U.S. Equity Markets advanced on optimism that the U.S. and China will make progress in trade talks this week despite some conflicting signals on the outlook. Treasury yields climbed. The S&P 500 Index ended the day up almost 1% in a rally fuelled by speculation that China is still open to a partial deal with the U.S. But in a sign of how tenuous the new-found confidence is, stocks pared gains in the afternoon after a report that China sought to tamp down expectations for progress. Ten-year Treasury yields climbed past 1.55%. The Turkish currency and its stocks dropped after the country began a military offensive in Syria against Kurdish militants. The Stoxx Europe 600 Index advanced for the third day in four. Thursday morning was not one for coffee breaks for traders in Asia, with markets whipsawed by contrasting headlines on the chances of some sort of progress in critical U.S.-China trade talks. Futures on the S&P 500 Index initially fell sharply on concerns that the negotiations — scheduled for Thursday and Friday in Washington — might be cut short. They erased most losses after news from Bloomberg that next week’s tariff hike could be suspended and a report from the New York Times that President Donald Trump could let some U.S. companies supply Huawei Technologies Co.
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While volume was subdued during the Yom Kippur holiday, equities traders were looking closely for signals about high-level U.S.-China trade talks that are set to resume in Washington on Thursday. While a broad agreement seems unlikely, China indicated it’s open to a limited deal, provided no more tariffs are imposed, according to an official. In return, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points, the official said, without offering further details. The South China Morning Post reported that deputies had made no progress in talks before the principal negotiations. The paper said Vice Premier Liu He would also cut the scheduled talks short by a day, and depart Washington Thursday.
The S&P 500 Index rose 0.9% to close at a price of 2919. However overnight the S&P hit a low of 2882 before rebounding to trade at 2915 as I go to press.
The Stoxx Europe 600 Index gained 0.4%.
The MSCI Emerging Market Index slipped 0.1%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index was little changed.
The Euro rose 0.2% to $1.0973.
The British Pound slumped 0.1% to $1.2208.
The Japanese Yen depreciated 0.4% to 107.47 per dollar.
The yield on 10-year Treasuries added five basis points to 1.58%.
Britain’s 10-year yield climbed five basis points to 0.46%.
Germany’s 10-year yield rose five basis points to -0.55%.
West Texas Intermediate crude climbed 0.1% to $52.66 a barrel.
Gold gained 0.1% to $1,506.77 an ounce.
This morning on the Economic Front we have the German Trade Balance at 7.00 am. This is followed at 9.30 am by UK Industrial/Manufacturing Production, Index of Services, Trade Balance and GDP. At 10.20 am we have a speech by Bank of England Governor Carney. Next, we have U.S. CPI and the Weekly Jobless Claims, Finally, we have speeches from the Fed’s Kashkari and Mester at 5.15 pm and 10.30 pm respectively.
December S&P 500
The past 24 hours have been one of the most volatile of the year to date with the S&P moving up and down in 20 Handle clips. Just as I was going to bed it was announced that China were cutting short the Trade talks by one day. This saw the S&P drop 35 Handles to my 2884 buy level before recovering the whole move lower and this rebound enabled me to cover this long position at my 2895 T/P level and I am now flat. Given the ferocity of the moves in both directions it is almost impossible to trade the S&P with any ‘’Stop’’. I have cut my position size in half and I am only using mental stops at this time. Shortly after I posted yesterday morning the S&P rallied to a high of 2935. Today I will again look to buy the S&P on any dip lower to 2882/2897 with a wider 2869 stop. The S&P has strong resistance from 2958/2973 and I will be a seller in this area with a 2981 stop.
In comparison to Equity Markets the Currency markets have literally stopped moving. I am still flat the Euro and today I will raise my buy level to 1.0900/1.0940 with a higher 1.0860 stop.
December Dollar Index
No Change as my only interest in selling the Dollar is still on a rally higher to 99.10/99.50 with the same 99.85 stop.
European markets are ignoring the two-way volatility in the US Indices. This is unusual but this has been the underlying theme for most of the past two months. I am still flat the DAX and today I will raise my buy level to 11910/11980 with a 11865 tight stop.
The continuing weakness in Sterling is helping the FTSE to rally over the past week. The FTSE never came close to my buy level yesterday despite the massive sell-off in the S&P overnight. Today I will raise my buy level to 7080/7125 with a 7035 stop.
Dow Rolling Contract
It took a while but finally the Dow sold off to my 26035 buy level before rallying to my 26150 T/P level and I am now flat. Most Members are probably still long the US Indices as most of you were probably asleep when the U.S. Indices hit my buy levels. If you are you waking up to a nice gain across the board with the Dow now trading at 26325. Today I will again look to buy the Dow on any dip lower to 26940/26090 with a 26840 wider stop. I still do not want to be short the Dow at this time. The McClellan Oscillator did improve yesterday to close at -98 and if the MO can get back into positive territory it will be good for the bulls.
My NASDAQ plan also worked well with the market trading lower to my 7590 buy level before rallying to my 7630 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7570/7620 with a 7525 stop.
The Bund fell 50 points yesterday and I am still flat. Today I will lower my sell level to 174.40/174.80 with a lower 175.15 stop.
Gold Rolling Contract
No Change as I am still a buyer on any dip lower to 1484/1494 with a 1476 stop.
Silver Rolling Contract
Unfortunately Silver never came close to my buy range yesterday and I am still flat. I will now raise my buy level slightly to 17.20/17.60 with a higher 16.85 stop.