead by 1824 points for August, having made 1153 points in July, 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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The trade war escalation rekindled concerns about the outlook for global growth that’s already looking shaky. The announcement came before leaders from the Group of Seven nations prepared to meet in France and central bankers gather in Jackson Hole. Trump tweeted that the Fed chairman could be a greater “enemy” of the U.S. than Chinese President Xi Jinping. “As usual, the Fed did NOTHING!,” he wrote. The plunge in the S&P 500 Friday destroyed what was shaping up to be a rally for the week. There have been just four other weeks during this bull market when a Friday rout erased a gain of more than 1% through Thursday, data compiled by Sentiment Trader show. This had never occurred from 1950 to mid-1980s, and since then, it’s happened just 15 other times before last week.
The S&P 500 sank 2.6% to close at 2,847, before trading to an overnight low of 2810.25. The CBOE Volatility Index surged 19%, closing at 19.87. In Europe, the Stoxx Europe 600 Index declined 0.8%.
Meanwhile the Nikkei closed 2.17% lower this morning at 20.261.
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index sank 0.35%.
The Euro jumped 0.6% to $1.1144, where it is opening this morning.
The Japanese Yen appreciated 1% to 105.39 per dollar.
The afternoon reversal in US Indices saw the yield on 10-year Treasuries fall eight basis points to 1.54%. In Europe, Germany’s 10-year yield decreased three basis points to -0.68% and Britain’s 10-year yield declined four basis points to 0.481%.
The Bloomberg Commodity Index decreased 0.5%.
West Texas Intermediate crude fell 2.1% to $54.17 a barrel.
Gold surged 1.9% to $1,537.60 an ounce.
This morning on the Economic Font we have German IFO Expectations and Business Climate at 9.00 am. The UK is closed for the August Bank Holiday so liquidity will be affected as a result. At 1.30 pm we have US Durable Goods Orders. Finally, at 3.30 pm we have the Dallas Fed Manufacturing Business Index.
September S&P 500
I cannot emphasise enough the importance of my Platinum Service as the updated emails are the key especially when markets reverse as we saw on Friday. Initially the S&P traded the whole of my 2908/2918 buy range for an average long position at 2913 with a 2902.50 low before the market rallied above 2923 on Powell. This move higher enabled me to cover this position at my revised 2918 T/P level and I am still flat. Incredibly the S&P fell 90 Handles into the close before reversing 20 Handles of these losses in the last few minutes of trading. As mentioned above the S&P traded to a low of 2810.25 shortly after the US Futures Markets re-opened at 11.00 pm last night. There has been so much technical damage done this month with the S&P now trading nearly 200 Handles lower than before the Fed Rate Cut on July 31. Initially I thought the market may hold up until mid-September before getting hit hard but the level of damage done last Friday certainly clouds this view. The S&P needs to break back above 2880 or else there is every chance we will test the early August low of 2775. Just as I go to press we have another tweet from Trump who said that he spoke to China twice overnight and that they want to make a deal. As a result the S&P has rallied to 2865 as I go to press. Today I will be a seller on any further rally to 2877/2892 with a 2903 tight stop. My only interest in buying the S&P is on a dip lower to 2800/2815 with a 2790 stop.
The Daily Sentiment Index again proved what a fantastic trade signal it is especially when it prints in single digits as we saw for most of last week. Frustratingly the Euro just missed my 1.1040 buy level with a 1.1051 low print before rallying 100 points and I am still flat. Today I will raise my buy level to 1.1070/1.1110 with a 1.1035 stop.
September Dollar Index
The Dollar just missed my 98.45 sell level before selling off 80 points on Friday and I am still flat. Today I will lower my sell level to 97.90/98.30 with a 98.65 lower stop.
My DAX plan worked well on Friday with the market trading lower to my 11660 buy level before rallying to my 11710 T/P level and I am now flat. Subsequently the DAX got hit hard into its 9.00 pm close. The reversal in the Euro was also a factor in the DAX falling over 250 points. The DAX has strong support from 11250/11350 and I will be a buyer in this area with a 11180 stop. Despite Friday’s reversal I am reluctant to chase this market lower especially as I have sell levels in both the S&P and Dow.
After the FTSE traded lower to my 7095 buy level I emailed my Platinum Members to exit any long position at 7110. Thankfully the FTSE made a rebound high of 7117, thus enabling me to exit this long position and I am still flat. With London closed today and the FTSE Cash Market closed as a result I will stay flat FTSE until tomorrow.
Dow Rolling Contract
A stunning 1000 point reversal in the Dow from 3.30 pm on Friday has done massive technical damage to the bullish case as yet again Trump’s tweeting is the biggest influence in the US stock market. Luckily ahead of this mini crash the Dow which had traded lower to my 26100 buy level did reverse on Powell’s comments to a rebound high of 26320 before getting slammed on Trump. This move higher should have enabled anyone who was long to record a decent gain. Personally, I covered this position at my revised 26155 T/P level and I am still flat. The Dow now has resistance from 25850/26000 and today I will be a small seller in this area with a tight 26080 stop. The Dow has strong support from 25050/25200 and I will be a buyer in this area with a 24960 stop.
I am still flat the NASDAQ as thankfully I had no buy level in this market on Friday given the fact that we closed 3% lower. The market has strong support from 7300/7360 and I will be a buyer on any dip to this area with a 7255 stop.
I went short the Bund on Friday at 178.60 before adding to this position on the re-open of the Futures Market this morning at 179.00 for a now average 178.80 short position. I am not comfortable with this position despite the insane negative yield and I will now look to exit this position at a price of 178.50. I will have a stop on this position at 179.20. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Despite a DSI reading of over 90% and the latest Commitment of Traders Report showing that Managed Money Accounts are net-long 285,090 Futures Contract, which is nearly a record total, Gold managed to rally $50 since I posted on Friday. Thankfully we had no sell level in this market and are still flat. Gold has a potential target of 1591 and today I will be a small seller from 1585/1595 with a 1605 stop.
Silver Rolling Contract
Silver just missed my 16.80 buy level before breaking and closing over its key 17.50 resistance level. As a result I will now raise my buy level to 17.25/17.55 with a 16.85 stop. If I am taken long I will have a T/P level at 17.85.