U.S. Indices closed lower for the second consecutive trading session as tensions with China rose again. Beijing ordered the U.S Consulate in Chengdu to close in response to America ordering China’s Houston Consulate which was closed earlier in the week. The Republican Stimulus proposal was also delayed, with Senate Republicans saying they will unveil their own stimulus package this week due to the fine- tuning of measures that they want to include. Equity Markets were not helped by the weaker than expected U.S Preliminary Composite Purchasing Managers’ Index for July which came in weaker than expected. However, New Home Sales surged 13.8% in June, blowing away estimates and hitting a 13-Yaer High. The NASDAQ posted it first back-to-back loss in 49 trading sessions, led by Intel which closed 16% lower on Friday. European Indices also closed lower. The UK’s Chief Brexit negotiator said ‘’considerable gaps’’ remain between Britain and the EU on a post-Brexit trade deal. Elsewhere, The US Dollar fell for a fifth straight day while Oil closed 0.3% higher.
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The S&P 500 Index fell 0.6%, to close at a price of 3215.
The Dow Jones Industrial Average fell 182 points for a 0.7% fall to close at 26,469.
The Nasdaq 100 Index fell 0.92%, closing at 10,483, well off its intra-day low of 10,313.
The Stoxx Europe 600 Index closed 1.7% lower at a price of 367.29.
The Nikkei is closed 0.16% lower at 22,715
Here is a Summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index declined 0.6% closing at 1187, for its lowest close in more than six months.
The Euro rose 0.4% to $1.1643.
The British Pound closed 0.3% higher at $1.2775.
The Japanese Yen added 0.8% to 105.97 per dollar.
The yield on 10-year Treasuries closed unchanged at 0.58%.
Germany’s 10-year yield increased three basis points to -0.45%.
Britain’s 10-year yield increased two basis points to 0.14%.
West Texas Intermediate crude rose 0.3% to $41.55 a barrel.
Silver closed unchanged at $22.90 per ounce.
Gold rose 0.6% to $1898 an ounce
This morning on the Economic Front we have the German IFO Survey at 9.00 am and this is followed at 10.00 am by Euro-Zone Money Supply. At 1.30 pm we have U.S. Durable Goods Orders, Finally, at 3.30 pm we have the Dallas Fed Manufacturing Business Index.
September S&P 500
My S&P plan worked well with the market trading lower to my 3193 buy level before rallying to my 3208 T/P level and I am now flat. Overnight the S&P again tested Friday’s low before rallying to sit at 3215 as I go to press. The rebound high for the S&P so far is at 3283 before the market fell to a low of 3192 on Friday. The S&P has had every chance to sell-off aggressively given the back drop to the pick up in COVID-19 across the globe but so far the market is holding in. As long as the S&P does not close below 3150 I will continue to buy the dip. I am still looking for most of the February Gap at 3330 to be filled first before we see a more meaningful and sustainable sell-off. On top of the we will get a fifth Stimulus before the Congress recess at the end of the next week. This will also support the US Indices. Today I will be a buyer from 3177/3195 with a 3163 wider stop. I will now move my sell level higher to 3255/3270 with a 3281 stop.
The Euro has now rallied over 10% since its 1.0635 low print on March 23, to hit a rebound high earlier this morning at 1.1724. This is a huge move and as a result the Euro is severely overbought. The Daily Sentiment Index closed on Friday with a 91% print. History tells us that anytime we see a DSI reading over 90% that a correction is forthcoming. I am now short the Euro at an average rate of 1.1675. I will leave my stop unchanged at 1.1745 while raising my T/P level to 1.1650. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September Dollar Index
My latest 94.95 long Dollar position did not work well as I was stopped out of this position at 94.45 on Friday and I am still flat. This morning the Dollar is trading lower at 93.90 while the DSI for the Dollar closed at just 10% bulls on Friday, which is below the September 21, 2018 low of 11. Commodities, Currencies and Precious Metals tend to end their trends with spikes, so I am aware of the potential for a further spike lower in the Dollar this week and the price action this morning would suggest this is already happening. The Dollar has near-term support from 93.10/93.60 where I will again look to buy with a 92.70 stop.
Just as I posted on Friday I was stopped out of my latest 12940 long position at 12845 and I am still flat. Given the unprecedented Euro 130 billion Stimulus Package from the German Government, I still believe that this enormous stimulus will continue to support the DAX and this view will hold as long as the DAX does not break and close below 12400. The stronger Euro will hurt the DAX but as long as the above support holds I will continue to be a buyer on dips. The DAX has near-term support from 12650/12760 where I will be a buyer with a 12575 stop. I still do not want to be short the DAX at this time.
The FTSE rallied to my 6110 exit level on my 6125 long position and I am still flat. This morning the FTSE is trading slightly lower at 6090. It has support from 6010/6060 where I will again look to buy the FTSE with a 5965 stop.
Dow Rolling Contract
Frustratingly the Dow missed my 26330 buy level with an overnight low at 26337 before rallying to sit at 26530 as I go to press. I will now raise my buy level to 26160/26360 with a wide 25995 stop. If I am taken long I will have a T/P level at 26510.
As I mentioned in my economic commentary above, the NASDAQ closed lower for two consecutive trading sessions for the first time in 49 trading sessions, which is a remarkable statistic given all that has happened in the past two months. On Friday my NASDAQ plan worked well with the market trading lower to my 10340 buy level before rallying to my 10410 T/P level and I am still flat. Although the NASDAQ closed lower the price action was positive given the extent of the bounce off its 10310 low print. Today I will be a buyer from 10340/10440 with a 10265 tight stop. The NASDAQ has resistance from 10700/10800 where I will be a small seller with a 10885 stop.
Finally, after been short the Bund for three days at 176.60, the market dipped to my 176.35 T/P level and I am still flat. Today, I will again look to sell the Bund from 176.65/177.10 with a 177.45 stop.
Gold Rolling Contract
I mentioned in my Dollar commentary above that Precious Metals tend to reverse after having a spike higher. We are certainly seeing this this morning in both Gold and Silver with Gold now trading at a new all-time high of 1932 as I go to press. With Silver trading well below its $51 high from May 2011 we now have the largest divergence relative to Silver in the history of the two precious metals. Gold has resistance from 1965/1985 where I will be a small seller with a 1994 tight stop.
Silver Rolling Contract
Silver has gapped higher this morning and I am now short in small size at the top of my sell range at 24.10. I will raise my T/P level on this position to 23.60 while leaving my stop unchanged at 24.55. If any of the above levels are hit I will be back with a new update for my Platinum Members.