U.S. Equity Markets soared on Friday, led by the 3.49% gain in the NASDAQ 100, helping the VIX to close lower by over 6% at a price of 27.22. On Friday, the U.S. Federal Reserve released a report showing that all major U.S. banks passed its Comprehensive Capital Analysis and Review. This is welcome news for the market, as it implies the economy may not struggle as much as it did during the 2007 to 2009 financial crisis – at least in the instance we see a recession. Following the Great Recession, reforms within the financial system have helped banks better prepare for potential issues thanks to certain capital reserve requirements and annual stress tests. So, while the risk of a recession remains, the data offers some optimism – as it means banks will be able to lend to consumers and support economic output moving forward. Within the S&P 500, all 11 sectors finished higher. European Markets closed higher. The Ifo Institute for Economic Research’s German Business Confidence Index data for June was weaker than expected on rising fears of a recession. The Italian National Institute of Statistics’ Consumer Confidence index figures for June deteriorated further on increased concerns about the domestic economy. European Central Bank (“ECB”) Governing Council member Joachim Nagel said the longer the bank waits to normalise interest rates, the more painful future hikes will become. ECB Governing Council member Peter Kazimir called for interest rates to be between 1.75% and 2% by the middle of next year. In Asia, Japan’s core Consumer Price Index growth for May was in line with expectations, holding steady compared to April, and remained well below the Bank of Japan’s 2% target. Bank of China Deputy Governor Chen Yulu said the bank has refrained from massive stimulus but will replenish small banks’ capital to boost lending and support growth. South Korean Vice Finance Minister Bang Ki-sun said the government will work to try and ease inflation costs for consumers by easing an oil tax and asking gas stations to lower prices. Taiwan’s Industrial Production growth figures for May cooled compared to April, driven by slowing output for electronics parts and computers. Elsewhere, Oi rose 3.16% after President Joe Biden announced an accelerated development of offshore windfarms amid talks with refiners, while Gold gained 0.07% on Dollar weakness.
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The S&P 500 closed 3.06% higher at a price of 3911.
The Dow Jones Industrial Average closed 823 points higher for a 2.69% gain at a price of 31,500.
The NASDAQ 100 closed 3.49% higher at a price of 12,105.
The Stoxx Europe 600 Index closed 2.6% higher.
This morning, the MSCI Asia Pacific Index rose 1.2%.
This morning, the Nikkei closed 1.35% higher at a price of 26,850
The Bloomberg Dollar Spot Index closed 0.3% lower.
The Euro closed 0.4% higher at $1.0558.
The British Pound closed 0.2% lower at 1.2281.
The Japanese Yen fell 0.2% closing at $134.98.
Germany’s 10-year yield closed one basis points higher at 1.45%.
Britain’s 10-year yield closed two basis points lower at 2.30%.
US 10 Year Treasury closed nine basis points higher at 3.16%.
West Texas Intermediate crude closed 3.16% higher at $107.22 a barrel.
Gold closed 0.07% higher at $1827.10 an ounce.
This morning on the Economic Front we have no data of note from either the Euro-Zone or U.K. At 1.30 pm we have U.S. Durable Goods Orders, followed by Pending Home Sales at 3.00 pm. Finally, at 3.30 pm we have the Dallas Fed Manufacturing Business Index.
Cash S&P 500
The S&P had its first gain in three weeks as the market surged on Friday, making up for the previous week’s major loss with a 236 Handle gain. The move to 3900 that I expected to happen by next Friday came in one day as short positions got obliterated. The S&P is still in a downtrend with the first resistance at the 50-Day Moving Average which comes in at 4065. A break and close over this level by Quarter-End will be short-term bullish. Friday’s rally saw the S&P close above the May lows while tagging right at the Weekly 5 EMA. However, we are short-term overbought and we may need some back filling first before attacking the 4000 level. I am flat the S&P having exited my 3985 long position near the close at 3900 and I am pleased by this development having been so far offside on this position. The S&P has resistance from 3925/3942 where I will be a small seller with a 3955 stop. We have support from 3862/3882 where I will be a strong buyer with a 3949 ‘’Closing Stop’’.
The Euro rallied to my 1.0555 T/P level on my latest 1.0510 long position and I am now flat. I would have expected the Dollar to fall further given the 3% rally in U.S. Indexes so caution is warranted. The Euro has support from 1.0460/1.0510 where I will be a small buyer with a 1.0425 tight stop.
March Dollar Index
I am still flat as the Dollar never came close to Friday’s sell range. I will now lower my sell level to 104.30/104.90 with a tight 105.45 stop.
I am still flat the DAX. Despite the 3% surge in the S&P on Friday, the DAX struggled for any real momentum and is off Friday’s highs this morning. I am reluctant to sell the DAX preferring to be a buyer of dips especially as we are only 700 points above the March lows. The DAX has support from 12950/13040 where I will be a small buyer with a 12865 stop. I still do not want to be short the DAX at this time.
The FTSE rallied on Friday and I am still flat. We have support from 7100/7160 where I will be a strong buyer with a 7045 tight stop.
Dow Rolling Contract
The Dow is trading 1000 points higher from where I market prices on Friday as the market is telling the Fed that come September, we are done with rate hikes and that it will soon be time to start cutting again. Inflation has fallen a lot from the April highs but this fall has not been reflected in ‘’Official’’ data as yet but the charts are clearly telling us that we are experiencing a strong slowdown in inflation components. The Dow just missed my buy level on Friday before surging shortly after the Cash Markets opened and I am still flat. The Dow is short-term overbought. We have support from 30900/31200 where I will be a small buyer with a 30695 ‘’Closing Stop’’. I still do not want to be short the Dow at this time. The McClellan Oscillator improved further, closing Friday night at +114, for a sixth consecutive rise, while the Fear and Greed Index improved slightly, showing a reading of ‘’Fear’’ with a 28 print.
Cash NASDAQ 100
Frustratingly, the NDX just missed my buy range by a few points before again reversing Friday morning’s sell-off, to lead the American Indexes higher with a gain of 3.5%. This morning, the NDX is trading above12,100. I will not add to my existing 14327 long position as I look for a further rally to 12900 to exit this position that I have now owned since April.
My Bund plan worked well with the market trading lower to my 147.05 buy level before rallying to my 147.55 revised T/P level and I am now flat. This morning, the Bund is trading lower at 147.20. We have support from 146.20/146.80 where I will be a small buyer with a 145.75 tight stop.
Gold Rolling Contract
No Change. I will not chase the price of Gold higher, leaving 1798/1810 buy level unchanged with the same 1789 ‘’Closing Stop’’.
Silver Rolling Contract
Frustratingly, Silver missed my 20.50 buy level by a few points before rallying to sit at 21.40 as I go to press. I will now raise my buy level to 20.50/21.10 with a tight 19.95 stop.